Formulario 10-Q VERU INC. Para: 31 de marzo

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Si tu

VERU INC.

DECLARACIONES DE FLUJOS DE EFECTIVO CONSOLIDADAS CORTO DESCONOCIDAS

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Si tu

Si tu

Si tu

Seis meses más

Si tu

31 de marzo,

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2020

2019

ACTIVIDADES DE EXPLOTACIÓN

Pérdida anual

PS

(4,115,610)

PS

(6.182.833)

Ajustes para conciliar la pérdida neta con el flujo de efectivo de las actividades operativas:

Depreciación

74,213

84,394

La amortización de los activos intangibles

158,184

154,617

Cambio no efectivo en derechos de uso

154,325

– –

Gastos por intereses no monetarios

2,306,387

2,536,695

Pagos basados ​​en acciones

1.296.178

913.465

Impuestos sobre la renta diferido

(198,944)

24,710

Provisión para inventario desactualizado

229,047

51,924

Cambio en el valor razonable de pasivos derivados

(75,000)

403,000

Otro

7,500

122,433

Cambios en los activos y pasivos corrientes:

Aumento de reclamos

(1,837,178)

(54,603)

Incremento en inventario

(2,597,964)

(748.095)

Aumento de gastos prepagos y otros activos.

(962,470)

(73,589)

Aumento (disminución) de pasivos

1.110.928

(656,527)

Disminución de ganancias no ganadas

– –

(187, 159)

Disminución de provisiones y otros pasivos corrientes

(293,429)

(391.011)

Disminución de pasivos por arrendamientos operativos

(183,658)

– –

Efectivo generado por operaciones

(4.927.491)

(4,002,579)

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ACTIVIDADES DE INVERSION

Inversiones

(54,680)

(644)

Flujo de caja de las actividades de inversión.

(54,680)

(644)

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ACTIVIDADES DE FINANCIACIÓN

Producto de la venta de acciones en el público que ofrecen menos comisiones

– –

9,400,000

Pago de costos relacionados con ofertas públicas.

– –

(268.033)

Producto de la venta de acciones bajo un acuerdo de compra de acciones comunes

1,227,000

– –

Pagos a plazos en el acuerdo de préstamo SWK

(944,612)

(3,191,717)

Ingresos por ejercicios de opciones sobre acciones

408,632

200,000

Acuerdo de financiación de ingresos Ingresos

836.780

– –

Pagos a plazos en el acuerdo de financiación de primas

(277 965)

– –

Pago en efectivo por la porción de deuda del arrendamiento financiero

(5,302)

– –

Flujo de caja de actividades de financiamiento

1,244,533

6.140.250

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Aumento neto (disminución) en efectivo

(3.737.638)

2,137,027

EFECTIVO Y DINERO EQUIVALENTES AL PRINCIPIO DEL TIEMPO

6.295.152

3,759,509

Efectivo y equivalentes de efectivo al final del período

PS

2,557,514

PS

5.896.536

Si tu

Divulgación adicional de actividades no monetarias:

Derechos de uso que se reconocen a cambio de pasivos por arrendamiento

PS

1,229,926

PS

– –

Depreciación de costos diferidos en relación con el contrato de compra de acciones ordinarias

PS

34,759

PS

– –

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Véanse las notas sobre los estados financieros consolidados condensados ​​no auditados.

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VERU INC.

NOTAS A LOS ESTADOS FINANCIEROS CONSOLIDADOS CONDENSADOS NO AUDITADOS

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Nota 1 – Base de presentación

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Los estados financieros consolidados intermedios condensados ​​no auditados adjuntos para Veru Inc. («nosotros», «nuestro», «nos», «Veru» o la «compañía») se han preparado de conformidad con las normas y reglamentos de la Comisión de Bolsa y Valores («SEC») Información financiera intermedia. De acuerdo con estas reglas y regulaciones, cierta información y notas al pie típicamente incluidas en los estados financieros preparados de acuerdo con los estándares de contabilidad generalmente aceptados de los US GAAP se han agregado u omitido, aunque la compañía cree que La información proporcionada es suficiente para que la información no sea engañosa. En consecuencia, estas declaraciones no contienen todas las revelaciones que normalmente son requeridas por los US GAAP para los estados financieros anuales y deben leerse junto con la discusión y el análisis en este informe de la situación financiera y los resultados de las operaciones de la administración, así como los estados financieros auditados y los comentarios contenidos en los mismos. nuestro Informe Anual en el Formulario 10-K para el año fiscal que finaliza el 30 de septiembre de 2019. El balance consolidado condensado adjunto al 30 de septiembre de 2019 se obtuvo de nuestros estados financieros anuales auditados. El estado de resultados consolidado condensado no auditado para los tres y seis Meses terminados marzo 31, 20Vigésimo y flujos de efectivo para el seis Meses terminados marzo 31, 20Vigésimo no son necesariamente una indicación de los resultados esperados para un período futuro o para el año fiscal que termina el 30 de septiembre de 2020.

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La preparación de nuestros estados financieros intermedios condensados ​​no auditados GAAP de los EE. UU. Requiere que la gerencia haga estimaciones y suposiciones que afecten los montos de activos y pasivos revelados al momento del cierre, la revelación de activos y pasivos contingentes, y los montos revelados de ingresos y gastos en el Períodos de informes. Los resultados reales pueden diferir de estas estimaciones.

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La gerencia cree que los estados financieros consolidados intermedios condensados ​​condensados ​​no auditados que se acompañan contienen todos los ajustes (que consisten solo en ajustes normalmente recurrentes) que son necesarios para presentar adecuadamente la posición financiera y los resultados de las operaciones a la fecha de presentación y para los períodos presentados.

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Principios de consolidación y tipo de negocio.: Veru Inc. es en estas notas, junto con sus subsidiarias, se denomina «nosotros», «nuestro», «nos», «Veru» o la «compañía». Los estados financieros consolidados incluyen las cuentas de Veru y sus subsidiarias de propiedad total Aspen Park Pharmaceuticals, Inc. («APP») y The Female Health Company Limited, y la subsidiaria de propiedad total de The Female Health Company Limited, The Female Health Company (Reino Unido). plc (The Female Health Company Limited y The Female Health Company (UK) plc, colectivamente la «Filial británica») y la subsidiaria de propiedad total de The Female Health Company (Reino Unido) plc, The Female Health Company (M) SDN.BHD (morir «Filial en Malasia»). Todas las transacciones y cuentas importantes dentro del grupo se eliminaron en la consolidación. Antes de completar la adquisición de APP el 31 de octubre de 2016 (la «Adquisición de APP») mediante la fusión de una subsidiaria de propiedad total de la compañía en APP, la compañía era una compañía de un solo producto que se ocupaba de la comercialización, fabricación y distribución del producto de salud para el consumidor de APP, el FC2 Condón para mujeres / Condón interno FC2® («FC2»). Con la finalización de la adquisición de la aplicación, la compañía se convirtió en una compañía biofarmacéutica. enfocado en oncología y urología con varias drogas en desarrollo clínico. La mayoría de las ventas netas de la compañía durante los tres y seis Meses terminados marzo 31, 20Vigésimo y 20Diecinueveavo se derivaron de la venta de FC2.

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Reclasificaciones:: :: Ciertos montos de períodos anteriores de los estados financieros consolidados intermedios condensados ​​condensados ​​no auditados adjuntos se han reclasificado para reflejar la presentación del período actual. Estas reclasificaciones no tuvieron efecto las ganancias o la posición financiera para cada período presentado.

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Arrendamientos: Los arrendamientos se clasifican inicialmente como arrendamientos operativos o financieros. Un derecho de uso («ROU») y un pasivo de arrendamiento correspondiente se determinan al comienzo del valor presente de los pagos de arrendamiento fijos durante el plazo del arrendamiento. El activo de ROU incluye todos los costos directos iniciales y los pagos de arrendamiento realizados en la fecha de inicio o antes y se reduce mediante pagos de incentivos de arrendamiento. La Compañía ha decidido no separar los componentes de arrendamiento y no arrendamiento para todas las clases de los activos subyacentes. La Compañía utiliza su tasa de interés incremental como tasa de descuento para determinar el valor presente de los pagos de arrendamiento para arrendamientos para los cuales no existe una tasa de descuento implícita fácilmente determinable. La tasa de endeudamiento incremental es la tasa que la compañía cobraría por préstamos garantizados durante un plazo y monto similares en un entorno económico similar. La compañía determina las tasas de préstamos incrementales para sus arrendamientos ajustando la tasa libre de riesgo con una prima de riesgo de crédito que coincida con la calificación crediticia de la compañía.


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Los costos de arrendamiento operativo para pagos de arrendamiento fijos se registran en línea recta durante el plazo del arrendamiento. Los costos de arrendamiento financiero son una combinación del gasto de depreciación para el activo de ROU y el gasto de interés para el pasivo de arrendamiento pendiente utilizando la tasa de descuento aplicable. Los pagos de arrendamiento variables se reconocen cuando surgen debido a su ocurrencia o uso. Los arrendamientos a corto plazo con un plazo inicial de 12 meses o menos no se reconocen en el balance general. Registramos los gastos de arrendamiento para arrendamientos a corto plazo de forma lineal durante el plazo del arrendamiento.

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Otras pérdidas importantes: Las políticas contables generalmente requieren que los ingresos, gastos, ganancias y pérdidas reconocidas se incluyan en la pérdida neta. Aunque ciertos cambios en los activos y pasivos, como B. Los ajustes de conversión de moneda, que se informan como una parte separada de la sección de patrimonio del balance consolidado condensado no auditado adjunto, estas partidas, junto con la pérdida neta, son parte de la otra pérdida total. Para los tres y seis Meses terminados marzo 31, 20Vigésimo y 20DiecinueveavoLa pérdida total corresponde a la pérdida neta reportada.

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Estados contables emitidos recientemente:: :: En febrero de 2016, el Consejo de Normas de Contabilidad Financiera («FASB») publicó la Actualización de Normas de Contabilidad («ASU») 2016‑02, Arrendamientos (tema 842), Esto requiere que los arrendatarios registren un activo de ROU y un pasivo de arrendamiento en todos los arrendamientos con un plazo de arrendamiento de más de doce meses en el balance general. La ASU 2016-02 diferencia entre arrendamientos como arrendamientos financieros o arrendamientos operativos, lo que afecta la medición y presentación de los arrendamientos en el estado de resultados y en el estado de flujo de efectivo y requiere que se revelen los arrendamientos información importante sobre contratos de arrendamiento. Se requiere un enfoque de transición retrospectivo modificado para la aceptación. yoEn julio de 2018, el FASB emitió la ASU No. 2018‑10, Mejoras de codificación sobre el tema 842, arrendamientos para aclarar las pautas de implementación y ASU No. 2018‑11, Arrendamientos (tema 842) Mejoras dirigidas. Estas pautas actualizadas proporcionan un método de transición opcional que permite que el nuevo estándar contable se aplique por primera vez en el momento de la solicitud y que se haga un ajuste al efecto acumulativo en el saldo inicial de las ganancias retenidas al comienzo del período de aplicación. yoEn diciembre de 2018, el FASB publicó el ASU 2018-20. Arrendamientos (tema 842): Mejoras en el área estrecha para propietarios Resolver ciertos problemas de implementación que enfrentan los arrendadores al presentar ASU 2016‑02. yoEl FASB publicó la ASU 2019 en marzo de 2019‑01, Arrendamientos (tema 842): mejoras de codificación entre otras cosas, para cumplir con ciertos requisitos de divulgación para la transición después de la adopción de la ASU 2016‑02.

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La compañía ha adoptado el nuevo estándar de contabilidad de arrendamiento utilizando el enfoque retrospectivo modificado el 1 de octubre de 2019 y elegido de forma segura herramientas prácticas, incluido el método de transición opcional, que permite aplicar el nuevo estándar cuando se adopta sin ajustar las cantidades del período anterior. Elegimos el conjunto de herramientas prácticas que están permitidas bajo las pautas de transición, lo que nos impidió reevaluar nuestras conclusiones anteriores sobre la identificación de arrendamientos, clasificación de arrendamientos y costos directos iniciales. La adopción de la nueva norma resultó en el reconocimiento de activos de ROU y pasivos de arrendamiento de aproximadamente $ 1.2 Millones y $ 1.5 Millones y la baja en cuentas de gastos prepagos y pasivos por alquileres diferidos de arrendamientos operativos de $ 23,000 y $ 247,000efectivo a partir del 1 de octubre de 2019 cero Ajuste del efecto acumulado a las ganancias retenidas. El nuevo estándar no tuvo un impacto significativo en nuestro estado de resultados consolidado o flujo de efectivo.

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El FASB publicó ASU 2018 en junio de 2018‑07, Remuneración – retribución de acciones (Tema 718): Mejoras en la contabilidad de pagos basados ​​en acciones para no empleados. El propósito de ASU 2018-07 es expandir el alcance de Tema 718, Compensación – Compensación de acciones (que actualmente solo incluye pagos basados ​​en acciones a empleados), incluidos pagos basados ​​en acciones a no empleados por bienes o servicios. Como resultado, la contabilidad de los pagos basados ​​en acciones a no empleados y empleados está esencialmente coordinada. La compañía ha emitido pagos basados ​​en acciones a no empleados en el pasado, pero no puede predecir la cantidad de pagos futuros basados ​​en acciones a no empleados, si corresponde. Adoptamos ASU 2018-07 con efecto a partir del 1 de octubre de 2019. La adopción de la ASU 2018‑07 no tuvo un impacto significativo en nuestros estados financieros consolidados y la información relacionada.

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En diciembre de 2019, el FASB publicó el ASU 2019-12, Impuesto a las ganancias (tema 740). Simplificación de la contabilidad del impuesto sobre la renta.. La nueva guía elimina ciertas excepciones relacionadas con el enfoque de asignación de impuestos temporales, el método de cálculo de impuestos a las ganancias provisionales y el reconocimiento de pasivos por impuestos diferidos por diferencias de base externas. Otros aspectos de la contabilidad del impuesto sobre la renta también se aclaran y simplifican. La ASU 2019-12 se aplica a los años fiscales y períodos intermedios dentro de estos años fiscales que comienzan después del 15 de diciembre de 2020. Se permite la aplicación anticipada. Es poco probable que la introducción de ASU 2019-12 tenga un impacto significativo en nuestros estados financieros consolidados y la información relacionada.


Nota 2 – Liquidez

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La compañía ha sufrido pérdidas operativas trimestrales desde el cuarto trimestre del año fiscal 2016 y espera continuar usando efectivo y sufrir pérdidas netas sustanciales en el desarrollo de sus candidatos a drogas. Debido a los muchos riesgos e incertidumbres asociados con el desarrollo de medicamentos, la compañía no puede estimar las cantidades exactas de capital y gastos operativos necesarios para financiar el desarrollo de sus candidatos a medicamentos y obtener aprobaciones regulatorias. Los requisitos de capital futuros de la compañía dependerán de muchos factores.

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La Compañía cree que su posición de liquidez actual, el efectivo que se espera generar de la venta de los productos comerciales de la Compañía y su capacidad para asegurar el financiamiento de capital u otras alternativas de financiamiento son suficientes para financiar las operaciones planificadas de la Compañía para los próximos 12 meses. Dichas alternativas de financiamiento pueden incluir deuda, acciones ordinarias o financiamiento convertible u otro vinculado al capital, y financiamiento de acuerdo con la declaración de registro efectivo de la Compañía en el Formulario S-3 (Caso 333-221120) («Declaración de registro de estante»). La Compañía tiene la intención de ser oportunista en la búsqueda de financiamiento de capital o deuda que podría incluir la venta de acciones comunes en virtud de su acuerdo de compra con Aspire Capital Fund, LLC (ver Nota 9).

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Nota 3 – Valoraciones del valor razonable

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El tema 820 de la Codificación de normas de contabilidad de FASB («ASC») especifica una jerarquía de técnicas de valoración en función de si las entradas a estas técnicas de valoración son observables o no. Las entradas observables reflejan datos del mercado de fuentes independientes, mientras que las entradas no observables reflejan supuestos del mercado. La jerarquía otorga a los precios cotizados sin igual en mercados activos para activos o pasivos idénticos la prioridad más alta (medición de nivel 1) y los insumos no observables la prioridad más baja (medición de nivel 3).

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Los tres niveles de la jerarquía del valor razonable son los siguientes:

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Nivel 1 – Precios cotizados para instrumentos idénticos en mercados activos.

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Nivel 2 – Precios cotizados para instrumentos similares en mercados activos; precios cotizados para instrumentos idénticos o similares en mercados que no están activos; y valoraciones basadas en modelos cuyas entradas son observables o cuyos valores significativos pueden observarse.

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Nivel 3: instrumentos con impulsores de valor principalmente no observables.

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Revisamos la clasificación de la jerarquía del valor razonable trimestralmente. Los cambios en la capacidad de monitorear las entradas de valuación pueden conducir a una reclasificación de los niveles de ciertos valores dentro de la jerarquía del valor razonable. No hubo transferencias entre niveles 1, Nivel 2do y nivel 3ro en los seis meses terminados el 31 de marzo de 2020 y 2019.

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Al 31 de marzo de 2020 y al 30 de septiembre de 2019, los pasivos financieros de la compañía a valor razonable, que consistían en derivados implícitos, se clasificaron en el nivel 3 de la jerarquía de valor razonable.

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La empresa determina el valor razonable de los instrumentos híbridos en función de los datos de mercado disponibles utilizando modelos de valoración adecuados, teniendo en cuenta todos los derechos y obligaciones de cada instrumento. La compañía estima el valor razonable de los instrumentos híbridos utilizando diversas técnicas (y combinaciones de los mismos) que se consideran compatibles con el objetivo de medir el valor razonable. Al seleccionar la tecnología adecuada, la empresa tiene en cuenta, entre otras cosas, el tipo de instrumento, los riesgos de mercado que incorpora y las opciones de procesamiento esperadas. La estimación del valor razonable de los instrumentos financieros derivados requiere el desarrollo de estimaciones significativas y subjetivas, que pueden cambiar y se espera que cambien durante el plazo del instrumento con los cambios asociados en los factores del mercado interno y externo. Los aumentos en el valor razonable durante un cierto trimestre comercial conducen al reconocimiento de gastos derivados no monetarios. Por el contrario, una disminución en el valor razonable durante un trimestre comercial en particular daría como resultado el reconocimiento de ingresos por derivados no monetarios.

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La siguiente tabla muestra una conciliación del saldo del pasivo inicial y final para los derivados implícitos, que se miden al valor razonable, utilizando parámetros materiales no observables (nivel 3). Al 31 de marzo de 2020 y 2019:

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Si tu

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Seis meses más

Si tu

31 de marzo,

Si tu

2020

2019

Si tu

Saldo de apertura

PS

3,625,000

PS

2,426,000

Cambio en el valor razonable de pasivos derivados

(75,000)

403,000

Saldo final

PS

3,550,000

PS

2,829,000

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El gasto asociado con el cambio en el valor razonable de los derivados implícitos se incluye como un elemento separado en el estado de resultados consolidado condensado no auditado adjunto.

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Los pasivos asociados con los derivados implícitos representan el valor razonable de las disposiciones de cambio de control en el acuerdo de crédito y el acuerdo de licencia residual. Para obtener más información, consulte la Nota 8. Actualmente no existe un mercado observable para este tipo de derivados. La compañia determinó el valor razonable de los derivados implícitos utilizando un modelo de simulación de Monte Carlo para la valoración de pasivos financieros al inicio y en fechas de valoración posteriores. Este modelo de valoración incluye detalles de la transacción, como los términos del contrato, las salidas de efectivo esperadas, las fechas de reembolso esperadas, la probabilidad de un cambio de control, la volatilidad esperada y las tasas de interés libres de riesgo. Una aceleración significativa en la fecha de reembolso estimada o una disminución significativa en la probabilidad de un evento de cambio de control antes del reembolso del contrato de préstamo resultaría en una valuación significativamente menor de los pasivos asociados con los derivados implícitos a valor razonable.

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La siguiente tabla proporciona información cuantitativa sobre las entradas y los métodos de medición utilizados para determinar el valor razonable de los derivados implícitos clasificados en el Nivel 3 de la jerarquía del valor razonable al 31 de marzo de 2020 y el 30 de septiembre de 2019:

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Promedio ponderado (rango, si corresponde)

Método de valoración

Entrada no observable significativa

31 de marzo de 2020

30 de septiembre de 2019

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simulación del Monte Carlo

Cambio estimado en los datos de control.

Diciembre 2020 a Diciembre 2021

Septiembre 2020 a Diciembre 2021

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Tasa de descuento

16,7% a 21,0%

14,4% a 16,8%

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Probabilidad de un cambio de control.

10% a 90%

10% a 90%

Nota 4 – Ingresos por contratos con clientes

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La compañía genera casi todos sus ingresos de las ventas directas de productos. Los ingresos por ventas directas de productos generalmente se reconocen cuando el cliente adquiere el control del producto, lo que ocurre en un momento determinado y puede realizarse al momento del envío o entrega según los términos contractuales de envío de un contrato. Los impuestos sobre las ventas y los impuestos similares que la empresa recauda al mismo tiempo que las actividades generadoras de ventas están excluidos de las ventas.

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La cantidad de consideración que la compañía finalmente recibe depende de los descuentos de ventas y otros incentivos que la compañía pueda ofrecer. Estos se tienen en cuenta como una consideración variable al estimar la cantidad de ventas que se registrarán. Estimar la consideración variable requiere un juicio considerable. La Compañía incluirá montos estimados en el precio de la transacción si es probable que los ingresos acumulados reconocidos no se reviertan significativamente una vez que se resuelva la incertidumbre asociada con la contraprestación variable. Las estimaciones de la contraprestación variable y la determinación de si los montos estimados deben incluirse en el precio de la transacción se basan en gran medida en una evaluación de las condiciones actuales de venta del contrato y la experiencia histórica de pago.

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Las devoluciones de productos generalmente no son significativas ya que las devoluciones generalmente solo se permiten si el producto está dañado en el momento de la recepción.

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Los ingresos de la compañía provienen de la venta directa de productos de FC2 en el sector público mundial, las ventas de FC2 en el canal de medicamentos recetados de EE. UU. Y las ventas de toallitas de drogas PREBOOST® para prevenir la eyaculación precoz. La siguiente tabla muestra el ingreso neto de estas tres categorías:

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Si tu

Si tu

Si tu

Tres meses terminaron

Seis meses más

Si tu

31 de marzo,

31 de marzo,

Si tu

2020

2019

2020

2019

FC2

sector público

PS

2,569,644

PS

4,249,652

PS

6,943,438

PS

8.134.004

Canal de prescripción de EE. UU.

6,952,627

2,594,271

13.003.757

5.034.316

FC2 total

9.522.271

6.843.923

19,947,195

13.168.320

PREBOOST®

420,833

132,192

573,925

179,604

Las ventas netas

PS

9,943,104

PS

6,976,115

PS

20,521,120

PS

13,347,924

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La siguiente tabla muestra los ingresos netos por área geográfica:

Si tu

Si tu

Si tu

Si tu

Tres meses terminaron

Seis meses más

Si tu

31 de marzo,

31 de marzo,

Si tu

2020

2019

2020

2019

Si tu

Estados Unidos

PS

7.674.849

PS

2,596,281

PS

14.166.003

PS

5.645.884

Zimbabue

– –

* *

– –

1,948,304

Brasil

* *

1,098,000

* *

* *

Otro

2,268,255

3.281.834

6.355.117

5,753,736

Las ventas netas

PS

9,943,104

PS

6,976,115

PS

20,521,120

PS

13,347,924

* Menos del 10% de las ventas netas totales

Si tu

Las obligaciones de desempeño de la compañía son principalmente transferir el control de los productos especificados en los contratos. Esto sucede si: i) el producto se pone a disposición del cliente para su envío; ii) el producto se envía a través de un transportista común; o iii) el producto se entrega al cliente o distribuidor de acuerdo con los términos del acuerdo. Algunos contratos de la empresa requieren que el cliente realice pagos por adelantado antes de transferir el control de los productos. Estos pagos anticipados establecen responsabilidad contractual para la empresa. Los saldos de responsabilidad contractual de la Compañía, que se incluyen en las provisiones y otros pasivos corrientes en los balances consolidados condensados ​​no auditados adjuntos, fueron aproximadamente $ 508,000 y $ 249,000 al 31 de marzo de 2020 y al 30 de septiembre de 2019.

Si tu

La compañía registra una responsabilidad de ventas no derivada del trabajo si un cliente paga una contraprestación por el producto enviado por la compañía, pero los criterios para el reconocimiento de ingresos no se cumplieron de acuerdo con los términos del contrato. Las ganancias no ganadas se registran como ganancias después de que el control del producto se haya transferido al cliente y se hayan cumplido todos los criterios para el reconocimiento de ingresos. La empresa tenía No Ganancias no derivadas al 31 de marzo de 2020 o 30 de septiembre de 2019.

Si tu

La empresa tuvo ventas de $ 299,000 y $ 221,000 en los seis meses terminados el 31 de marzo de 2020 y 2019, respectivamente, después de cumplir con sus obligaciones contractuales y transferir el control sobre pasivos contractuales previamente reconocidos o ingresos no ganados.

Nota 5 – Contabilidad de cuentas por cobrar y concentración de riesgo de crédito

Si tu

Los términos de crédito estándar de la compañía varían de 30 a 120 Días, dependiendo de la clase comercial y las condiciones habituales dentro de un área, de modo que las demandas estén influenciadas por la mezcla del comprador dentro del período. Como es típico del negocio de la compañía, ocasionalmente se pueden ofrecer términos de crédito extendido como promociones de ventas o para ciertas ventas. La compañía ha acordado condiciones de crédito de hasta ventas para el distribuidor de la compañía en Brasil. 180 Días después de la aprobación del producto por el Ministerio de Salud de Brasil. La empresa clasificó aproximadamente $ 1.1 Millones y $ 300,000 Las cuentas por cobrar comerciales de su agente de ventas en Brasil son tan largas como el 31 de marzo de 2020 y el 30 de septiembre de 2019, respectivamente, ya que el pago se esperaba en más de un año. La parte a largo plazo de las cuentas por cobrar comerciales se incluye en los otros activos en el balance general consolidado condensado no auditado adjunto.


Si tu

Al 31 de marzo de 2020 y al 30 de septiembre de 2019, los componentes de las cuentas por cobrar consisten en los siguientes componentes:

Si tu

Si tu

Si tu

Si tu

Si tu

31 de marzo,

30. septiembre

Si tu

2020

2019

Si tu

Cuentas por cobrar comerciales, brutas

PS

7.013.027

PS

5.410.165

Menos: teniendo en cuenta cuentas dudosas

(25,643)

(33, 143)

Menos: consideración de descuentos en ventas y pagos

(84,743)

(49,623)

Menos cuentas por cobrar comerciales a largo plazo *

(1,100,625)

(306,342)

Reclamaciones netas

PS

5.802.016

PS

5,021,057

* Incluido en los otros activos del balance consolidado condensado no auditado adjunto

Si tu

Al 31 de marzo de 2020 y 30 de septiembre de 2019 No Los clientes tenían un saldo de cuentas por cobrar que era más del 10% de los activos corrientes.

Si tu

Al 31 de marzo de 2020 Tres Los clientes tenían unonorte Saldo de clientes mayor al 10% de cuentas por cobrar netas y cuentas por cobrar comerciales a largo plazomostrando 8vo1% de cuentas por cobrar netas y cuentas por cobrar comerciales a largo plazo en total. Fue el 30 de septiembre de 2019 dos Los clientes tenían unonorte Saldo de clientes mayor al 10% de cuentas por cobrar netas y cuentas por cobrar comerciales a largo plazomostrando 6 66 6% de cuentas por cobrar netas y cuentas por cobrar comerciales a largo plazo en total.

Si tu

Para los tres meses terminados el 31 de marzo de 2020 hubo Tres Clientes cuyas ventas netas individuales para la compañía superaron el 10% de las ventas netas de la compañía. 80% del ingreso neto total de la compañía. Para los tres meses terminados el 31 de marzo de 2019 hubo cuatro Clientes cuyas ventas netas individuales para la compañía superaron el 10% de las ventas netas de la compañía. 82% del ingreso neto total de la compañía.

Si tu

Hubo un semestre que finalizó el 31 de marzo de 2020. dos Clientes cuyas ventas netas individuales para la compañía superaron el 10% de las ventas netas de la compañía. 71% del ingreso neto total de la compañía. Hubo un semestre que finalizó el 31 de marzo de 2019. Tres Clientes cuyas ventas netas individuales para la compañía superaron el 10% de las ventas netas de la compañía. 66% del ingreso neto total de la compañía.

Si tu

La compañía tiene en cuenta las cuentas dudosas para las pérdidas estimadas resultantes de la incapacidad de sus clientes para realizar los pagos necesarios para las reclamaciones. La gerencia determina la asignación para cuentas dudosas identificando cuentas problemáticas y utilizando la experiencia histórica de envejecimiento de cuentas. La gerencia también evalúa regularmente los reclamos individuales de los clientes y tiene en cuenta la situación financiera, la solvencia y las condiciones económicas actuales del cliente. Las cuentas por cobrar se cargan si se consideran incobrables.

Si tu

La siguiente tabla resume el cambio en la asignación de deuda incobrable para los seis meses terminados el 31 de marzo de 2020 y 2019:

Si tu

Si tu

Si tu

Si tu

Seis meses hasta el 31 de marzo

Si tu

2020

2019

Si tu

Saldo de apertura

PS

33,143

PS

36.201

Costo al costo

– –

– –

Cargos

(7,500)

– –

Saldo final

PS

25,643

PS

36.201

Las recuperaciones de cuentas por cobrar previamente cargadas se registran al recibo. Zu den Kunden des Unternehmens zählen hauptsächlich große globale Agenturen, Nichtregierungsorganisationen, Gesundheitsministerien und andere Regierungsbehörden, die FC2 zur Verwendung in HIV / AIDS-Präventions- und Familienplanungsprogrammen kaufen und vertreiben. Zu den Kunden des Unternehmens in den USA zählen Telemedizinanbieter, die über den verschreibungspflichtigen Kanal verkaufen.


Anmerkung 6 – Bilanzinformationen

Si tu

Inventar

Si tu

Vorräte werden zum niedrigeren Wert aus Anschaffungskosten oder Nettoveräußerungswert bewertet. Die Kosten werden nach der FIFO-Methode (First-In, First-Out) ermittelt. Vorräte werden auch für Schätzungen des Managements für Produkte abgeschrieben, die nicht vor dem Ablaufdatum verkauft werden. Write-downs of inventories establish a new cost basis which is not increased for future increases in the net realizable value of inventories or changes in estimated obsolescence.

Si tu

Inventory consisted of the following at March 31, 2020 and September 30, 2019:

Si tu

Si tu

Si tu

March 31,

September 30,

Si tu

2020

2019

FC2:

Rohstoff

PS

665,134

PS

426,590

Work in process

49,684

187,970

Finished goods

5,386,041

3,157,952

FC2, gross

6,100,859

3,772,512

Less: inventory reserves

(84,536)

(125,106)

Inventory, net

PS

6,016,323

PS

3,647,406

Si tu

Fixed Assets

Si tu

We record equipment, furniture and fixtures, and leasehold improvements at historical cost. Expenditures for maintenance and repairs are recorded to expense. Depreciation and amortization are primarily computed using the straight-line method. Depreciation and amortization are computed over the estimated useful lives of the respective assets. Leasehold improvements are depreciated on a straight-line basis over the lesser of the remaining lease term or the estimated useful lives of the improvements.

Si tu

Plant and equipment consisted of the following at March 31, 2020 and September 30, 2019:

Si tu

Si tu

Si tu

Estimated

March 31,

September 30,

Si tu

Useful Life

2020

2019

Plant and equipment:

Manufacturing equipment

5 5 – – 8vo Jahre

PS

2,748,604

PS

2,716,647

Office equipment, furniture and fixtures

3ro – – 10 Jahre

817,951

795,228

Leasehold improvements

3ro – – 8vo Jahre

298,886

298,886

Total plant and equipment

3,865,441

3,810,761

Less: accumulated depreciation and amortization

(3,533,079)

(3,458,866)

Plant and equipment, net

PS

332,362

PS

351,895

Note 7 – Intangible Assets and Goodwill

Si tu

Intangible Assets

Si tu

The gross carrying amounts and net book value of intangible assets are as follows at March 31, 2020:

Si tu

Si tu

Si tu

Gross Carrying

Accumulated

Net Book

Si tu

cantidad

Amortization

Value

Intangible assets with finite lives:

Developed technology – PREBOOST®

PS

2,400,000

PS

645,641

PS

1,754,359

Covenants not-to-compete

500.000

244,048

255,952

Total intangible assets with finite lives

2,900,000

889,689

2,010,311

Acquired in-process research and development assets

18,000,000

– –

18,000,000

Total intangible assets

PS

20,900,000

PS

889,689

PS

20,010,311

Si tu


The gross carrying amounts and net book value of intangible assets are as follows at September 30, 2019:

Si tu

Si tu

Si tu

Gross Carrying

Accumulated

Net Book

Si tu

cantidad

Amortization

Value

Intangible assets with finite lives:

Developed technology – PREBOOST®

PS

2,400,000

PS

523,172

PS

1,876,828

Covenants not-to-compete

500.000

208,333

291,667

Total intangible assets with finite lives

2,900,000

731,505

2,168,495

Acquired in-process research and development assets

18,000,000

– –

18,000,000

Total intangible assets

PS

20,900,000

PS

731,505

PS

20,168,495

Si tu

For the three months ended March 31, 2020 and 2019, amortization expense was approximately $79,000 y $77,000, respectively. For the six months ended March 31, 2020 and 2019, amortization expense was approximately $158,000 and $155,000, respectively.

Si tu

Goodwill

Si tu

The carrying amount of goodwill at March 31, 2020 and September 30, 2019 was $6.9 million. There was no change in the balance during the six months ended March 31, 2020 and 2019.

Note 8 – Debt

Si tu

SWK Credit Agreement

Si tu

On March 5, 2018, the Company entered into a Credit Agreement (as amended, the “Credit Agreement”) with the financial institutions party thereto from time to time (the “Lenders”) and SWK Funding LLC, as agent for the Lenders (the “Agent”), for a synthetic royalty financing transaction. On and subject to the terms of the Credit Agreement, the Lenders provided the Company with a term loan of $10.0 million, which was advanced to the Company on the date of the Credit Agreement. After payment by the Company of certain fees and expenses of the Agent and the Lenders as required in the Credit Agreement, the Company received net proceeds of approximately $9.9 million from the $10.0 million loan under the Credit Agreement.

Si tu

The Lenders will be entitled to receive quarterly payments on the term loan based on the Company’s product revenue from net sales of FC2 as provided in the Credit Agreement until the Company has paid 176.5% of the aggregate amount advanced to the Company under the Credit Agreement. yof product revenue from net sales of FC2 for the 12-month period ended as of the last day of the respective quarterly payment period is less than $10.0 million, the quarterly payments will be 32.5% of product revenue from net sales of FC2 during the quarterly period. If product revenue from net sales of FC2 for the 12-month period ended as of the last day of the respective quarterly payment period is equal to or greater than $10.0 million, the quarterly payments are calculated as follows: (i) as it relates to each quarter during the 2019 calendar year, the sum of 12,5% of product revenue from net sales of FC2 up to and including $12.5 million in the Elapsed Period (as defined in the Credit Agreement), plus 5% of product revenue from net sales of FC2 greater than $12.5 million in the Elapsed Period, (ii) as it relates to each quarter during the 2020 calendar year, the sum of 25% of product revenue from net sales of FC2 up to and including $12.5 million in the Elapsed Period, plus 10% of product revenue from net sales of FC2 greater than $12.5 million in the Elapsed Period, and (iii) as it relates to each quarter during the 2021 calendar year and thereafter, the sum of 30% of product revenue from net sales of FC2 up to and including $12.5 million in the Elapsed Period, plus 20% of product revenue from net sales of FC2 greater than $12.5 million in the Elapsed Period. U.pon the Credit Agreement’s termination date of March 5, 2025, the Company must pay 176.5% of the aggregate amount advanced to the Company under the Credit Agreement less the amounts previously paid by the Company from product revenue. The payment requirements described above reflect an amendment to the Credit Agreement dated May 13, 2019 (the “Second Amendment”) which included a reduction to the percentages to be used to calculate the quarterly revenue-based payments due on product revenue from net sales of FC2 during calendar 2019, a return to the original percentages to calculate the quarterly revenue-based payments due on product revenue from net sales of FC2 during calendar 2020 and an increase to the percentages to be used to calculate the quarterly revenue-based payments due on product revenue from net sales of FC2 during calendar 2021 and thereafter until the loan has been repaid.

Si tu


Upon a change of control of the Company or sale of the FC2 business, the Company must pay off the loan by making a payment to the Lenders equal to (i) 176.5% of the aggregate amount advanced to the Company under the Credit Agreement less the amounts previously paid by the Company from product revenue, plus (ii) the greater of (A) $2.0 million or (B) the product of (x) 5% of the product revenue from net sales of FC2 for the most recently completed 12-month period multiplied by (y) five. A “change of control” under the Credit Agreement includes (i) an acquisition by any person of direct or indirect ownership of more than 50% of the Company’s issued and outstanding voting equity, (ii) a change of control or similar event in the Company’s articles of incorporation or bylaws, (iii) certain Key Persons as defined in the Credit Agreement cease to serve in their current executive capacities unless replaced within 90 days by a person reasonably acceptable to the Agent, which acceptance not to be unreasonably withheld, or (iv) the sale of all or substantially all of the Company’s assets.

Si tu

The Credit Agreement contains customary representations and warranties in favor of the Agent and the Lenders and certain covenants, including financial covenants addressing minimum quarterly marketing and distribution expenses for FC2 and a requirement to maintain minimum unencumbered liquid assets of $1.0 Million. The Credit Agreement also restricts the payment of dividends and share repurchases. The recourse of the Lenders and the Agent for obligations under the Credit Agreement is limited to assets relating to FC2.

Si tu

In connection with the Credit Agreement, the Company and the Agent also entered into a Residual Royalty Agreement, dated as of March 5, 2018 (as amended, the “Residual Royalty Agreement”), which provides for an ongoing royalty payment of 5% of product revenue from net sales of FC2 commencing after the Company would have paid 175% of the aggregate amount advanced to the Company under the Credit Agreement based on a calculation of revenue-based payments under the Credit Agreement without taking into account the amendments to the payment requirements under the Credit Agreement effected by the Second Amendment. The Residual Royalty Agreement will terminate upon (i) a change of control or sale of the FC2 business and the payment by the Company of the amount due in connection therewith pursuant to the Credit Agreement, or (ii) mutual agreement of the parties. If a change of control or sale of the FC2 business occurs prior to payment in full of the Credit Agreement, there will be no further payment due with respect to the Residual Royalty Agreement. If a change of control or sale of the FC2 business occurs after payment in full of the Credit Agreement, the Agent will receive a payment that is the greater of (A) $2.0 million or (B) the product of (x) 5% of the product revenue from net sales of FC2 for the most recently completed 12-month period multiplied by (y) five.

Si tu

Pursuant to a Guarantee and Collateral Agreement dated as of March 5, 2018 (the “Collateral Agreement”) and an Intellectual Property Security Agreement dated as of March 5, 2018 (the “IP Security Agreement”), the Company’s obligations under the Credit Agreement are secured by a lien against substantially all of the assets of the Company that relate to or arise from FC2. In addition, pursuant to a Pledge Agreement dated as of March 5, 2018 (the “Pledge Agreement”), the Company’s obligations under the Credit Agreement are secured by a pledge of up to 65% of the outstanding shares of The Female Health Company Limited, a wholly owned U.K. subsidiary.

Si tu

For accounting purposes, the $10.0 million advance under the Credit Agreement was allocated between the Credit Agreement and the Residual Royalty Agreement on a relative fair value basis. A portion of the amount allocated to the Credit Agreement and a portion of the amount allocated to the Residual Royalty Agreement, in both cases equal to the fair value of the respective change of control provisions, was allocated to the embedded derivative liabilities. The derivative liabilities will be adjusted to fair market value at each subsequent reporting period. For financial statement presentation, the embedded derivative liabilities have been included with their respective host instruments as noted in the following tables. The debt discounts sind being amortized to interest expense over the expected term of the loan using the effective interest method. Additionally, the Company recorded deferred loan issuance costs of approximately $267,000 for legal fees incurred in connection with the Credit Agreement. The deferred loan issuance costs are presented as a reduction in the Credit Agreement obligation and are being amortized to interest expense over the expected term of the loan using the effective interest method. The Second Amendment was accounted for as a debt modification, which resulted in prospective adjustment to the effective interest rate.

Si tu


At March 31, 2020 and September 30, 2019, the Credit Agreement liability consisted of the following:

Si tu

Si tu

Si tu

Si tu

March 31,

September 30,

Si tu

2020

2019

Si tu

Aggregate repayment obligation

PS

17,650,000

PS

17,650,000

Less: cumulative payments

(6,522,697)

(5,578,085)

Less: unamortized discounts

(2,884,396)

(4,590,974)

Less: unamortized deferred issuance costs

(67,798)

(107,910)

Credit agreement, excluding embedded derivative liability, net

8,175,109

7,373,031

Add: embedded derivative liability at fair value (see Note 3)

821,000

899,000

Credit agreement, net

8,996,109

8,272,031

Credit agreement, short-term portion

(6,662,842)

(5,385,649)

Credit agreement, long-term portion

PS

2,333,267

PS

2,886,382

Si tu

The short-term portion of the Credit Agreement represents the aggregate of the estimated quarterly revenue-based payments payable during the 12-month periods subsequent to March 31, 2020 and September 30, 2019, respectively.

Si tu

At March 31, 2020 and September 30, 2019, the Residual Royalty Agreement liability consisted of the following:

Si tu

Si tu

Si tu

Si tu

March 31,

September 30,

Si tu

2020

2019

Si tu

Residual royalty agreement liability, fair value at inception

PS

346,000

PS

346,000

Add: accretion of liability using effective interest rate

1,333,215

773,518

Residual royalty agreement liability, excluding embedded derivative liability

1,679,215

1,119,518

Add: embedded derivative liability at fair value (see Note 3)

2,729,000

2,726,000

Residual royalty agreement liability

PS

4,408,215

PS

3,845,518

Si tu

Interest expense related to the Credit Agreement and the Residual Royalty Agreement consisted of amortization of the discounts, accretion of the liability for the Residual Royalty Agreement and amortization of the deferred issuance costs. For the three and six months ended March 31, 2020 and 2019, interest expense related to the Credit Agreement and Residual Royalty Agreement was as follows:

Si tu

Si tu

Si tu

Si tu

Three Months Ended

Six Months Ended

Si tu

March 31,

March 31,

Si tu

2020

2019

2020

2019

Si tu

Amortization of discounts

PS

844,592

PS

1,107,622

PS

1,706,578

PS

2,265,828

Accretion of residual royalty agreement

300,519

123,946

559,697

216,297

Amortization of deferred issuance costs

19,851

26,704

40,112

54,570

Interest expense

PS

1,164,962

PS

1,258,272

PS

2,306,387

PS

2,536,695

Si tu

Premium Finance Agreement

Si tu

On November 1, 2019, the Company entered into a Premium Finance Agreement to finance $837,000 of its directors and officers liability insurance premium at an annual percentage rate of 4.18%. The financing is payable in drei quarterly installments of principal and interest, which began on January 1, 2020. The balance of the insurance premium liability is $559,000 as of March 31, 2020 and is included in accrued expenses and other current liabilities on the accompanying unaudited condensed consolidated balance sheet.


Note 9 – Stockholders’ Equity

Si tu

Preferred Stock

Si tu

The Company has 5,000,000 shares designated as Class A Preferred Stock with a par value of $0.01 per share. Es gibt 1,040,000 shares of Class A Preferred Stock – Series 1 authorized; 1,500,000 shares of Class A Preferred Stock – Series 2 authorized; 700,000 shares of Class A Preferred Stock – Series 3 authorized; y 548,000 shares of Class A Preferred Stock – Series 4 (the “Series 4 Preferred Stock”) authorized. There were no shares of Class A Preferred Stock of any series ausgegeben y hervorragend at March 31, 2020 and September 30, 2019. The Company has 15.000 shares designated as Class B Preferred Stock with a par value of $0.50 per share. There were no shares of Class B Preferred Stock ausgegeben y hervorragend at March 31, 2020 and September 30, 2019.

Si tu

Common Stock Offering

Si tu

On October 1, 2018, we completed an underwritten public offering of 7,142,857 shares of our common stock, at a public offering price of $1.40 per share. Net proceeds to the Company from this offering were $9.1 million after deducting underwriting discounts and commissions and costs paid by the Unternehmen. All of the shares sold in the offering were by the Company. The offering was made pursuant to the Shelf Registration Statement.

Si tu

Common Stock Purchase Warrants

Si tu

In connection with the closing of the APP Acquisition, the Company issued a warrant to purchase up to 2,585,379 shares of the Company’s common stock to Torreya Capital, the Company’s financial advisor (the “Financial Advisor Warrant”). The Financial Advisor Warrant has a five-year term expiring October 31, 2021, a cashless exercise feature and a strike price equal to $1.93 per share. The Financial Advisor Warrant vested upon issuance and remains outstanding at March 31, 2020.

Si tu

Aspire Capital Purchase Agreement

Si tu

On December 29, 2017, the Company entered into a common stock purchase agreement (the “Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”) which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company has the right, from time to time in its sole discretion during the 36-month term of the Purchase Agreement, to direct Aspire Capital to purchase up to $15.0 million of the Company’s common stock in the aggregate. Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Aspire Capital (the “Registration Rights Agreement”), in which the Company agreed to prepare and file under the Securities Act of 1933 and under the Shelf Registration Statement, a prospectus supplement for the sale or potential sale of the shares of the Company’s common stock that have been and may be issued to Aspire Capital under the Purchase Agreement.

Si tu

Under the Purchase Agreement, on any trading day selected by the Company, the Company has the right, in its sole discretion, to present Aspire Capital with a purchase notice (each, a “Purchase Notice”), directing Aspire Capital (as principal) to purchase up to 200.000 shares of the Company’s common stock per business day, up to $15.0 million of the Company’s common stock in the aggregate at a per share price (the “Purchase Price”) equal to the lesser of the lowest sale price of the Company’s common stock on the purchase date or the average of the three lowest closing sale prices for the Company’s common stock during the ten consecutive trading days ending on the trading day immediately preceding the purchase date.

Si tu

In addition, on any date on which the Company submits a Purchase Notice to Aspire Capital in an amount equal to 200.000 shares and the closing sale price of our common stock is equal to or greater than $0.50 per share, the Company also has the right, in its sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to purchase an amount of common stock equal to up to 30% of the aggregate shares of the common stock traded on its principal market on the next trading day (the “VWAP Purchase Date”), subject to a maximum number of shares the Company may determine. The purchase price per share pursuant to such VWAP Purchase Notice is generally 97% of the volume-weighted average price for the Company’s common stock traded on its principal market on the VWAP Purchase Date.

Si tu


During the six months ended March 31, 2020, we sold 300.000 shares of common stock to Aspire Capital under the Purchase Agreement resulting in proceeds to the Company of $1.2 Million. As a result of these sales, we recorded approximately $35,000 of deferred costs to additional paid-in capital.

Si tu

Since inception of the Purchase Agreement through March 31, 2020, we sold an aggregate of 4,017,010 shares of common stock to Aspire Capital resulting in proceeds to the Company of $7.8 Million. As of March 31, 2020, the amount remaining under the Purchase Agreement was $7.2 Million. Subsequent to March 31, 2020, we sold 400.000 shares of common stock to Aspire Capital under the Purchase Agreement resulting in proceeds to the Company of 1,3 $ Million.

Si tu

In consideration for entering into the Purchase Agreement, concurrently with the execution of the Purchase Agreement, the Company issued to Aspire Capital 304,457 shares of the Company’s common stock. The shares of common stock issued as consideration were valued at approximately $347,000. This amount and related expenses of approximately $78,000, which total approximately $425,000, were recorded as deferred costs. The unamortized amount of deferred costs of approximately $203,000 y $238,000 at March 31, 2020 and September 30, 2019, respectively, is included in other assets on the accompanying unaudited condensed consolidated balance sheets.

Si tu

Note 10 – Share-based Compensation

Si tu

We allocate share-based compensation expense to cost of sales, selling, general and administrative expense, and research and development expense based on the award holder’s employment function. For the three and six months ended March 31, 2020 and 2019, we recorded share-based compensation expenses as follows:

Si tu

Si tu

Si tu

Three Months Ended

Six Months Ended

Si tu

March 31,

March 31,

Si tu

2020

2019

2020

2019

Si tu

Cost of sales

PS

16,425

PS

7,778

PS

30,970

PS

15,730

Selling, general and administrative

480,628

407,426

952,323

734,435

Research and development

184,627

81,005

312,885

163,300

Share-based compensation

PS

681,680

PS

496,209

PS

1,296,178

PS

913,465

Si tu

Equity Plans

Si tu

In March 2018, the Company’s stockholders approved the Company’s 2018 Equity Incentive Plan (the “2018 Plan”). On March 24, 2020, the Company’s stockholders approved an increase in the number of shares that may be issued under the 2018 Plan to 11.0 Million. As of March 31, 2020, 5,876,321 shares remain available for issuance under the 2018 Plan.

Si tu

In July 2017, the Company’s stockholders approved the Company’s 2017 Equity Incentive Plan (the “2017 Plan”). A total of 4.7 million shares are authorized for issuance under the 2017 Plan. As of March 31, 2020, 70,181 shares remain available for issuance under the 2017 Plan. The 2017 Plan replaced the Company’s 2008 Stock Incentive Plan (the “2008 Plan”), and no further awards will be made under the 2008 Plan.

Si tu

Stock Options

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Each option grants the holder the right to purchase from us one share of our common stock at a specified price, which is generally the closing price per share of our common stock on the date the option is issued. Options generally vest on a pro-rata basis on each anniversary of the issuance date within drei years of the date the option is issued. Options may be exercised after they have vested and prior to the specified expiry date provided applicable exercise conditions are met, if any. The expiry date can be for periods of up to ten years from the date the option is issued. The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions established at that time. The Company accounts for forfeitures as they occur and does not estimate forfeitures as of the option grant date.


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The following table outlines the weighted average assumptions for options granted during the three and six months ended March 31, 2020 and 2019:

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Three Months Ended

Six Months Ended

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March 31,

March 31,

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2020

2019

2020

2019

Weighted Average Assumptions:

Expected volatility

65.66%

65.45%

63.13%

66.88%

Expected dividend yield

0.00%

0.00%

0.00%

0.00%

Risk-free interest rate

0.62%

2.27%

1,63%

2.59%

Expected term (in years)

6.0

5.9

5.9

5.7

Fair value of options granted

PS

1.84

PS

0.90

PS

1.14

PS

0.85

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During the three and six months ended March 31, 2020 and 2019, the Company used historical volatility of our common stock over a period equal to the expected life of the options to estimate their fair value. The dividend yield assumption is based on the Company’s recent history and expectation of future dividend payouts on the common stock. The risk-free interest rate is based on the implied yield available on U.S. treasury zero-coupon issues with an equivalent remaining term.

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The following table summarizes the stock options outstanding and exercisable at March 31, 2020:

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Gewichteter Durchschnitt

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Verbleibend

Aggregate

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Anzahl der

Exercise Price

Contractual Term

Intrinsic

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Shares

Per Share

(Jahre)

Value

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Outstanding at September 30, 2019

7,027,989

PS

1.58

Granted

2,228,827

PS

1.97

Exercised

(436,748)

PS

1,67

Forfeited

(176,028)

PS

1.51

Outstanding at March 31, 2020

8,644,040

PS

1,68

8.25

PS

13,781,911

Exercisable at March 31, 2020

3,342,581

PS

1.48

7.36

PS

5,973,380

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The aggregate intrinsic values in the table above are before income taxes and represent the number of in-the-money options outstanding or exercisable multiplied by the closing price per share of the Company’s common stock on the last trading day of the quarter ended March 31, 2020 von $3.27, less the respective weighted average exercise price per share at period end.

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The total intrinsic value of options exercised during the six months ended March 31, 2020 and 2019 was approximately $1.1 million and $48,000, respectively. Cash received from options exercised during the six months ended March 31, 2020 and 2019 was approximately $409,000 y $200,000, respectively. During the six months ended March 31, 2020, 223,415 options were exercised using the cashless exercise feature available under the 2017 Plan and 2018 Plan, which resulted in the issuance of 143,958 shares of common stock.

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As of March 31, 2020, the Company had unrecognized compensation expense of approximately $4.1 million related to unvested stock options. This expense is expected to be recognized over approximately drei Jahre.

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Stock Appreciation Rights

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In connection with the closing of the APP Acquisition, the Company issued stock appreciation rights based on 50.000 y 140.000 shares of the Company’s common stock to an employee and an outside director, respectively, that vested on October 31, 2018. The stock appreciation rights have a ten-year term and an exercise price per share of $0.95, which was the closing price per share of the Company’s common stock as quoted on NASDAQ on the trading day immediately preceding the date of the completion of the APP Acquisition. Upon exercise, the stock appreciation rights will be settled in common stock issued under the 2017 Plan. As of March 31, 2020, vested stock appreciation rights based on 50.000 shares of common stock remain outstanding.

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Note 11 – Leases

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The Company has operating leases for its office, manufacturing and warehouse space, and office equipment. The Company has a finance lease for office equipment, furniture, and fixtures. The Company’s leases have remaining lease terms of less than one year to six years, which include the option to extend a lease when the Company is reasonably certain to exercise that option. The Company does not have any leases that have not yet commenced as of March 31, 2020. Certain of our lease agreements include variable lease payments for common area maintenance, real estate taxes, and insurance or based on usage for certain equipment leases. For one of our office space leases, the Company entered into a sublease, for which it receives sublease income. Sublease income is recognized as a reduction to operating lease costs as the sublease is outside of the Company’s normal business operations. This is consistent with the Company’s recognition of sublease income prior to the adoption of FASB ASC Topic 842.

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The components of the Company’s lease cost were as follows for the three and six months ended March 31, 2020:

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Three Months Ended

Six Months Ended

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31. März 2020

31. März 2020

Finance lease cost:

Amortization of right-of-use assets

PS

2,179

PS

4,357

Interest on lease liabilities

1,379

2,859

Operating lease cost

121,106

253,680

Short-term lease cost

1,863

3,726

Variable lease cost

33,671

67,136

Sublease income

(44,845)

(89,689)

Total lease cost

PS

115,353

PS

242,069

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The Company paid cash of $244,000 for amounts included in the measurement of operating lease liabilities during the six months ended March 31, 2020.

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The Company’s operating lease ROU assets and the related lease liabilities are presented as separate line items on the accompanying unaudited condensed consolidated balance sheet as of March 31, 2020. The Company’s finance lease ROU asset was $39,000 as of March 31, 2020 and is included in property and equipment, net on the accompanying unaudited condensed consolidated balance sheet. The current and long-term finance lease liabilities were $20,000 y $17,000, respectively, and are included in accrued expenses and other current liabilities and other liabilities, respectively, on the accompanying unaudited condensed consolidated balance sheet as of March 31, 2020.

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Other information related to the Company’s leases as of March 31, 2020 was as follows:

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31. März 2020

Operating Leases

Weighted-average remaining lease term

4.3

Weighted-average discount rate

12.01%

Finance Leases

Weighted-average remaining lease term

1.9

Weighted average discount rate

13.86%

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The Company’s lease agreements do not provide a readily determinable implicit rate. Therefore, the Company estimates its incremental borrowing rate based on information available at lease commencement in order to discount lease payments to present value.

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As of March 31, 2020, maturities of lease liabilities were as follows:

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Operating

Finanzen

Sublease

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Leases

Leases

Income

Fiscal year ended September 30,

2020

PS

211,163

PS

10,812

PS

97,081

2021

428,848

22,199

198,668

2022

347,841

9,496

203,584

2023

293,045

– –

190,749

2024

189,335

– –

– –

Thereafter

162,672

– –

– –

Total lease payments

1,632,904

42,507

PS

690,082

Less imputed interest

(362,819)

(5,498)

Total lease liabilities

PS

1,270,085

PS

37,009

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Under FASB ASC 840, the lease accounting guidance prior to the Company’s adoption of FASB ASC 842, the Company had net capital lease assets of $43,000 included in property and equipment, net and a related capital lease obligation of $42,000 included in accrued expenses and other current liabilities and other liabilities on the accompanying unaudited condensed consolidated balance sheet as of September 30, 2019.

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Under FASB ASC 840, future minimum payments under operating leases consisted of the following as of September 30, 2019:

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Operating

Sublease

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Leases

Income

Net Total

Fiscal year ended September 30,

2020

PS

469,002

PS

193,753

PS

275,249

2021

433,751

198,668

235,083

2022

337,456

203,584

133,872

2023

114,493

190,749

(76,256)

2024

11,238

– –

11,238

Total minimum lease payments

PS

1,365,940

PS

786,754

PS

579,186

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The minimum lease payments presented above do not include real estate taxes, common area maintenance charges or insurance charges payable under the Company’s operating leases for office and manufacturing facility space. These amounts are generally not fixed and can fluctuate from year to year.

Note 12 – Contingent Liabilities

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The testing, manufacturing and marketing of consumer products by the Company and the clinical testing of our product candidates entail an inherent risk that product liability claims will be asserted against the Company. The Company maintains product liability insurance coverage for claims arising from the use of its products. The coverage amount is currently $10.0 Million.

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Rechtsstreitigkeiten

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From time to time we may be involved in litigation or other contingencies arising in the ordinary course of business. Based on the information presently available, management believes there are no contingencies, claims or actions, pending or threatened, the ultimate resolution of which will have a material adverse effect on our financial position, liquidity or results of operations.

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In accordance with FASB ASC 450, Contingencies, we accrue loss contingencies including costs of settlement, damages and defense related to litigation to the extent they are probable and reasonably estimable. Otherwise, we expense these costs as incurred. If the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range.

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License and Purchase Agreements

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From time to time, we license or purchase rights to technology or intellectual property from third parties. These licenses and purchase agreements require us to pay upfront payments as well as development or other payments upon successful completion of preclinical, clinical, regulatory or revenue milestones. In addition, these agreements may require us to pay royalties on sales of products arising from the licensed or acquired technology or intellectual property. Because the achievement of future milestones is not reasonably estimable, we have not recorded a liability on the accompanying unaudited condensed consolidated financial statements for any of these contingencies.

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Note 13 – Income Taxes

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The Company accounts for income taxes using the liability method, which requires the recognition of deferred tax assets or liabilities for the tax-effected temporary differences between the financial reporting and tax bases of its assets and liabilities, and for net operating loss and tax credit carryforwards.

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The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) repealed the alternative minimum tax (“AMT”) for corporations. The law provides that AMT carryovers can be utilized to reduce or eliminate the tax liability in subsequent years or to obtain a tax refund. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020, accelerates the ability to claim a refund of the entire refundable credit to 2018 with an election when filing. The Tax Act previously allowed a 50% refundable credit for tax years beginning in 2018 through 2020, with a 100% credit refund in 2021. At March 31, 2020, the Company has $0.5 million of AMT credit carryovers in prepaid expenses and other current assets due to the expectation, as a result of the CARES Act, that the AMT credits will be refundable over the next year.

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As of September 30, 2019, the Company had U.S. federal and state net operating loss carryforwards of $42.7 million and $25.4 million, respectively, for income tax purposes with $14.4 million and $20.5 million, respectively, expiring in years 2022 a 2038 y $28.3 million and $4.9 million, respectively, which can be carried forward indefinitely. The Company’s U.K. subsidiary has U.K. net operating loss carryforwards of $61.7 million as of September 30, 2019, which can be carried forward indefinitely to be used to offset future U.K. taxable income.

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A reconciliation of income tax (benefit) expense and the amount computed by applying the statutory federal income tax rate of 21% to income before income taxes is as follows:

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Three Months Ended

Six Months Ended

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March 31,

March 31,

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2020

2019

2020

2019

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Income tax benefit at U.S. federal statutory rates

PS

(198,166)

PS

(841,862)

PS

(908,354)

PS

(1,273,685)

State income tax benefit, net of federal benefits

(15,347)

(199,521)

(70,347)

(301,863)

Effect of foreign income tax rates

23,832

4,830

66,386

(3,527)

Effect of deemed dividend and repatriation tax

(34,331)

32,318

16,120

63,627

Change in valuation allowance

89,741

1,028,063

682,451

1,651,193

Other, net

1,131

1,339

3,861

(18,080)

Income tax (benefit) expense

PS

(133,140)

PS

25,167

PS

(209,883)

PS

117,665

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Significant components of the Company’s deferred tax assets and liabilities are as follows:

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March 31,

September 30,

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2020

2019

Deferred tax assets:

Federal net operating loss carryforwards

PS

8,966,965

PS

8,971,569

State net operating loss carryforwards

1,690,205

1,689,536

Foreign net operating loss carryforwards – U.K.

10,622,504

10,486,476

Foreign capital allowance – U.K.

103,400

103,400

Share-based compensation

1,007,166

804,378

Interest expense

524,852

– –

Other, net – U.K.

50,781

50,781

Other, net – U.S.

420,636

434,764

Gross deferred tax assets

23,386,509

22,540,904

Valuation allowance for deferred tax assets

(10,512,660)

(9,830,209)

Net deferred tax assets

12,873,849

12,710,695

Deferred tax liabilities:

In-process research and development

(4,072,740)

(4,072,740)

Developed technology

(396,947)

(424,657)

Covenant not-to-compete

(57,913)

(65,993)

Other, net – Malaysia

(3,865)

(3,865)

Other, net – U.S.

(6,376)

(6,376)

Net deferred tax liabilities

(4,537,841)

(4,573,631)

Net deferred tax asset

PS

8,336,008

PS

8,137,064

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The deferred tax amounts have been classified on the accompanying unaudited condensed consolidated balance sheets as follows:

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March 31,

September 30,

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2020

2019

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Deferred tax asset – U.K.

PS

8,632,613

PS

8,433,669

Total deferred tax asset

PS

8,632,613

PS

8,433,669

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Deferred tax liability – U.S.

PS

(292,740)

PS

(292,740)

Deferred tax liability – Malaysia

(3,865)

(3,865)

Total deferred tax liability

PS

(296,605)

PS

(296,605)

Note 14 – Net Loss Per Share

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Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing net income by the weighted average number of common shares outstanding during the period after giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of the incremental common shares issuable upon the exercise of stock options, stock appreciation rights and warrants, and the vesting of unvested restricted stock and restricted stock units. Due to our net loss for the periods presented, all potentially dilutive instruments were excluded because their inclusion would have been anti-dilutive. See Notes 9 and 10 for a discussion of our dilutive potential common shares.

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Note 15 – Industry Segments

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The Company currently operates in two reporting segments: Kommerziell y Research and Development. The Commercial segment consists of FC2 and PREBOOST®. The Research and Development segment consists of multiple drug products under clinical development for oncology and urology. There are no significant inter-segment sales. We evaluate the performance of each segment based on operating profit or loss. There is no inter-segment allocation of non-operating expenses and income taxes. Our chief operating decision-maker (“CODM”) is Mitchell S. Steiner, M.D., our Chairman, President and Chief Executive Officer.

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The Company’s operating income (loss) by segment is as follows:

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Three Months Ended

Six Months Ended

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March 31,

March 31,

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2020

2019

2020

2019

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Kommerziell

PS

6,186,211

PS

2,801,740

PS

11,989,804

PS

6,160,921

Research and development

(3,866,775)

(2,888,361)

(9,113,156)

(5,250,184)

Corporate

(2,619,114)

(2,037,969)

(4,960,719)

(4,047,054)

Operating loss

PS

(299,678)

PS

(2,124,590)

PS

(2,084,071)

PS

(3,136,317)

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All of our net revenues, which are primarily derived from the sale of FC2, are attributed to our Commercial reporting segment. See Note 4 for additional information regarding our net revenues. Costs related to the office located in London, England are fully dedicated to FC2 and are presented as a component of the Commercial segment. Depreciation and amortization related to long-lived assets that are not utilized in the production of FC2 are not reported as part of the reporting segments or reviewed by the CODM. These amounts are included in Corporate in the reconciliations above. Total assets are not presented by reporting segment as they are not reviewed by the CODM when evaluating the reporting segments’ performance.

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Note 16 – Subsequent Events

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There are many uncertainties regarding the current COVID-19 pandemic. The Company is closely monitoring the impact of the pandemic on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, and distribution channels. While the pandemic did not materially adversely affect the Company’s financial results and business operations in the three months ended March 31, 2020, significant uncertainty remains as to the potential impact of the COVID-19 pandemic on our operations, and on the global economy. It is currently not possible to predict how long the pandemic will last or the time that it will take for economic activity to return to prior levels. We do not yet know the full extent of any impact on our business or our operations; however, we will continue to monitor the COVID-19 situation and its impact on our business closely and expect to reevaluate the timing of our anticipated clinical trials as the impact of COVID-19 on our industry becomes more clear.

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The CARES Act established the Paycheck Protection Program (“PPP”), which authorizes forgivable loans to small businesses. Pursuant to the CARES Act, the loan will be fully forgiven if the funds are used for payroll costs, rent and utilities, subject to certain conditions, including maintaining employees and maintaining salary levels. Loans made under the PPP have a maturity of 2 years and an interest rate of 1%. Prepayments may be made without penalty. In April 2020, the Company received loan funding of approximately $540,000 under the PPP. As of the date of this report, the Company has not terminated any employees in the U.S. due to the COVID-19 pandemic. The Company intends to use the proceeds from the PPP to pay salaries for its U.S.-based employees and to pay rent and utilities.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Überblick

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Veru Inc., The Prostate Cancer Company, is an oncology and urology biopharmaceutical company developing novel medicines for the management of prostate cancer.

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The Company’s prostate cancer pipeline includes VERU-111, zuclomiphene citrate, and VERU-100.

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VERU-111 is an oral, next-generation, first-in-class small molecule that targets alpha and beta tubulin subunits to disrupt microtubules in cells to treat metastatic prostate cancer patients whose disease is resistant to both castration and novel androgen-blocking agents (e.g., abiraterone or enzalutamide). VERU-111 is being evaluated in men with metastatic castration and androgen-blocking agent resistant prostate cancer in two portions of an ongoing open label clinical trial: the Phase 1b portion and the Phase 2 portion. Recently we announced positive results from the fully enrolled but ongoing Phase 1b portion of the Phase 1b/2 VERU-111 trial for prostate cancer. The Phase 1b portion of the Phase 1b/2 clinical study enrolled 39 men with metastatic castration-resistant prostate cancer who have also become resistant to at least one novel androgen blocking agent from 7 clinical sites in the United States. A standard 3×3 design was used to establish the maximum tolerated dose (MTD), to select a recommended clinical dose for Phase 2 study, and to assess preliminary evidence of antitumor activity of VERU-111. Oral dosing escalated from 4.5mg to 81mg (7 days of dosing followed by 14 days of no drug each 21-day cycle and expanded to 21 days of continuous dosing per cycle). As for safety, the MTD of VERU-111 was determined to be 72mg (3 of 11 men had reversible Grade 3 diarrhea). No Grade 3 diarrhea was observed at doses less than 72 mg per day. At doses of VERU-111 of 63 mg and lower per day, mild to moderate nausea, vomiting, diarrhea and fatigue were the most common adverse events. There were no reports of neurotoxicity and no neutropenia at doses 63 mg and lower oral daily dosing continuous for 21 days per cycle. Preliminary antitumor activity was assessed by serum PSA and standard local imaging with bone and CT scans. In the eight men that received at least four 21-day cycles of oral VERU-111 at any dose, based upon their 21-day cycle baseline PSA levels, 6/8 (75%) had decreases in their PSA levels, 4 patients (50%) demonstrated a größer als oder gleich wie 30% decline, and 2 patients (25%) had a größer als oder gleich wie 50% decline in serum PSA. Based upon PCWG3 and Response Evaluation Criteria in Solid Tumors (RECIST) 1.1 criteria, objective tumor responses were seen in 2 patients (25%) (soft tissue and bone) and 5/8 patients (63%) had stable disease. Objective tumor responses and PSA declines lasted longer than 12 weeks. The primary endpoint used in pivotal efficacy studies for the treatment of metastatic castration-resistant prostate cancer is median time to cancer progression by imaging (bone and CT scans). In the current study, median duration of response, or time to cancer progression, has not been reached since 7 out of 8 of the men are still being treated on the study with an average duration of response of 10 months (range is 6-14 months). There are an additional 3 subjects on study that have not yet completed four 21-day cycles; therefore, a total of 10 men are still on study. The Phase 2 portion of the trial is currently enrolling men who have metastatic castration resistant prostate cancer and who have also become resistant to novel androgen blocking agents, such as abiraterone or enzalutamide, but prior to proceeding to IV chemotherapy, also referred to as the prechemotherapy stage. In addition, based on the Phase 1b safety and efficacy clinical data, the Company plans to meet with la FDA next quarter to reach agreement on the registration Phase 3 design for the treatment of men with metastatic castration resistant prostate cancer who also have failed one androgen blocking agent (enzalutamide or abiraterone). We also plan to present an update of the Phase 1b/2 clinical data at a future major scientific meeting.

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Zuclomiphene citrate is an oral nonsteroidal estrogen receptor agonist that has successfully completed a Phase 2 trial (Stage 1 testing placebo, Zuclomiphene 10mg, and Zuclomiphene 50 mg) to treat hot flashes, a common side effect caused by androgen deprivation therapy (ADT) in men with advanced prostate cancer. Following an End of Phase 2 meeting with the FDA, the Company plans to advance zuclomiphene citrate to a Phase 3 clinical trial in men with advanced prostate cancer who experience moderate to severe hot flashes with a potential start date in late calendar year 2020.

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VERU-100 is a novel, proprietary peptide formulation for ADT with multiple potential beneficial clinical attributes addressing the shortfalls of current FDA-approved ADT formulations for the treatment of advanced prostate cancer. VERU-100 is a long-acting gonadotropin-releasing hormone (GnRH) antagonist designed to be administered as a small volume subcutaneous 3-month depot injection without a loading dose. VERU-100 will immediately suppress testosterone with no testosterone surge upon initial or repeated administration—a problem which occurs with currently approved luteinizing hormone-releasing hormone (LHRH) agonists used for ADT. There are no GnRH antagonists commercially approved beyond a one-month injection. VERU-100 is anticipated to enter a Phase 2 dose-finding study with a potential start date in the third quarter of calendar year 2020.

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Recently the Company announced that it has received FDA permission to initiate a Phase 2 clinical trial to assess the efficacy of VERU-111, a microtubule depolymerization agent, in combating COVID-19, the global pandemic disease caused by the novel coronavirus SARS-CoV-2. VERU-111 is an oral, first-in-class microtubule depolymerization agent that targets the colchicine binding site of alpha and beta tubulin subunits to inhibit microtubules and is currently under clinical development in prostate cancer. Drugs that target microtubules have broad antiviral activity by disrupting the intracellular transport of viruses such as SARS CoV-2, along microtubules. Microtubule trafficking is critical for viruses to cause infection. Furthermore, microtubule depolymerization agents that target alpha and beta tubulin subunits of microtubules also have strong anti-inflammatory effects including the potential to treat the cytokine release syndrome (cytokine storm) induced by the SARS-CoV-2 viral infection that seems to be associated with high COVID-19 mortality rates. The Company met with the FDA and received agreement on the clinical development program for VERU-111 as a potential dual antiviral and anti-inflammatory agent to combat COVID-19 under the new FDA program, Coronavirus Treatment Acceleration Program (CTAP). The Phase 2 clinical trial is a double-blind randomized (1:1) placebo-controlled trial evaluating daily oral doses of VERU-111 versus placebo for 21 days in 40 hospitalized patients (VERU-111 20 subjects and placebo 20 subjects) who tested positive for the SARS-CoV-2 virus and are at high risk for Acute Respiratory Distress Syndrome (ARDS). The primary efficacy endpoint will be the proportion of patients that are alive and without respiratory failure at Day 29.  Secondary endpoints include the measured improvements on the WHO Disease Severity Scale (8-point ordinal scale) which captures COVID-19 disease symptoms and signs including hospitalization to progression of pulmonary symptoms to mechanical ventilation as well as death. The Phase 2 COVID-19 study will evaluate an 18mg oral daily dosing single treatment for 21 days. Because of the urgent need for effective and timely therapeutics to combat COVID-19, the Company has applied for significant grant funding through both The Biomedical Advanced Research and Development Authority of the US Department of Health and Human Services (BARDA) and The Defense Advanced Research Projects Agency of the US Department of Defense (DARPA) to expedite the clinical development program of VERU-111 for COVID-19. There can be no assurances that any such grant funding will be provided.

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The Company is also advancing new drug formulations in its specialty pharmaceutical pipeline addressing unmet medical needs in urology such as TADFIN® for the administration of tadalafil 5mg and finasteride 5mg combination formulation dosed daily to treat urinary tract symptoms caused by BPH. T.adalafil (CIALIS®) is currently approved for treatment of benign prostatic hyperplasia (BPH) and erectile dysfunction and finasteride is currently approved for treatment of BPH (finasteride 5mg PROSCAR®) and male pattern hair loss (finasteride 1mg PROPECIA®) The co-administration of tadalafil and finasteride has been shown to be more effective for the treatment of BPH than by finasteride alone. The Company had a successful pre-NDA meeting with the FDA and the expected submission of the NDA for TADFIN® is the fourth quarter of calendar year 2020 or early 2021. The Company is also developing a Tamsulosin XR formulation which is a formulation of tamsulosin, the active ingredient in FLOMAX®, which the Company has designed to avoid the “food effect” inherent in currently marketed versions of the drug, allowing for potentially safer administration and improved patient compliance.

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The Company’s commercial products include FC2, an FDA-approved product for the dual protection against unintended pregnancy and sexually transmitted infections, and the PREBOOST® 4% benzocaine medicated individual wipe for the treatment of premature ejaculation. The Company’s Female Health Company Division markets and sells FC2 commercially and in the public health sector both in the U.S. and globally. In the U.S., FC2 is available by prescription through the Company’s multiple telemedicine and internet pharmacy partners and retail pharmacies, as well as OTC through the Company’s website at www.fc2.us.com. In the global public health sector, the Company markets FC2 to entities, including ministries of health, government health agencies, U.N. agencies, nonprofit organizations and commercial partners, that work to support and improve the lives, health and well-being of women around the world. PREBOOST® is marketed online in the U.S. through an exclusive marketing arrangement under the Roman® Swipes brand name by Roman Health Ventures Inc. Roman is a leading telemedicine company that sells men’s health products via the internet website www.getroman.com.


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In October 2016, we completed the APP Acquisition. Prior to the completion of the APP Acquisition, the Company had been a single product company, focused on manufacturing, marketing and selling FC2 in the public sector. Most of the Company’s net revenues are currently derived from sales of FC2 in the public and commercial sectors.

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Kürzliche Entwicklungen

In December 2019, a novel strain of coronavirus was reported to have emerged in Wuhan, China. COVID-19, the disease caused by the coronavirus, has since spread to over 100 countries, including every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to the COVID-19 outbreak.

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In an effort to contain and mitigate the spread of COVID-19, many countries, including the United States, the United Kingdom and Malaysia, have imposed unprecedented restrictions on travel, and there have been business closures and a substantial reduction in economic activity in countries that have had significant outbreaks of COVID-19. In addition and in an attempt to slow the rapid growth of the COVID-19 infection rate, many governments around the world, including in the United States at the federal, state and local levels as well as in the United Kingdom and Malaysia, have imposed mandatory sheltering in place and social distancing restrictions that severely limit the ability of its citizens to travel freely and to conduct activities.

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The COVID-19 pandemic has substantially impacted the global healthcare system, including the conduct of clinical trials. Many healthcare systems have restructured operations to prioritize caring for those suffering from COVID-19 and to limit or cease other activities. The severe burden on healthcare systems caused by this pandemic has also impaired the ability of many research sites to start new clinical trials or to enroll new patients in clinical trials. The imposed mandatory sheltering in place and social distancing restrictions may delay the recruitment of patients and impede their ability to effectively participate in such trials. Significant fees may also be owed to contract research organizations associated with starting and stopping clinical trials, typically more so than delaying the start of a clinical trial. For these and other reasons, Veru has decided to postpone initiation of the first Phase 3 trial for zuclomiphene citrate until at least the end of calendar year 2020 or until such time as there is additional clarity and certainty surrounding the impact of the COVID-19 pandemic on the healthcare system.

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The Phase 1b portion of our ongoing VERU-111 clinical trial is fully enrolled. As for the Phase 2 portion of the VERU-111 clinical trial, discontinuation would disrupt treatment of patients’ advanced prostate cancer. Therefore, the VERU-111 Phase 2 study for metastatic castration resistant prostate cancer is currently enrolling as planned. However, there is a risk that changing circumstances relating to the COVID-19 pandemic may not allow our healthcare clinical trial investigators, their healthcare facilities or other necessary parties to continue to participate in these trials through completion.

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In addition to its impact on our clinical trials, COVID-19 has had, and will likely continue to have, a significant impact on our operations. On March 16, 2020, the Malaysian government issued an order closing non-essential businesses in that country due to the COVID-19 pandemic. As a result, the sole facility where the Company manufactures FC2 was unable to manufacture or ship product starting March 16, 2020. Because FC2 is a health product, the Company received an exemption to reopen the facility with limited staff to ship existing inventory on March 27, 2020, to reopen for manufacturing with 50% of the regular number of workers and social distancing requirements on April 20, 2020 and to return to 100% of the regular number of workers but continued social distancing requirements on May 4, 2020. The Company has had a sufficient quantity of FC2 outside of Malaysia to continue to satisfy customer demand, and with the facility reopening the Company does not expect to have issues with supply of FC2. However, if the Company’s Malaysian manufacturing facility encounters labor or raw material shortages, transportation delays or other issues, our ability to supply product to our customers could be disrupted. The sole supplier of the nitrile polymer sheath for FC2 has recently been prioritizing production of surgical gloves during the COVID-19 pandemic and may continue to do so, which could disrupt the Company’s supply of a critical raw material. Malaysian ports are currently open for shipment but at limited capacity, and the Company may also encounter issues shipping product into key markets. The COVID-19 pandemic and related economic disruption may also adversely affect customer demand for FC2 and PREBOOST. For example, sales of FC2 could be impacted in the U.S. prescription market if insurance coverage is affected by job losses and in the Global Public Sector if governments delay future tenders or reduce spending on female condoms due to financial strains or changed spending priorities caused by the COVID-19 pandemic. To protect the health and safety of our workforce, we have closed our offices in the United States and the United Kingdom and our personnel have been working remotely. Travel between our facilities in the United States, the United Kingdom and Malaysia has also been restricted.

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Significant uncertainty remains as to the potential impact of the COVID-19 pandemic on our operations, and on the global economy. It is currently not possible to predict how long the pandemic will last or the time that it will take for economic activity to return to prior levels. We do not yet know the full extent of any impact on our business or our operations; however, we will continue to monitor the COVID-19 situation and its impact on our business closely and expect to reevaluate the timing of our anticipated clinical trials as the impact of COVID-19 on our industry becomes more clear.

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Sales of FC2 in the public and commercial sectors

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FC2 Public Sector. FC2’s primary use is for the prevention of HIV/AIDS and other sexually transmitted diseases and family planning, and the global public health sector has been the Company’s main market for FC2. Within the global public health sector, various organizations supply critical products such as FC2, at no cost or low cost, to those who need but cannot afford to buy such products for themselves.

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FC2 has been distributed in the U.S. and 149 other countries. A significant number of countries with the highest demand potential are in the developing world. The incidence of HIV/AIDS, other sexually transmitted infections and unwanted pregnancy in these countries represents a remarkable potential for significant sales of a product that benefits some of the world’s most underprivileged people. However, conditions in these countries can be volatile and result in unpredictable delays in program development, tender applications and processing orders.

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The Company currently has a limited number of customers for FC2 in the global public health sector who generally purchase in large quantities. Over the past few years, significant customers have included large global agencies, such as UNFPA, USAID, the Brazil Ministry of Health either through UNFPA or Semina Indústria e Comércio Ltda (Semina), the Company’s distributor in Brazil, and the Republic of South Africa health authorities that purchase through the Company’s various local distributors. Other customers include ministries of health or other governmental agencies, which either purchase directly or via in-country distributors, and NGOs.


Purchasing patterns for FC2 in the public sector vary significantly from one customer to another and may reflect factors other than simple demand. For example, some governmental agencies purchase FC2 through a formal procurement process in which a tender (request for bid) is issued for either a specific or a maximum unit quantity. Tenders also define the other elements required for a qualified bid submission (such as product specifications, regulatory approvals, clearance by WHO, unit pricing and delivery timetable). Bidders have a limited period of time in which to submit bids. Bids are subjected to an evaluation process which is intended to conclude with a tender award to the successful bidder. The entire tender process, from publication to award, may take many months to complete, including administrative actions or appeals. A tender award indicates acceptance of the bidder’s price rather than an order or guarantee of the purchase of any minimum number of units. Many governmental tenders are stated to be “up to” the maximum number of units, which gives the applicable government agency discretion to purchase less than the full maximum tender amount. Orders are placed after the tender is awarded; there are often no set dates for orders in the tender and there are no guarantees as to the timing or amount of actual orders or shipments. Orders received may vary from the amount of the tender award based on a number of factors including vendor supply capacity, quality inspections and changes in demand. Administrative issues, politics, bureaucracy, process errors, changes in leadership, funding priorities and/or other pressures may delay or derail the process and affect the purchasing patterns of public sector customers. As a result, the Company may experience significant quarter-to-quarter sales variances in the global public sector due to the timing and shipment of large orders of FC2.

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On August 27, 2018, the Company announced that through six of its distributors in the Republic of South Africa, the Company had received a tender award to supply 75% of a tender covering up to 120 million female condoms over three years. The Company began shipping units under this tender award in the third quarter of fiscal 2019.

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The Company classified approximately $1.1 million and $300,000 of trade receivables with its distributor in Brazil as long-term as of March 31, 2020 and September 30, 2019, respectively, because payment was expected in greater than one year.

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FC2 Commercial Sector. In April 2017, the Company launched a small-scale marketing and sales program to support the promotion of FC2 in the U.S. market. The commercial team developed a plan to confirm the “proof of concept” that FC2 represented a significant business opportunity. This required changes in the distribution process for FC2 in the U.S. As part of this strategy the Company announced new distribution agreements with three of the country’s largest distributors that support the pharmaceutical industry. This newly developed network now allows up to 92% of major retail pharmacies the ability to make FC2 available to their customers. In addition to the distribution system, the Company expanded sales and market access efforts that resulted in FC2 now being available through the following access points: community-based organizations, by prescription, through leading telemedicine providers, through 340B covered entities, colleges and universities and our patient assistance program. We continue to increase healthcare provider awareness, education and acceptance, which has resulted in more women utilizing FC2 in the U.S. In 2018, we dissolved our small-scale marketing and sales program to focus our efforts in partnering with fast-growing, highly reputable telemedicine firms (telemedicine being the remote diagnosis and treatment of patients by means of telecommunications technology) to bring our much-needed FC2 product to patients in a cost-effective and highly convenient manner.

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FC2 Unit Sales. Details of the quarterly unit sales of FC2 for the last five fiscal years are as follows:

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Zeitraum

2020

2019

2018

2017

2016

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October 1 — December 31

10,070,700

7,382,524

4,399,932

6,389,320

15,380,240

January 1 — March 31

6,884,472

9,792,584

4,125,032

4,549,020

9,163,855

April 1 — June 30

– –

10,876,704

10,021,188

8,466,004

10,749,860

July 1 — September 30

– –

9,842,020

6,755,124

6,854,868

6,690,080

Gesamt

16,955,172

37,893,832

25,301,276

26,259,212

41,984,035

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Revenues. The Company’s revenues are primarily derived from sales of FC2 in the global public sector and the U.S. prescription channel. Other revenues are from sales of PREBOOST® (Roman® Swipes). These sales are recognized upon shipment or delivery of the product to the customers depending on contract terms.

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The Company’s most significant customers have been global public health sector agencies who purchase and/or distribute FC2 for use in preventing the transmission of HIV/AIDS and/or family planning and, in the U.S., telemedicine providers who sell into the prescription channel.


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The Company is working to further develop a global market and distribution network for FC2 by maintaining relationships with global public health sector groups and completing strategic arrangements with companies with the necessary marketing and financial resources and local market expertise.

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In 2017, the Company began expanding access to FC2 in the U.S. by making it available by prescription. With a prescription, FC2 is covered by most insurance companies with no copay under the Patient Protection and Affordable Care Act (the “ACA”) and the laws of 20+ states prior to enactment of the ACA. The Company supplies FC2 to a leading telemedicine provider, which has become one of our largest customers. The Company has developed and is working to develop additional supply and distributor relationships with telemedicine and other providers.

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The Company manufactures FC2 in a leased facility located in Selangor D.E., Malaysia, resulting in a portion of the Company’s operating costs being denominated in foreign currencies. While a material portion of the Company’s future sales are likely to be in foreign markets, all sales are denominated in the U.S. dollar. Effective October 1, 2009, the Company’s U.K. and Malaysia subsidiaries adopted the U.S. dollar as their functional currency, further reducing the Company’s foreign currency risk.

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Operating Expenses. The Company manufactures FC2 at its Malaysian facility. The Company’s cost of sales consists primarily of direct material costs, direct labor costs and indirect production and distribution costs. Direct material costs include raw materials used to make FC2, principally a nitrile polymer. Indirect production costs include logistics, quality control and maintenance expenses, as well as costs for electricity and other utilities. All the key components for the manufacture of FC2 are essentially available from either multiple sources or multiple locations within a source.

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Conducting research and development is central to our business model. Since the completion of the APP Acquisition we have invested and expect to continue to invest significant time and capital in our research and development operations. Our research and development expenses were $3.9 million and $2.9 million for the three months ended March 31, 2020 and 2019, respectively. Our research and development expenses were $9.2 million and $5.3 million for the six months ended March 31, 2020 and 2019, respectively. We expect to continue this trend of increased expenses relating to research and development due to advancement of multiple drug candidates.

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Results of Operations

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THREE MONTHS ENDED MARCH 31, 2020 COMPARED TO THREE MONTHS ENDED MARCH 31, 2019

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The Company generated net revenues of $9.9 million and Netz loss of $0.8 million, or $(0.01) per basic and diluted common share, for the three months ended March 31, 2020, compared to net revenues of $7.0 million and net loss of $4.0 million, or $(0.07) per basic and diluted common share, for the three months ended March 31, 2019. Net revenues increased 43% year over year.

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FC2 net revenues represented 96% of total net revenues for the three months ended March 31, 2020. FC2 net revenues increased 39% year over year. There was a 30% decrease in total FC2 unit sales and an increase in FC2 average sales price per unit of 98%. los principal factor for the increase in the FC2 average sales price per unit compared to prior year was the increase in net revenues in the U.S. prescription channel. The Company experienced an increase of 168% in FC2 net revenues in the U.S. prescription channel and a decrease of 40% in FC2 net revenues in the global public sector.

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Cost of sales increased to $2.5 million in the three months ended March 31, 2020 from $2.4 million in the three months ended March 31, 2019 primarily due to an increase in labor, transportation, and equipment maintenance costs.

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Gross profit increased to $7.4 million in the three months ended March 31, 2020 from $4.6 million in the three months ended March 31, 2019. Gross profit margin for the 2020 period was 75% of net revenues, compared to 66% of net revenues for the 2019 period. los erhöhen, ansteigen in the gross profit margin is primarily due to the increase in sales in the U.S. prescription channel, which is at a higher average sales price.

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Significant quarter-to-quarter variances in the Company’s results have historically resulted from the timing and shipment of large orders rather than from any fundamental changes in the business or the underlying demand for FC2. The Company is also currently seeing pressure on pricing for FC2 by large global agencies and donor governments in the developed world. As a result, the Company may continue to experience challenges for revenue from sales of FC2 in the global public sector. The Company is experiencing a significant increase in revenue from sales in the U.S. prescription channel, which is helping grow net revenues quarter to quarter and year to year. The Company anticipates that its largest U.S. telemedicine customer may reduce its orders in the third quarter of fiscal 2020, which could adversely affect net revenues and gross profit margin.

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Research and development expenses increased to $3.9 million in the three months ended March 31, 2020 from $2.9 million in the same period in fiscal 2019. The increase is primarily due to increased costs associated with the in-process research and development projects and increased personnel costs.

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Selling, general and administrative expenses remained bestehenent at $3.8 million in the three months ended März 31, 2020 compared to the three months ended März 31, 2019 9.

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Interest expense, which consists of items related to the Credit Agreement and Residual Royalty Agreement, was $1.2 million in the three months ended March 31, 2020, which is vergleichbar with $1.3 million in the three months ended March 31, 2019.

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Income associated with the change in fair value of the embedded derivatives related to the Credit Agreement and Residual Royalty Agreement was $0.5 million in the three months ended March 31, 2020 compared to expense of $0.6 million in the three months ended March 31, 2019. The liabilities associated with embedded derivatives represent the fair value of the change of control provisions in the Credit Agreement and Residual Royalty Agreement. See Note 3 and Note 8 to the financial statements included in this report for additional information.

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The income tax benefit in the second quarter of fiscal 2020 was $133,000, compared to income tax expense of $25,000 in the second quarter of fiscal 2019. The increase in the income tax benefit of $158,000 is primarily due to a decrease in the change in the valuation allowance of $0.9 million, teilweise offset by a decrease in the income tax benefit of $0.8 million related to the decrease in the loss before income taxes during the current period.


SIX MONTHS ENDED MARCH 31, 2020 COMPARED TO SIX MONTHS ENDED MARCH 31, 2019

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The Company generated net revenues of $20.5 million and net loss of $4.1 million, or $(0.06) per basic and diluted common share, for the six months ended March 31, 2020, compared to net revenues of $13.3 million and net loss of $6.2 million, or $(0.10) per basic and diluted common share, for the six months ended March 31, 2019. Net revenues increased 54% year over year.

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FC2 net revenues represented 97% of total net revenues for the six months ended March 31, 2020. FC2 net revenues increased 51% year over year. There was a 1% decrease in total FC2 unit sales and an increase in FC2 average sales price per unit of 53%. The principal factor for the increase in the FC2 average sales price per unit compared to prior year was the increase in net revenues in the U.S. prescription channel. The Company experienced an increase in FC2 net revenues of 158% in the U.S. prescription channel and a decrease of 15% in FC2 net revenues in the global public sector.

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Cost of sales increased to $5.8 million in the six months ended March 31, 2020 from $4.1 million in the six months ended March 31, 2019 primarily due to an increase in labor, transportation, and equipment maintenance costs.

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Gross profit increased to $14.7 million in the six months ended March 31, 2020 from $9.3 million in the six months ended March 31, 2019. Gross profit margin for the fiscal 2020 period was 72% of net revenues, compared to 69% of net revenues for the fiscal 2019 period. The increase in the gross profit margin is primarily due to the increase in sales in the U.S. prescription channel, which is at a higher average sales price.

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Significant quarter-to-quarter variances in the Company’s results have historically resulted from the timing and shipment of large orders rather than from any fundamental changes in the business or the underlying demand for FC2. The Company is also currently seeing pressure on pricing for FC2 by large global agencies and donor governments in the developed world. As a result, the Company may continue to experience challenges for revenue from sales of FC2 in the global public sector. The Company is experiencing a significant increase in revenue from sales in the U.S. prescription channel, which is helping grow net revenues quarter to quarter and year to year. The Company anticipates that its largest U.S. telemedicine customer may reduce its orders in the third quarter of fiscal 2020, which could adversely affect net revenues and gross profit margin.

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Research and development expenses increased to $9.2 million in the six months ended March 31, 2020 from $5.3 million in the same period in fiscal 2019. The increase is primarily due to increased costs associated with the in-process research and development projects and increased personnel costs.

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Selling, general and administrative expenses ist gestiegen to $7.6 million in the sechs months ended März 31, 2020 from $7.1 million in the sechs months ended März 31, 2019 9. The increase is primarily due to increased personnel, personnel costs, and related benefits.

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Interest expense, which consists of items related to the Credit Agreement and Residual Royalty Agreement, was $2.3 million in the six months ended March 31, 2020, which is comparable with $2.5 million in the six months ended March 31, 2019.

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Income associated with the change in fair value of the embedded derivatives related to the Credit Agreement and Residual Royalty Agreement was $75,000 in the six months ended March 31, 2020 compared to expense of $0.4 million in the six months ended March 31, 2019. The liabilities associated with embedded derivatives represent the fair value of the change of control provisions in the Credit Agreement and Residual Royalty Agreement. See Note 3 and Note 8 to the financial statements included in this report for additional information.

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The income tax benefit in the first six months of fiscal 2020 was $0.2 million, compared to income tax expense of $0.1 million in the first six months of fiscal 2019. The increase in the income tax benefit of $0.3 million is primarily due to a decrease in the change in the valuation allowance of $1.0 million, teilweise offset by a decrease in the income tax benefit of $0.6 6 Million related to the decrease in the loss before income taxes during the current period y a decrease of $70,000 for the effect of lower foreign income tax rates.

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Liquidity and Sources of Capital

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Liquidität

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Our cash on hand at March 31, 2020 was $2.6 million, compared to $6.3 million at September 30, 2019. At March 31, 2020, the Company had working capital of $0.6 million and stockholders’ equity of $31.1 million compared to working capital of $2.8 million and stockholders’ equity of $32.3 million as of September 30, 2019. The decrease in working capital is primarily due to an increase in the current portion of the Credit Agreement liability and the recognition of a current liability for operating leases as a result of the Company’s adoption of the new lease accounting standard, as described in Note 1 to the financial statements included in this report.

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We have incurred quarterly operating losses since the fourth quarter of fiscal 2016 and anticipate that we will continue to consume cash and incur substantial net losses as we develop our drug candidates. Because of the numerous risks and uncertainties associated with the development of pharmaceutical products, we are unable to estimate the exact amounts of capital outlays and operating expenditures necessary to fund development of our drug candidates and obtain regulatory approvals. Our future capital requirements will depend on many factors. See Part II, Item 1A of this Form 10-Q and Part I, Item 1A, «Risk Factors – Risks Related to Our Financial Position and Need for Capital» in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, for a description of certain risks that will affect our future capital requirements.

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The Company believes its current cash position, cash expected to be generated from sales of the Company’s commercial products, and its ability to secure equity financing or other financing alternatives are adequate to fund planned operations of the Company for the next 12 months. Such financing alternatives may include debt financing, common stock offerings, or financing involving convertible debt or other equity-linked securities and may include financings under the Company’s effective shelf registration statement on Form S-3 (File No. 333-221120) (the “Shelf Registration Statement”). The Company intends to be opportunistic when pursuing equity or debt financing which could include selling common stock under the Purchase Agreement with Aspire Capital. See Part II, Item 1A of this Form 10-Q and Part I, Item 1A, «Risk Factors – Risks Related to Our Financial Position and Need for Capital» in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, for a description of certain risks related to our ability to raise capital on acceptable terms.

Operating activities

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Our operating activities used cash of $4.9 million in the siX months ended March 31, 2020. Cash used in operating activities included a net loss of $4.1 million, adjustments for noncash items totaling $4.0 million and changes in operating assets and liabilities of $4.8 million. Anpassungen for noncash items primarily consisted of $2.3 million of noncash interest expense, $1.3 million of share-based compensation, and $0.2 million for the write-down of obsolete inventory. The decrease in cash from changes in operating assets and liabilities included an increase in accounts receivable of $1.8 million, an increase in inventories of $2.6 million, an increase in prepaid expenses and other current assets of $1.0 million, and a decrease in accrued expenses and other current liabilities of $0.3 million. T.hese were offset by an increase in accounts payable of $1.1 million.

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Our operating activities used cash of $4.0 million in the sechs Monate ended March 31, 2019 9. Cash used in operating activities included a net loss of $6.2 million, adjustments for noncash items totaling $4.3 million and changes in operating assets and liabilities of $2.1 Million. Adjustments for noncash items primarily consisted of $2.5 million of noncash interest expense related to the Credit Agreement and Residual Royalty Agreement, PS0.9 million of share-based compensation, and $0.4 million of expense due to the increase in fair value of the derivative liabilities. los decrease in cash from changes in operating assets and liabilities inbegriffen decreases in accounts payable and accrued expenses of $1.0 million and an increase in inventories of $0.7 million.

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Investitionstätigkeit

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Net cash used in investing activities in the sechs months ended März 31, 2020 was $55,000 and was primarily associated with capital expenditures at our U.K. and Malaysia locations.

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Financing activities

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Netz cash provided by financing activities in the six months ended March 31, 2020 was $1.2 million and consisted of $1.2 million from the sale of shares under the Purchase Agreement with Aspire Capital (see discussion below), proceeds from the Premium Finance Agreement of $0.8 million, which were used to finance the Company’s directors and officers liability insurance premium, and proceeds from stock option exercises of $0.4 million, less payments on the Credit Agreement (see discussion below) of $0.9 million and payments on the Premium Finance Agreement of $0.3 million.

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Net cash provided by financing activities in the six months ended March 31, 2019 was $6.1 million and consisted of net proceeds from the underwritten public offering of the Company’s common stock of $9.1 million (see discussion below) y proceeds from stock option exercises of $0.2 million, less payments on the Credit Agreement totaling $3.2 Million.

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Sources of Capital

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Common Stock Offering

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On October 1, 2018, we completed an underwritten public offering of 7,142,857 shares of our common stock, at a public offering price of $1.40 per share. Net proceeds to the Company from this offering were $9.1 million after deducting underwriting discounts and commissions and costs paid by the Company. All the shares sold in the offering were by the Company. The offering was made pursuant to the Shelf Registration Statement.

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SWK Credit Agreement

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On March 5, 2018, the Company entered into a Credit Agreement (as amended, the “Credit Agreement”) with the financial institutions party thereto from time to time (the “Lenders”) and SWK Funding LLC, as agent for the Lenders (the “Agent”), for a synthetic royalty financing transaction. On and subject to the terms of the Credit Agreement, the Lenders provided the Company with a term loan of $10.0 million, which was advanced to the Company on the date of the Credit Agreement. Under the Credit Agreement, the Company is required to make quarterly payments on the term loan based on the Company’s product revenue from net sales of FC2 until the earlier of receipt by the Lenders of a return premium specified in the Credit Agreement or a required payment upon termination of the Credit Agreement on March 5, 2025 or an earlier change of control of the Company or sale of the FC2 business. The recourse of the Lenders and the Agent for obligations under the Credit Agreement is limited to assets relating to FC2. On May 13, 2019, the Company entered into an amendment to the Credit Agreement (the “Second Amendment”) which included a reduction to the percentages to be used to calculate the quarterly revenue-based payments due on product revenue from net sales of FC2 during calendar 2019, a return to the original percentages to calculate the quarterly revenue-based payments due on product revenue from net sales of FC2 during calendar year 2020 and an increase to the percentages to be used to calculate the quarterly revenue-based payments due on product revenue from net sales of FC2 during calendar year 2021 and thereafter until the loan has been repaid.

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In connection with the Credit Agreement, Veru and the Agent also entered into a Residual Royalty Agreement, dated as of March 5, 2018 (as amended, the “Residual Royalty Agreement”), which provides for an ongoing royalty payment of 5% of product revenue from net sales of FC2 commencing after the Lenders would have received their return premium based on the return premium and calculation of revenue-based payments under the Credit Agreement without taking into account the amendments effected by the Second Amendment. The Residual Royalty Agreement will terminate upon (i) a change of control or sale of the FC2 business and the payment by the Company of the amount due in connection therewith pursuant to the Credit Agreement, or (ii) mutual agreement of the parties.

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The Company made total payments under the Credit Agreement of $0.9 million and $3.2 million during the six months ended March 31, 2020 and 2019, respectively. As a result of the Second Amendment, the Company currently estimates the aggregate amount of quarterly revenue-based payments payable during the 12-month period subsequent to March 31, 2020 will be approximately $6.7 million.

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Aspire Capital Purchase Agreement

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On December 29, 2017, the Company entered into the Purchase Agreement with Aspire Capital which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company has the right, from time to time and in its sole discretion during the 36-month term of the Purchase Agreement, to direct Aspire Capital purchase up to $15.0 million of the Company’s common stock in the aggregate. Other than the 304,457 shares of common stock issued to Aspire Capital in consideration for entering into the Purchase Agreement, the Company has no obligation to sell any shares of common stock pursuant to the Purchase Agreement and the timing and amount of any such sales are in the Company’s sole discretion subject to the conditions and terms set forth in the Purchase Agreement.

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During the six months ended March 31, 2020, we sold 300,000 shares of common stock to Aspire Capital under the Purchase Agreement resulting in proceeds to the Company of $1.2 Million. Since inception of the Purchase Agreement through March 31, 2020, we sold 4,017,010 shares of common stock to Aspire Capital resulting in proceeds to the Company of $7.8 million. Subsequent to March 31, 2020, we sold 400,000 shares of common stock to Aspire Capital under the Purchase Agreement resulting in proceeds to the Company of $1.3ro Million. As of May 11, 2020, the amount remaining under the Purchase Agreement was $5.9 million.

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U.S. Small Business Administration’s Paycheck Protection Program

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In April 2020, the Company was approved for a loan under the U.S. Small Business Administration’s (the “SBA”) Paycheck Protection Program established by the CARES Act in the amount of $0.5 million (the “PPP Loan”). The PPP Loan proceeds were received on April 20, 2020. The PPP Loan has a maturity of two years and an interest rate of 1%. Payments on the PPP Loan are deferred for six months. Pursuant to the CARES Act, the PPP Loan will be fully forgiven if the funds are used for payroll costs, rent and utilities, subject to certain conditions, including maintaining employees and maintaining salary levels. As of the date of this report, the Company has not terminated any employees in the U.S. due to the COVID-19 pandemic. The Company intends to use the proceeds of the PPP Loan to pay salaries for its U.S.-based employees and to pay rent and utilities. The amount of the PPP Loan that might be forgiven is not known at this time.

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Fair Value Measurements

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As of March 31, 2020 and September 30, 2019, the Company’s financial liabilities measured at fair value on a recurring basis, which consisted of embedded derivatives, represent the fair value of the change of control provisions in the Credit Agreement and Residual Royalty Agreement. See Note 8 to the financial statements included in this report for additional information.

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The fair values of these liabilities were estimated based on unobservable inputs (Level 3 measurement), which requires highly subjective judgment and assumptions. The Company determined the fair value of the embedded derivatives at inception and on subsequent valuation dates using a Monte Carlo simulation model. This valuation model incorporates transaction details such as the contractual terms, expected cash outflows, expected repayment dates, probability of a change of control, expected volatility, and risk-free interest rates. The assumptions used in calculating the fair value of financial instruments represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, the use of different estimates or assumptions would result in a higher or lower fair value and different amounts being recorded in the Company’s financial statements. Material changes in any of these inputs could result in a significantly higher or lower fair value measurement at future reporting dates, which could have a material effect on our results of operations. See Note 3 to the financial statements included in this report for additional information.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

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The Company’s exposure to market risk was discussed in the “Quantitative and Qualitative Disclosures About Market Risk” section contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019. There have been no material changes to such exposures since September 30, 2019.

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Item 4. Controls and Procedures

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Evaluation of Disclosure Controls and Procedures

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As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective. It should be noted that in designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company has designed its disclosure controls and procedures to reach a level of reasonable assurance of achieving desired control objectives and, based on the evaluation described above, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at reaching that level of reasonable assurance.

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Changes in Internal Control over Financial Reporting

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Dort wurden no Änderungen in the Company’S internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the Company’s most recently completed fiscal quarter that have materially affected, or sind reasonably likely to materially affect, the Company‘s internal control over financial reporting.


PART II.       OTHER INFORMATION

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Item 1.  Legal Proceedings

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Neither the Company nor any of its subsidiaries is a party to any material pending legal proceedings at the date of filing of this Quarterly Report on Form 10-Q.

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Item 1A.  Risk Factors

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In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risks and uncertainties relating to the Company’s business disclosed in Part I, Item 1A, «Risk Factors,» in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019. There have been no material changes from the risk factors previously disclosed in Part I, Item 1A, «Risk Factors,» in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, except for the following additional risk factors. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our business operations, and there is significant uncertainty regarding the COVID-19 pandemic and its impact on the economic environment and our business which could affect the risk factors set forth below and in the Form 10-K.

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Due to the COVID-19 pandemic, we may find it difficult to effectively recruit new clinical trial patients in a timely manner and to partner with clinical trial investigators and sites, which could delay or prevent us from proceeding with, or otherwise adversely affect, clinical trials of our drug candidates.

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Identifying and qualifying patients to participate in, and partnering with investigators and sites to run, clinical trials of our drug candidates is critical to the timely completion of our clinical trials. Patients may be unwilling to participate in our clinical trials because of the ongoing COVID-19 pandemic. The severe burden on healthcare systems caused by the COVID-19 pandemic has also impaired the ability of many research sites to start new clinical trials or to enroll new patients in clinical trials. The imposed mandatory sheltering in place and social distancing restrictions may delay the recruitment of patients and impede their ability to effectively participate in such trials. Significant fees may also be owed to contract research organizations associated with starting and stopping clinical trials, typically more so than delaying the start of a clinical trial. For these and other reasons, the Company has made the decision to postpone initiation of the first Phase 3 trial for zuclomiphene citrate until at least the end of calendar year 2020 or until such time as there is additional clarity and certainty surrounding the impact of the COVID-19 pandemic on the healthcare system. We plan to continue the Phase 1b portion of our ongoing VERU-111 clinical trial, which is fully enrolled, and to continue enrolling for the Phase 2 portion of the VERU-111 clinical trial as discontinuation would disrupt treatment of patients’ advanced prostate cancer. Patients enrolling in our VERU-111 clinical trial have not been able to access hospitals for imaging scans due to COVID-19. If they continue to lack such access, our VERU-111 clinical trial could be delayed.

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There is a risk that changing circumstances relating to the COVID-19 pandemic may not allow our healthcare clinical trial investigators, their healthcare facilities or other necessary parties to continue to participate in our clinical trials through completion or may delay the initiation of planned clinical trials. Any delays related to clinical trials could result in increased costs, delays in advancing our drug candidates, delays in testing the effectiveness of our drug candidates or termination of the clinical trials altogether.

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Disruptions at the FDA caused by the COVID-19 pandemic could delay or prevent new drugs from being developed, approved or commercialized in a timely manner or at all, or otherwise prevent the FDA from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.

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Disruptions at the FDA caused by the COVID-19 pandemic may slow the time necessary for new drugs to be reviewed and/or approved, which would adversely affect our business. In response to the COVID-19 pandemic, on March 10, 2020 the FDA announced its intention to postpone most inspections of foreign manufacturing facilities and products through April 2020. On March 18, 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic manufacturing facilities. The FDA has also prioritized the review of submissions relating to COVID-19. The FDA may adopt other restrictions or policy measures in response to the COVID-19 pandemic or issue guidance materially affecting the conduct of clinical trials. If global health concerns continue to prevent the FDA from conducting its regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

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The COVID-19 pandemic has disrupted, and may continue to disrupt, our operations and the operations of our suppliers and customers.

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In December 2019, a novel strain of coronavirus was reported to have emerged in Wuhan, China. COVID-19, the disease caused by the coronavirus, has since spread to over 100 countries, including every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to the COVID-19 outbreak. los outbreak and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen.

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If COVID-19 continues to spread and to affect economic activity in the United States and other markets in which we conduct business, we may experience disruptions that could severely impact our business, including:

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·

if our Malaysian manufacturing facility is closed again our ability to supply product to our customers could be disrupted;

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·

we may encounter labor or raw material shortages, transportation delays or other issues at our Malaysian manufacturing facility;

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·

our personnel may not be able to travel between our facilities in the United States, the United Kingdom and Malaysia, which may impact our ability to effectively oversee our international operations;

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·

customer demand for FC2 and PREBOOST may be adversely affected, including with respect to FC2 in the U.S. prescription market if insurance coverage is affected by job losses and in the Global Public Sector if governments delay future tenders or reduce spending on female condoms due to financial strains or changed spending priorities caused by the COVID-19 pandemic;

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·

our customers, including in the global public health sector, may reduce orders or delay paying their accounts receivable balances due to liquidity issues, spending priorities or other issues related to the COVID-19 pandemic;

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·

there may be limitations in employee resources, potentially including key executives, because of sickness of employees or their families or the desire of employees to avoid contact;

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·

we may face delays in receiving approval from the FDA or other applicable regulatory authorities in connection with our clinical trials;

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·

there may be delays or difficulties in enrolling patients in our clinical trials or in recruiting clinical site investigators and staff;

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·

there may be delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials, including interruption in shipping;

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·

there may be changes in local regulations as part of a response to the COVID-19 outbreak which may require us to change the ways in which our clinical trials are conducted, to incur unexpected costs, or to discontinue the clinical trials altogether;

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·

healthcare resources may be diverted away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

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·

key clinical trial activities may be interrupted, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others, or the clinical research organizations or clinical trial sites’ own risks related to the COVID-19 outbreak, which could affect the integrity of clinical data or the conduct of the trial;

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·

participants enrolled in our clinical trials could acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial, including by increasing the number of observed adverse events;

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·

necessary interactions with local regulators, ethics committees and other important agencies and contractors may be delayed due to limitations in employee resources or forced furlough of government employees; y

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·

the FDA may refuse to accept data from clinical trials in affected geographies.

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Significant uncertainty remains as to the potential impact of the COVID-19 pandemic on our operations, and on the global economy. It is currently not possible to predict how long the pandemic will last or the time that it will take for economic activity to return to prior levels. We do not yet know the full extent of any impact on our business or our operations, and it is possible that its effect on our business and operations will significantly worsen in the future.

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COVID-19 and its impact on the economic environment and capital markets could adversely affect our access to capital when needed.

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We expect to incur significant expenditures over the next several years to support our preclinical and clinical development activities, particularly with respect to clinical trials for certain of our drug candidates and to commence the commercialization of our drug candidates. Market volatility resulting from the COVID-19 pandemic or other factors could adversely affect our ability to access capital as and when needed and could also adversely affect the terms of a financing. If sales of FC2 decline due to the current economic environment, supply constraints or other issues, we may need additional financing to make up for reduced cash flows from our FC2 business. If adequate funds are not available on commercially acceptable terms when needed, we may be forced to delay, reduce or terminate some of our research and development activities or we may be unable to take advantage of future business opportunities.

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Our pursuit of a COVID-19 treatment candidate is at an early stage. We may be unable to produce a drug that successfully treats the virus in a timely manner, if at all.

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We recently announced that we have received FDA permission to initiate a Phase 2 clinical trial to assess the efficacy of VERU-111, a microtubule depolymerization agent, in combating COVID-19. Our development of a COVID-19 treatment is in its early stages, and we may be unable to produce a drug that successfully treats the virus in a timely manner, if at all. We are also committing financial resources and personnel to the development of a COVID-19 treatment which may cause delays in or otherwise negatively impact our other development programs, despite uncertainties surrounding the longevity and extent of coronavirus as a global health concern. Our business could be negatively impacted by our allocation of significant resources to a global health threat that is unpredictable and could rapidly dissipate or against which our treatment, if developed, may not be partially or fully effective.

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Government entities may take actions that directly or indirectly have the effect of limiting opportunities for VERU-111 as a COVID-19 treatment.

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Various government entities, including the U.S. government, are offering incentives, grants and contracts to encourage additional investment by commercial organizations into preventative and therapeutic agents against COVID-19, which may have the effect of increasing the number of competitors and/or providing advantages to competitors. Accordingly, there can be no assurance that we will be able to successfully establish a competitive market share if we develop a COVID-19 treatment. COVID-19 treatments may also be subject to government pricing controls, which could adversely affect the profitability of any COVID-19 treatment we are able to develop and commercialize.

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We may not be entitled to forgiveness of our recently received PPP Loan, and our application for the PPP Loan could in the future be determined to have been impermissible or could result in damage to our reputation.

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In April 2020, we received proceeds of approximately $540,000 from a loan under the Paycheck Protection Program of the CARES Act, a portion of which may be forgiven, which we intend to use to retain employees, maintain payroll and make lease and utility payments. The PPP Loan matures in April 2022 and bears annual interest at a rate of 1.0%. Commencing in November 2020, we are required to pay the lender equal monthly payments of principal and interest as required to fully amortize by April 2022 any principal amount outstanding on the PPP Loan as of October 2020. A portion of the PPP Loan may be forgiven by the SBA upon our application beginning 60 days but not later than 120 days after loan approval and upon documentation of expenditures in accordance with the SBA requirements. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the eight-week period beginning on the date of loan approval. Not more than 25% of the forgiven amount may be for non-payroll costs. The amount of the PPP Loan eligible to be forgiven is reduced if our full-time headcount declines or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. We will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest, in accordance with the amortization schedule described above, and we cannot provide any assurance that we will be eligible for loan forgiveness or that any amount of the PPP Loan will ultimately be forgiven by the SBA.

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In order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations. We made this certification in good faith after analyzing, among other things, our financial situation and access to alternative forms of capital, and believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan is consistent with the broad objectives of the Paycheck Protection Program of the CARES Act. The certification described above does not contain any objective criteria and is subject to interpretation. However, on April 23, 2020, the SBA issued guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith. The lack of clarity regarding loan eligibility under the Paycheck Protection Program has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans. If, despite our good-faith belief that we satisfied all eligible requirements for the PPP Loan, we are later determined to have violated any of the laws or governmental regulations that apply to us in connection with the PPP Loan, such as the False Claims Act, or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be subject to penalties, including significant civil, criminal and administrative penalties, or damages or could be required to repay the PPP Loan in its entirety.  In addition, our receipt of the PPP Loan may result in adverse publicity and damage to our reputation, and a review or audit by the SBA or other government entity or claims under the False Claims Act could consume significant financial and management resources.


Item 6.  Exhibits

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Exhibit

Nummer

Beschreibung

3.1

Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Form SB-2 Registration Statement (File No. 333-89273) filed with the SEC on October 19, 1999).

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3.2

Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company increasing the number of authorized shares of common stock to 27,000,000 shares (incorporated by reference to Exhibit 3.2 to the Company’s Form SB-2 Registration Statement (File No. 333-46314) filed with the SEC on September 21, 2000).

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3.3

Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company increasing the number of authorized shares of common stock to 35,500,000 shares (incorporated by reference to Exhibit 3.3 to the Company’s Form SB-2 Registration Statement (File No. 333-99285) filed with the SEC on September 6, 2002).

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3.4

Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company increasing the number of authorized shares of common stock to 38,500,000 shares (incorporated by reference to Exhibit 3.4 to the Company’s Form 10-QSB (File No. 1-13602) filed with the SEC on May 15, 2003).

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3.5

Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company designating the terms and preferences for the Class A Preferred Stock – Series 3 (incorporated by reference to Exhibit 3.5 to the Company’s Form 10-QSB (File No. 1-13602) filed with the SEC on May 17, 2004).

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3.6

Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company designating the terms and preferences for the Class A Preferred Stock – Series 4 (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K (File No. 1-13602) filed with the SEC on November 2, 2016).

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3.7

Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company changing the corporate name to Veru Inc. and increasing the number of authorized shares of common stock to 77,000,000 shares (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K (File No. 1-13602) filed with the SEC on August 1, 2017).

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3.8

Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company increasing the number of authorized shares of common stock to 154,000,000 shares (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K (File No. 1-13602) filed with the SEC on March 29, 2019).

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3.9

Amended and Restated By-Laws (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K (File No. 1-13602) filed with the SEC on May 4, 2018).

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4.1

Amended and Restated Articles of Incorporation, as amended (same as Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7 y 3.8)

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4.2

Articles II, VII and XI of the Amended and Restated By-Laws (included in Exhibit 3.9).

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10.1

Veru Inc. 2018 Equity Incentive Plan (as amended and restated effective March 24, 2020) (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K (File No. 1-13602) filed with the SEC on March 26, 2020.*

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10.2

Form of Non-Qualified Stock Option Grant Agreement under Veru Inc. 2018 Equity Incentive Plan. *, ** **.


10.3

Form of Non-Qualified Stock Option Grant Agreement under Veru Inc. 2017 Equity Incentive Plan. *, **

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31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ** **.

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31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ** **.

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32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002). **, ***

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101

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in XBRL (Extensible Business Reporting Language):  (1) the Unaudited Condensed Consolidated Balance Sheets, (2) the Unaudited Condensed Consolidated Statements of Operations, (3) the Unaudited Condensed Consolidated Statements of Stockholders’ Equity, (4) the Unaudited Condensed Consolidated Statements of Cash Flows and (5) the Notes to the Unaudited Condensed Consolidated Financial Statements.

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* *

Management contract or compensatory plan or arrangement

** **.

Filed herewith

***.

This certification is not «filed» for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

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SIGNATURES

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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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VERU INC.

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DATE: May 13, 2020

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/s/ Mitchell S. Steiner

Mitchell S. Steiner

Chairman, Chief Executive Officer and President

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DATE: May 13, 2020

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/s/ Michele Greco

Michele Greco

Chief Financial Officer and Chief Administrative Officer

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