TherapeuticsMD, Inc. - Quarter Report: 2015 September (Form 10-Q)

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2015

For the transition period from________ to ___________

Commission File No. 001-00100

THERAPEUTICSMD, INC. 

(Exact Name of Registrant as Specified in Its Charter)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐    No  ☒

The number of shares outstanding of the registrant’s common stock, par value $0.001 per share, as of November 2, 2015 was 177,848,041.

 PART I - FINANCIAL INFORMATION

 Item 1.  Financial Statements

The accompanying footnotes are an integral part of these consolidated financial statements.

The accompanying footnotes are an integral part of these consolidated financial statements.

THERAPEUTICSMD, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying footnotes are an integral part of these consolidated financial statements

 THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

NOTE 1 – THE COMPANY

TherapeuticsMD, Inc., a Nevada corporation, or TherapeuticsMD or the Company, has three wholly owned subsidiaries, vitaMedMD, LLC, a Delaware limited liability company, or VitaMed, BocaGreenMD, Inc., a Nevada corporation, or BocaGreen, and VitaCare Prescription Services, Inc., a Florida corporation, or VitaCare. Unless the context otherwise requires, TherapeuticsMD, VitaMed, BocaGreen, and VitaCare collectively are sometimes referred to as "our company," "we," "our," or "us."

Nature of Business

We are a women’s health care product company focused on creating and commercializing products targeted exclusively for women. As of the date of these unaudited consolidated financial statements, we are focused on conducting the clinical trials necessary for regulatory approval and commercialization of our advanced hormone therapy pharmaceutical products. The drug candidates used in our clinical trials are designed to alleviate the symptoms of and reduce the health risks resulting from menopause-related hormone deficiencies, including hot flashes, osteoporosis, and vaginal discomfort. We are developing these hormone therapy drug candidates, which contain estradiol and progesterone alone or in combination, with the aim of demonstrating equivalent clinical efficacy at lower doses, thereby enabling an enhanced side effect profile compared with competing products. Our drug candidates are created from a platform of hormone technology that enables the administration of hormones with high bioavailability alone or in combination. In addition, we manufacture and distribute branded and generic prescription prenatal vitamins, as well as over-the-counter, or OTC, vitamins.

NOTE 2 – BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Interim Financial Statements

The accompanying unaudited interim consolidated financial statements of TherapeuticsMD, Inc., which include our wholly owned subsidiaries, should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission, or the SEC, from which we derived the accompanying consolidated balance sheet as of December 31, 2014. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying unaudited interim consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The accompanying unaudited interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of our management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year, or any other interim period.

THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

NOTE 2 – BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)

Recently Issued Accounting Pronouncements

In July 2015, the Financial Accounting Standards Board, or FASB, issued final guidance that requires entities to measure inventory at the lower of cost or net realizable value rather than at the lower of cost or market (LOCOM). The guidance applies only to inventories for which cost is determined by methods other than last-in first-out (LIFO) or the retail inventory method (RIM). Entities that use LIFO or RIM will continue to use existing impairment models. The new guidance does not change the calculation of net realizable value that entities are required to calculate when applying existing LOCOM guidance. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Under the new guidance, however, entities will no longer need to calculate other measures of “market.” The guidance is effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements and disclosures.

In June 2015, the FASB issued Accounting Standards Update, or ASU, No. 2015-10, Technical Corrections and Improvements, to correct differences between original guidance and the Accounting Standards Codification, or ASC, clarify the guidance, correct references and make minor improvements affecting a variety of topics. Amendments that the FASB deemed more substantive are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The other amendments are effective immediately. We do not expect the adoption of ASU 2015-10 to have a material effect on our consolidated financial statements and disclosures.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued (or available to be issued when applicable) and, if so, disclose that fact. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. We do not expect the adoption of ASU 2014-15 to have a material effect on our consolidated financial statements and disclosures.

In May 2014, the FASB and the International Accounting Standards Board (IASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under previous guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligations. In July 2015, the FASB approved the proposal to defer the effective date of ASU 2014-09 standard by one year. Early adoption is permitted after December 15, 2016, and the standard is effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. We are currently evaluating the impact of ASU 2014-09 on our consolidated financial statements and disclosures.

We do not believe there would have been a material effect on the accompanying consolidated financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period.

THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Impairment of Long-Lived Assets

We review the carrying values of property and equipment and long-lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. There was no impairment of any long-lived assets during the three and nine months ended September 30, 2015 and 2014.

Fair Value of Financial Instruments

Our financial instruments consist primarily of accounts receivable, accounts payable and accrued expenses. The carrying amount of accounts receivable, accounts payable and accrued expenses approximates their fair value because of the short-term maturity of such instruments.

We categorize our assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy as defined by ASC 820, Fair Value Measurements. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3). Assets and liabilities recorded in the consolidated balance sheet at fair value are categorized based on a hierarchy of inputs, as follows:

At September 30, 2015 and December 31, 2014, we had no assets or liabilities that were valued at fair value on a recurring basis.

The fair value of indefinite-lived assets or long-lived assets is measured on a non-recurring basis using significant unobservable inputs (Level 3) in connection with any required impairment test.

Revenue Recognition

We recognize revenue on arrangements in accordance with ASC 605, Revenue Recognition. We recognize revenue only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed, and collectability is reasonably assured.

Our OTC and prescription prenatal vitamin products are generally variations of the same product with slight modifications in formulation and marketing. The primary difference between our OTC and prescription prenatal vitamin products is the source of payment. Purchasers of our OTC prenatal vitamin products pay for the product directly while purchasers of our prescription prenatal vitamin products pay for the product via third-party payers. Both OTC and prescription prenatal vitamin products share the same marketing support team utilizing similar marketing techniques.

Over-the-Counter Products

We generate OTC revenue from product sales primarily to retail consumers. We recognize revenue from product sales upon shipment, when the rights of ownership and risk of loss have passed to the consumer. We include outbound shipping and handling fees in revenues, net, and bill them upon shipment. We include shipping expenses in cost of goods sold. A majority of our customers pay for our products with credit cards, and we usually receive the cash settlement in two to three banking days. Credit card sales minimize accounts receivable balances relative to sales. We provide an unconditional 30-day money-back return policy under which we accept product returns from our retail and eCommerce customers. We recognize our revenue from OTC sales, net of estimated returns, sales discounts, and eCommerce fees.

THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

Prescription Products

We sell our name brand and generic prescription products primarily through drug wholesalers and retail pharmacies. We recognize revenue from prescription product sales, net of sales discounts, chargebacks, and customer rebates.

We accept returns of unsalable product from customers within a return period of six months prior to and up to 12 months following product expiration. Our prescription products currently have a shelf life of 24 months from the date of manufacture. As of January 1, 2015, we started estimating returns based on historical return rates and recorded actual product returns against this reserve as received. Prior to January 1, 2015, we deferred the recognition of revenue on certain arrangements until the right of return no longer existed.

We maintain various rebate programs in an effort to maintain a competitive position in the marketplace and to promote sales and customer loyalty. The consumer rebate program is designed to enable the end user to submit a coupon to us. If the coupon qualifies, we send a rebate check to the end user. We estimate the allowance for consumer rebates based on our experience and industry averages, which is reviewed, and adjusted if necessary, on a quarterly basis.

Research and Development Expenses

Research and development, or R&D, expenses include internal R&D activities, services of external contract research organizations, or CROs, costs of their clinical research sites, manufacturing, scale-up and validation costs, and other activities. Internal R&D activity expenses include laboratory supplies, salaries, benefits, and non-cash share-based compensation expenses. Advance payments to be expensed in future research and development activities were $948,499 at September 30, 2015, of which $755,152 was included in Other current assets and $193,347 was included in long term Prepaid expense on the accompanying consolidated balance sheets. Advance payments to be expensed in future research and development activities were $1,175,082 at December 31, 2014, of which $711,362 was included in Other current assets and $463,720 was included in long term Prepaid expense on the accompanying consolidated balance sheets. CRO activity expenses include preclinical laboratory experiments and clinical trial studies. Other activity expenses include regulatory consulting and legal fees and costs. The activities undertaken by our regulatory consultants that were classified as research and development expenses include assisting, consulting with, and advising our in-house staff with respect to various FDA submission processes, clinical trial processes, and scientific writing matters, including preparing protocols and FDA submissions. Legal activities that were classified as research and development expenses related to designing experiments to generate data for patents and to further the formulation development process for our pipeline technologies. Outside legal counsel also provided professional research and advice regarding research and development, patents and regulatory matters. These consulting and legal expenses were direct costs associated with preparing, reviewing, and undertaking work for our clinical trials and investigative drugs. We charge internal R&D activities and other activity expenses to operations as incurred. We make payments to CROs based on agreed-upon terms, which may include payments in advance of a study starting date. We expense nonrefundable advance payments for goods and services that will be used in future R&D activities when the activity has been performed or when the goods have been received rather than when the payment is made. We review and accrue CRO expenses and clinical trial study expenses based on services performed and rely on estimates of those costs applicable to the completion stage of a study as provided by CROs. As of September 30, 2015, we classified $1,213,874 of the accrued clinical study costs as long term Accrued Expenses related to the costs that will be paid at the completion of one of our clinical trials. Estimated accrued CRO costs are subject to revisions as such studies progress to completion. We charge revisions expense in the period in which the facts that give rise to the revision become known.

THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

Segment Reporting

We are managed and operated as one business, which is focused on creating and commercializing products targeted exclusively for women. Our business operations are managed by a single management team that reports to the President of our Company. We do not operate separate lines of business with respect to any of our products and we do not prepare discrete financial information with respect to separate products. All product sales are derived from sales in the United States. Accordingly, we view our business as one reportable operating segment.

NOTE 4 – INVENTORY

Inventory consists of the following:

NOTE 5 – OTHER CURRENT ASSETS

Other current assets consist of the following:

NOTE 6 – FIXED ASSETS, NET

Fixed assets, net consist of the following:

Depreciation expense for the three months ended September 30, 2015 and 2014 was $7,856 and $7,122, respectively, and $22,104 and $22,713 for the nine months ended September 30, 2015 and 2014, respectively.

THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

NOTE 7 – PREPAID EXPENSE

Prepaid expense (long-term) consists of the following:

NOTE 8 – INTANGIBLE ASSETS, NET

The following table sets forth the gross carrying amount, accumulated amortization and net carrying amount of our intangible assets as of September 30, 2015 and December 31, 2014:

THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

We capitalize external costs, consisting primarily of legal costs, related to securing our patents and trademarks. Once a patent is granted, we amortize the capitalized patent costs over the remaining life of the patent using the straight-line method. If the patent is not granted, we write-off any capitalized patent costs at that time.

Trademarks are perpetual and are not amortized. As of September 30, 2015, the remaining life related to OPERA® patent was approximately 14 years and the remaining life related to the approved hormone therapy drug candidate patents was approximately 17 years. During the three and nine months ended September 30, 2015 and 2014, there was no impairment recognized.

In addition to numerous pending patent applications, as of September 30, 2015, we had 13 issued patents, including:

Amortization expense was $8,692 and $5,625 for the three months ended September 30, 2015 and 2014, respectively and $22,296 and $17,196 for the nine months ended September 30, 2015 and 2014, respectively. Estimated amortization expense for the next five years is as follows:

 THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

NOTE 9 – OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

NOTE 10 – NET LOSS PER SHARE

We calculate basic and diluted net loss per share allocable to common stockholders using the weighted-average number of shares of common stock, par value $0.001 per share, or Common Stock outstanding during the period, less any shares subject to repurchase or forfeiture. There were no shares of our Common Stock outstanding subject to repurchase or forfeiture for the three and nine months ended September 30, 2015 and 2014.

Since we are in a net loss position, we have excluded outstanding stock options, all of which are subject to forfeiture, as well as warrants for the purchase of our Common Stock from our calculation of diluted net loss per share.

The table below presents the potentially dilutive securities that would have been included in our calculation of diluted net loss per share allocable to common stockholders if they were not antidilutive for the periods presented.

NOTE 11 – STOCKHOLDERS’ EQUITY

Preferred Stock

At September 30, 2015, we had 10,000,000 shares of Preferred Stock, par value $0.001, authorized for issuance, of which no shares of Preferred Stock were issued or outstanding.

THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

Common Stock

At September 30, 2015, we had 350,000,000 shares of Common Stock authorized, of which 177,787,927 shares of Common Stock were issued and outstanding.

On July 9, 2015, we entered into an underwriting agreement with Stifel, Nicolaus & Company, Incorporated and Guggenheim Securities, LLC, as the representatives of the several underwriters, or the Stifel Underwriters, relating to an underwritten public offering of 3,846,154 shares of Common Stock at a public offering price of $7.80 per share. Under the terms of the underwriting agreement, we granted the Stifel Underwriters a 30-day option to purchase up to an aggregate of 576,923 additional shares of Common Stock, which option was exercised in full. The net proceeds to us from the offering were approximately $32.2 million, after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. The offering closed on July 15, 2015 and we issued 4,423,077 shares of our Common Stock.

On February 10, 2015, we entered into an underwriting agreement, or the Cowen Agreement, with Cowen and Company, LLC, as the representative of the several underwriters, or the Cowen Underwriters, relating to an underwritten public offering of 13,580,246 shares of Common Stock, at a public offering price of $4.05 per share. Under the terms of the Cowen Agreement, we granted the Cowen Underwriters a 30-day option to purchase up to an aggregate of 2,037,036 additional shares of Common Stock, which option was exercised in full. The net proceeds from the offering were approximately $59.1 million, after deducting underwriting discounts and commissions and other estimated offering expenses payable by us. The offering closed on February 17, 2015 and we issued 15,617,282 shares of our Common Stock.

On July 29, 2014, we entered into an underwriting agreement with Goldman Sachs & Co, or Goldman Sachs, as the representative of the underwriters named therein, or the Goldman Sachs Underwriters, relating to an underwritten public offering of 8,565,310 shares of Common Stock. The price to the public in the offering was $4.67 per share. Under the terms of the underwriting agreement, we granted the Goldman Sachs Underwriters a 30-day option to purchase up to an additional 1,284,796 shares of Common Stock. On July 30, 2014, the Goldman Sachs Underwriters exercised their option to purchase the additional 1,284,796 shares of Common Stock. Net proceeds from this offering were approximately $42.8 million, after deducting underwriting discounts and commissions and other offering expenses. The offering closed on August 4, 2014 and we issued 9,850,106 shares of our Common Stock.

Exercises During 2015

During the three months ended September 30, 2015, certain individuals exercised stock options to purchase 95,000 shares of Common Stock for $98,478 in cash. During the nine months ended September 30, 2015, certain individuals exercised stock options to purchase 472,867 shares of Common Stock for $589,829 in cash.

Exercises During 2014

During the nine months ended September 30, 2014, certain individuals exercised stock options to purchase 793,800 shares of Common Stock. Stock options to purchase shares of Common Stock were exercised as follows: (i) 674,193 options for $315,546 in cash and (ii) 119,607 options, pursuant to the stock options’ cashless provision, wherein 113,837 shares of Common Stock were issued. Also during the nine months ended September 30, 2014, we issued 50,000 shares of Common Stock to an employee upon the vesting of restricted stock units that were granted in December 2013.

Warrants to Purchase Common Stock

As of September 30, 2015, we had warrants outstanding to purchase an aggregate of 12,772,431 shares of Common Stock with a weighted-average contractual remaining life of 1.92 years, and exercise prices ranging from $0.24 to $6.35 per share, resulting in a weighted average exercise price of $1.93 per share.

THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

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

In January 2013, we granted warrants to purchase 1,250,000 shares of Common Stock in connection with the issuance of a Revolving Credit Note to Plato and Associates, LLC, or the Plato Warrant. The Plato Warrant has an exercise price of $3.20 per share. The Plato Warrant vested on October 31, 2013 and may be exercised prior to its expiration on January 31, 2019. The Plato Warrant, with a fair value of $1,711,956, was valued on the date of the grant using a term of six years; a volatility of 44.29%; risk free rate of 0.88%; and a dividend yield of 0%. For the nine months ended September 30, 2015 and 2014, $0 and $260,027, respectively, was recorded as financing costs in connection with the issuance of the Plato Warrant on the accompanying consolidated financial statements.

In May 2013, we entered into a consulting agreement with Sancilio & Company, Inc., or SCI, to develop drug technology to be used in our hormone replacement drug candidates. These services include support of our efforts to successfully obtain U.S. Food and Drug Administration, or the FDA, approval for our drug candidates, including a vaginal capsule for the treatment of vulvar and vaginal atrophy, or VVA. In connection with the agreement, SCI agreed to forfeit its rights to receive warrants to purchase 833,000 shares of Common Stock that were to be granted pursuant to the terms of a prior consulting agreement dated May 17, 2012. As consideration under the agreement, we agreed to grant to SCI a warrant to purchase 850,000 shares of Common Stock at $2.01 per share that has vested or will vest, as applicable, as follows:

As of September 30, 2015, unamortized costs associated with the SCI warrants issued in 2013 and 2012 totaled approximately $567,000 and will be recognized over a period of 1.75 years.

During the nine months ended September 30, 2015, we granted warrants to purchase 50,000 shares of Common Stock to an outside consultant at an exercise price of $6.35 and the expiration date of April 6, 2020. The total non-cash compensation expense related to this warrant was $42,266 and $86,008, respectively, for the three and nine months ended September 30, 2015.

THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

Warrant exercises

During the three months ended September 30, 2015, certain individuals and an entity exercised warrants to purchase 310,000 shares of Common Stock pursuant to the warrants’ cashless exercise provisions, wherein 232,197 shares of Common Stock were issued. During the nine months ended September 30, 2015, certain individuals and an entity exercised warrants to purchase 1,255,485 shares of Common Stock as follows: (i) 945,485 shares of Common Stock were issued for $366,000 in cash and (ii) warrants to purchase 310,000 shares of Common Stock were exercised pursuant to the warrants’ cashless exercise provisions, wherein 232,197 shares of Common Stock were issued.

During the nine months ended September 30, 2014, certain individuals exercised warrants to purchase 365,583 shares of Common Stock for $181,000 in cash.

Options to Purchase Common Stock

In 2009, we adopted the 2009 Long Term Incentive Compensation Plan, or the 2009 Plan, to provide financial incentives to employees, directors, advisers, and consultants of our company who are able to contribute towards the creation of or who have created stockholder value by providing them stock options and other stock and cash incentives, or the Awards. The Awards available under the 2009 Plan consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units, and other stock or cash awards as described in the 2009 Plan. There are 25,000,000 shares authorized for issuance thereunder. During the nine months ended September 30, 2015, we granted 1,231,000 non-qualified stock options under the 2009 Plan. As of September 30, 2015, there were non-qualified stock options to purchase 15,445,768 shares of Common Stock outstanding under the 2009 Plan.

In 2012, we adopted the 2012 Stock Incentive Plan, or the 2012 Plan, a non-qualified plan that was amended in August 2013. The 2012 Plan was designed to serve as an incentive for retaining qualified and competent key employees, officers, directors, and certain consultants and advisors of our company. There are 10,000,000 shares of Common Stock authorized for issuance thereunder. As of September 30, 2015, there were non-qualified stock options to purchase 1,968,474 shares of Common Stock outstanding under the 2012 Plan.

The valuation methodology used to determine the fair value of stock options is the Black-Scholes Model. The Black-Scholes Model requires the use of a number of assumptions including estimated volatility of the stock price, the risk-free interest rate, and the expected life of the stock options. The assumptions used in the Black-Scholes Model during the nine months ended September 30, 2015 and 2014 are set forth in the table below.

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the expected term. Estimated volatility is a measure of the amount by which the price of our Common Stock is expected to fluctuate each year during the term of an award. Our estimated volatility is an average of the historical volatility of the stock prices of our peer entities whose stock prices were publicly available. Our calculation of estimated volatility is based on historical stock prices over a period equal to the term of the awards. We used the historical volatility of our peer entities due to the lack of sufficient historical data on our stock price. The average expected life is based on the contractual terms of the stock option using the simplified method.

THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

A summary of activity under the 2009 and 2012 Plans and related information follows:

At September 30, 2015, our outstanding stock options had exercise prices ranging from $0.10 to $7.72 per share.

Share-based compensation expense for options recognized in our results of operations (based on vested awards) for the three and nine months ended September 30, 2015 were $1,626,862 and $4,328,964, respectively, and $1,047,493 and $3,341,604, respectively, for the same periods in 2014. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from the estimates. At September 30, 2015, total unrecognized estimated compensation expense related to unvested options granted prior to that date was approximately $5,593,000 which may be adjusted for future changes in forfeitures. This cost is expected to be recognized over a weighted-average period of 2.3 years. No tax benefit was realized due to a continued pattern of operating losses.

NOTE 12 – INCOME TAXES

Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We do not expect to pay any significant federal or state income tax for 2015 as a result of (i) the losses recorded during the nine months ended September 30, 2015, (ii) additional losses expected for the remainder of 2015, and/or (iii) net operating loss carry forwards from prior years. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is "more likely than not" that some component or all of the benefits of deferred tax assets will not be realized. As of September 30, 2015, we maintain a full valuation allowance for all deferred tax assets. Based on these requirements, no provision or benefit for income taxes has been recorded. There were no recorded unrecognized tax benefits at the end of the reporting period.

NOTE 13 – RELATED PARTIES

On February 29, 2012, Cooper C. Collins, who was then president and largest shareholder of Pernix Therapeutics, LLC, or Pernix, was elected to serve on our board of directors. From time to time, we have entered into agreements with Pernix in the normal course of business. All such agreements are reviewed by independent directors of our company or a committee consisting of independent directors of our company.

THERAPEUTICSMD, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 

During the nine months ended September 30, 2015 and 2014, we did not engage in any transactions with Pernix. At September 30, 2015 and December 31, 2014, there were amounts due Pernix of approximately $46,000.

Additionally, there were amounts due to us from Pernix for legal fee reimbursement relating to a litigation matter stemming from a license and supply agreement in the amounts of approximately $250,000 at both September 30, 2015 and December 31, 2014.

NOTE 14 - BUSINESS CONCENTRATIONS

We purchase our products from several suppliers with approximately 54% and 77% of our purchases supplied from one vendor for the nine months ended September 30, 2015 and 2014, respectively.

We sell our prescription prenatal vitamin products to wholesale distributors, specialty pharmacies, specialty distributors, and chain drug stores that generally sell products to retail pharmacies, hospitals, and other institutional customers. Revenue generated from four major customers accounted for approximately 90% and 95% of our recognized revenue for the nine months ended September 30, 2015 and 2014, respectively.

Customers that generated more than 10% of our sales are designated as customers “A”, “B”, “C” and “D”.  During the nine months ended September 30, 2015, two customers generated more than 10% of revenues and during the nine months ended September 30, 2014, four customers generated more than 10% of revenues. During the nine months ended September 30, 2015, customer A generated approximately $6,930,000 in revenues and customer B generated approximately $3,005,000 in revenues. During the nine months ended September 30, 2014, customers A, B, C and D generated approximately $3,930,000, $1,846,000, $1,590,000 and $1,555,000 in sales, respectively.

NOTE 15 – COMMITMENTS AND CONTINGENCIES

We lease administrative office space in Boca Raton, Florida pursuant to a 63 month non-cancelable operating lease that commenced on July 1, 2013 and expires on September 30, 2018. On February 18, 2015, we entered into an agreement to lease additional administrative office space in Boca Raton, Florida, pursuant to an addendum to such lease. This addendum was effective beginning April 1, 2015 and will expire with the original lease term on September 30, 2018.

The straight line rental expense related to our current lease totaled approximately $119,000 and $90,000 for the three months ended September 30, 2015 and 2014, respectively, and approximately $328,000 and $271,000 for the nine months ended September 30, 2015 and 2014, respectively. The 2014 amounts were partially offset by the rent income of approximately $6,000 and $42,000, respectively, for sublet space. We did not sublet any space during the nine months ended September 30, 2015.

As of September 30, 2015, future minimum rental payments are as follows:

NOTE 16 – SUBSEQUENT EVENTS

In October 2015, we completed enrollment in the REPLENISH trial, a phase 3 study of TX-001HR in postmenopausal women with an intact uterus. The trial was designed to enroll approximately 1,750 patients at approximately 100 sites.

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

General

The following discussion and analysis provides information that we believe to be relevant to an assessment and understanding of our results of operations and financial condition for the periods described. This discussion should be read together with our consolidated financial statements and the notes to the consolidated financial statements, which are included in this Quarterly Report on Form 10-Q. This information should also be read in conjunction with the information contained in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission, or the Commission or the SEC, on March 12, 2015, or the Annual Report, including the audited financial statements and notes included therein. The reported results will not necessarily reflect future results of operations or financial condition.

In addition, this Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. Forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies as well as statements, other than historical facts, that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. These statements are often characterized by terminology such as “believes,” “hopes,” “may,” “anticipates,” “should,” “intends,” “plans,” “will,” “expects,” “estimates,” “projects,” “positioned,” “strategy” and similar expressions and are based on assumptions and assessments made in light of management’s experience and perception of historical trends, current conditions, expected future developments and other factors believed to be appropriate. Forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q and we undertake no duty to update or revise any such statements, whether as a result of new information, future events or otherwise. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of our control. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the sections titled “Risk Factors” in our Annual Report, and include the following: our ability to maintain or increase sales of our products; our ability to develop and commercialize our hormone therapy drug candidates and obtain additional financing necessary therefor; the length, cost and uncertain results of our clinical trials; the potential of adverse side effects or other safety risks that could preclude the approval of our hormone therapy drug candidates; our reliance on third parties to conduct our clinical trials, research and development and manufacturing; the availability of reimbursement from government authorities and health insurance companies for our products; the impact of product liability lawsuits; and the influence of extensive and costly government regulation.

Throughout this Quarterly Report on Form 10-Q, the terms "we," "us," "our," "TherapeuticsMD," or "our company" refer to TherapeuticsMD, Inc., a Nevada corporation, and unless specified otherwise, include our wholly owned subsidiaries, vitaMedMD, LLC, a Delaware limited liability company, or VitaMed, BocaGreenMD, Inc., a Nevada corporation, or BocaGreen, and VitaCare Prescription Services, Inc., a Florida corporation, or VitaCare.

On June 30, 2015, we exceeded the $750 million public float threshold to trigger “large accelerated filer” reporting status with the SEC beginning in fiscal year 2016. Consequently, as of January 1, 2016, we will no longer be an “accelerated filed” as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and we will need to comply with the large accelerated filer reporting deadlines for our Annual Report on Form 10-K for the fiscal year ending December 31, 2015, and our Quaterly Reports on Form 10-Q beginning with the quarter ending March 31, 2016.

Overview

We are a women’s health care company focused on creating and commercializing products targeted exclusively for women. Currently, we are focused on conducting the clinical trials necessary for regulatory approval and commercialization of advanced hormone therapy pharmaceutical products. The current drug candidates used in our clinical trials are designed to alleviate the symptoms of and reduce the health risks resulting from menopause-related hormone deficiencies, including hot flashes, osteoporosis, and vaginal discomfort. We are developing these hormone therapy drug candidates, which contain estradiol and progesterone alone or in combination, with the aim of demonstrating equivalent clinical efficacy at lower doses, thereby enabling an enhanced side effect profile compared with competing products. Our drug candidates are created from hormone technology that enables the administration of hormones with high bioavailability alone or in combination. In addition, we manufacture and distribute branded and generic prescription prenatal vitamins, as well as over-the-counter, or OTC, vitamins.

Our common stock, par value $0.001 per share, or Common Stock, is traded on the NYSE MKT under the symbol “TXMD”. We maintain the following websites at www.therapeuticsmd.com, www.vitamedmd.com, www.vitamedmdrx.com, and www.bocagreenmd.com. The information contained on our websites or that can be accessed through our websites does not constitute part of this Quarterly Report on Form 10-Q.

Research and Development

Overview

We have obtained the U.S. Food and Drug Administration, or FDA, acceptance of our Investigational New Drug, or IND, applications to conduct clinical trials for four of our hormone therapy drug candidates: TX-001HR, our oral combination of progesterone and estradiol; TX-002HR, our oral progesterone alone; TX-003HR, our oral estradiol alone; and TX-004HR, our vaginal estradiol softgel with estradiol alone.

We are currently conducting phase 3 clinical trials for TX-001HR and TX-004HR. In July 2014, we temporarily suspended enrollment in the phase 3 clinical trial for TX-002HR, and in October 2014 we temporarily stopped the trial in order to update the phase 3 protocol based on discussions with the FDA. We have no current plans to conduct clinical trials for TX-003HR.

TX-001HR, our combination estradiol and progesterone drug candidate, is undergoing clinical trials for the treatment of moderate to severe vasomotor symptoms due to menopause, including hot flashes, night sweats, sleep disturbances, and vaginal discomfort for post-menopausal women with an intact uterus. The hormone therapy drug candidate is chemically identical to the hormones that naturally occur in a woman’s body, namely estradiol and progesterone, and is being studied as a continuous-combined regimen, in which the combination of estrogen and progesterone are taken together in one product daily. If approved by the FDA, we believe this would represent the first time a combination product of estradiol and progesterone (bioidentical to the estradiol and progesterone produced by the ovaries), would be approved for use in a single combined product.

On September 5, 2013, we began enrollment of the REPLENISH Trial, a multicenter, double-blind, placebo-controlled, phase 3 study of TX-001HR in postmenopausal women with an intact uterus. The study is designed to evaluate the efficacy of TX-001HR for the treatment of moderate to severe vasomotor symptoms due to menopause and the endometrial safety of TX-001HR. Patients are assigned to one of five treatment arms, four active and one placebo, and receive study medication for 12 months. The primary endpoint for the reduction of endometrial hyperplasia is an incidence of endometrial hyperplasia of less than 1% at 12 months, as determined by endometrial biopsy. The primary endpoint for the treatment of moderate to severe vasomotor symptoms is the mean change of frequency and severity of moderate to severe vasomotor symptoms at weeks four and 12 compared to placebo, as measured by the number and severity of hot flushes. Only subjects experiencing a minimum daily frequency of seven moderate to severe hot flushes at screening are included in the vasomotor symptoms analysis, while all subjects are included in the endometrial hyperplasia analysis. The secondary endpoints include reduction in sleep disturbances and improvement in quality of life measures, night sweats and vaginal dryness, measured at 12 weeks, six months and 12 months. The trial is designed to enroll approximately 1,750 patients at approximately 100 sites. We completed enrollment in the REPLENISH Trial in October 2015 and we currently anticipate that results of the trial will be reported in the fourth quarter of 2016 or the first quarter of 2017. Based on such timeline and successful reports of the trial, we would anticipate filing an NDA for TX-001HR during the fourth quarter of 2016 or the first quarter of 2017 and assuming an FDA review period of ten months from the receipt date to the Prescription Drug User Fee Act, or PDUFA, date for a non-new molecular entity, the NDA for TX-001HR could be approved by the FDA during the fourth quarter of 2017 or the first quarter of 2018.

TX-002HR is a natural progesterone formulation for the treatment of secondary amenorrhea without the potentially allergenic component of peanut oil. The hormone therapy drug candidate is chemically identical to the hormones that naturally occur in a woman’s body. We believe it will be similarly effective to traditional treatments, but may demonstrate efficacy at lower dosages. In January 2014, we began recruitment of patients in the SPRY Trial, a phase 3 clinical trial designed to measure the safety and effectiveness of TX-002HR in the treatment of secondary amenorrhea. During the first two quarters of 2014, the SPRY Trial encountered enrollment challenges because of Institutional Review Board approved clinical trial protocols and FDA inclusion and exclusion criteria. In July 2014, we temporarily suspended enrollment and in October 2014 we temporarily stopped the SPRY Trial in order to update the phase 3 protocol based on discussions with the FDA. We intend to update the phase 3 protocol to, among other things, target only those women with secondary amenorrhea due to polycystic ovarian syndrome and to amend the primary endpoint of the trial. We believe that the updated phase 3 protocol, if approved by the FDA, will allow us to mitigate the enrollment challenges in, and shorten the duration of, the SPRY Trial. However, there can be no assurance that the FDA will approve the updated phase 3 protocol that we intend to propose.

TX-004HR is a vaginal estradiol softgel drug candidate for the treatment of vulvar and vaginal atrophy, or VVA, in post-menopausal women with vaginal linings that do not receive enough estrogen. We believe that our drug candidate will be at least as effective as the traditional treatments for VVA because of an early onset of action with less systemic exposure inferring a greater probability of dose administration to the target tissue, and it will have an added advantage of being a simple, easier to use dosage form versus traditional VVA treatments. We initiated the REJOICE Trial, a multicenter, double-blind, placebo-controlled phase 3 clinical trial during the third quarter of 2014 to assess the safety and efficacy of TX-004HR for the treatment of moderate to severe dyspareunia, or painful intercourse, as a symptom of VVA due to menopause. We are conducting a single 12 week study, evaluating three different doses of estradiol: 4 mcg, 10 mcg and 25 mcg versus placebo. The FDA has noted that a single, large, well-controlled clinical trial to support safety and efficacy should be sufficient to submit an NDA for TX-004HR for the proposed indication and that to support the indication in a single trial, evidence of efficacy for a given dose would need to show statistical significance of at a 0.01 level. The study has been designed to include four primary endpoints: the reduction of vaginal pH levels to less than 5.0, an increase in superficial cells, a decrease in parabasal cells and the improvement of dyspareunia. If approved, the 4 mcg formulation would represent a lower effective dose than the currently available VVA therapies approved by the FDA. The trial is designed to enroll approximately 700 patients across approximately 100 sites. The last patient was enrolled in the REJOICE Trial in June 2015, and we have completed the last patient visit in the trial.  We currently anticipate that the topline results of the trial will be reported during the fourth quarter of 2015. Based on such timeline and successful reports of the trial, we would anticipate filing an NDA for TX-004HR as soon as the first half of 2016 and that such NDA could be approved by the FDA as soon as the first quarter of 2017, assuming an FDA review period of ten months from the receipt date to the PDUFA date for a non-new molecular entity.

As of September 30, 2015, we had 13 issued patents, which included 11 utility patents that relate to our combination progesterone and estradiol formulations, one utility patent that relates to TX-004HR, which establishes an important intellectual property foundation for TX-004HR, and one method patent that relates to our OPERA® information technology platform.

Research and Development Expenses

A significant portion of our operating expenses to date have been incurred in research and development activities. Research and development expenses relate primarily to the discovery and development of our drug products. Our business model is dependent upon our company continuing to conduct a significant amount of research and development. Our research and development expenses consist primarily of expenses incurred under agreements with contract research organizations, or CROs, investigative sites and consultants that conduct our clinical trials and a substantial portion of our preclinical studies; employee-related expenses, which include salaries and benefits, and non-cash share-based compensation; the cost of developing our chemistry, manufacturing and controls capabilities, and acquiring clinical trial materials; and costs associated with other research activities and regulatory approvals.

We make payments to the CROs based on agreed upon terms that may include payments in advance of a study starting date. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Advance payments to be expensed in future research and development activities were $948,499 at September 30, 2015, of which $755,152 was included in Other current assets and $193,347 was included in long term Prepaid expense on the accompanying consolidated balance sheets. Advance payments to be expensed in future research and development activities were $1,175,082 at December 31, 2014, of which $711,362 was included in Other current assets and $463,720 was included in long term Prepaid expense on the accompanying consolidated balance sheets.

The following table indicates our research and development expense by project/category for the periods indicated (in 000s):

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⁽¹⁾ Product costs are classified as other research and development expenses until one of our drug products receives IND approval from the FDA.

Research and development expenditures will continue to be significant as we continue development of our pipeline of novel drug candidates. We expect to incur significant research and development costs as we develop our drug pipeline, complete the ongoing clinical trials of our drug candidates, conduct our ongoing phase 3 clinical trials, manufacturing, scale-up, and prepare regulatory submissions.

The costs of clinical trials may vary significantly over the life of a project due to factors that include but are not limited to the following: per patient trial costs, the number of patients that participate in the trials; the number of sites included in the trials; the length of time each patient is enrolled in the trial; the number of doses that patients receive; the drop-out or discontinuation rates of patients; the amount of time required to recruit patients for the trial, the duration of patient follow-up; and the efficacy and safety profile of the drug candidate. We base our estimated expenses related to clinical trials on estimates that are based on our experience and estimates from CROs and other third parties.

Results of Operations

Three months ended September 30, 2015 compared with three months ended September 30, 2014

Revenues and Cost of Goods Sold

Revenues for the three months ended September 30, 2015 increased approximately $1,004,000, or 24%, to approximately $5,190,000, compared with approximately $4,186,000 for the three months ended September 30, 2014. Of this $1,004,000 increase, approximately $825,000, or 82%, was attributable to an increase in the number of units sold and approximately $179,000, or 18%, was attributable to product mix and an increase in the average net sales price of our products. Cost of goods sold increased approximately $125,000 or 12%, to approximately $1,194,000 for the three months ended September 30, 2015, compared with approximately $1,069,000 for the three months ended September 30, 2014. Cost of goods sold as a percentage of revenue was approximately 23% and 26% for the three months ended September 30, 2015 and 2014, respectively, which was primarily attributable to a favorable change in product mix.

Operating Expenses

Our principal operating costs include the following items as a percentage of total operating expenses.

*Prior year numbers have been reclassified to conform to current year’s presentation

Operating expenses increased by approximately $2,534,000 or 12%, to approximately $23,499,000 for the three months ended September 30, 2015, from approximately $20,965,000 for the three months ended September 30, 2014 as a result of the following items:

Research and development costs for the three months ended September 30, 2015 increased by approximately $1,513,000, or 10%, to approximately $16,422,000, compared with $14,909,000 for the three months ended September 30, 2014. Research and development costs include costs related to clinical trials as well as salaries, wages, non-cash compensation and benefits of personnel involved in research and development activities.  The increase in research and development costs was primarily due to an increase in scale-up and manufacturing activities for our phase 3 hormone therapy drug candidates, partially offset by lower clinical trial costs. Research and developments costs during the three months ended September 30, 2015 included the following research and development projects.

During the three months ending September 30, 2015 and the period from February 2013 (project inception) through September 30, 2015, we have incurred approximately $8,175,000 and $58,436,000, respectively, in research and development costs with respect to TX-001HR, our combination estradiol and progesterone drug candidate.

During the three months ended September 30, 2015 and the period April 2013 (project inception) through September 30, 2015, we have incurred approximately $6,000 and $2,520,000, respectively, in research and development costs with respect to TX-002HR, our progesterone only drug candidate.

During the three months ended September 30, 2015 and the period from August 2014 (project inception) through September 30, 2015, we have incurred approximately $4,581,000 and $22,225,000, respectively, in research and development costs with respect to TX-004HR, our vaginal estradiol softgel drug candidate.

For a discussion of the nature of efforts and steps necessary to complete these projects, see “Item 1. Business — Research and Development” in our Annual Report. For a discussion of the risks and uncertainties associated with completing development of our products, see “Item 1A. Risk Factors — Risks Related to Our Business” in our Annual Report. For a discussion of the extent and nature of additional resources that we may need to obtain if our current liquidity is not expected to be sufficient to complete these projects, see “— Liquidity and Capital Resources.” For a discussion as to whether a future milestone such as completion of a development phase, date of filing an NDA with a regulatory agency or approval from a regulatory agency can be reliably determined, see “Item 1. Business — Our Hormone Therapy Drug Candidates,” “Item 1. Business — Products in Development” and “Item 1. Business — Pharmaceutical Regulation” in our Annual Report. Future milestones, including NDA submission dates, are not easily determinable as such milestones are dependent on various factors related to our clinical trials, including the timing of ongoing patient recruitment efforts to find eligible subjects for the applicable trials.

Human resource costs, including salaries, benefits and taxes, for the three months ended September 30, 2015 increased by approximately $764,000, or 28%, to approximately $3,465,000, compared with $2,701,000 for the three months ended September 30, 2014, primarily as a result of increases of approximately $520,000 in non-cash compensation related to stock option awards and approximately $244,000 in personnel costs.

Professional fees for the three months ended September 30, 2015 increased by approximately $396,000, or 54%, to approximately $1,129,000, compared with $733,000 for the three months ended September 30, 2014, primarily as a result of higher consulting fees.

Other operating expense for the three months ended September 30, 2015 increased by approximately $82,000, or 9%, to approximately $1,034,000, compared with $952,000 for the three months ended September 30, 2014, primarily as a result of increased travel and rent expense.

Sales and marketing costs for the three months ended September 30, 2015 decreased by approximately $221,000, or 13%, to approximately $1,448,000, compared with $1,669,000 for the three months ended September 30, 2014, as a result of decreased costs related to advertising programs.

Operating Loss

As a result of the foregoing, our operating loss increased approximately $1,655,000, or 9%, to approximately $19,503,000 for the three months ended September 30, 2015, compared with approximately $17,848,000 for the three months ended September 30, 2014, primarily as a result of increased research and development costs associated with our continued development of our hormone therapy drug candidates, partially offset by increased revenue from sales of our prenatal vitamin products.

As a result of the continued development of our hormone therapy drug candidates, we anticipate that we will continue to have operating losses for the near future until our hormone therapy drug candidates are approved by the FDA and brought to market, although there is no assurance that we will attain such approvals or that any marketing of our hormone therapy drug candidates, if approved, will be successful.

Total other income

Other income increased by approximately $15,000, or 94%, to approximately $31,000 for the three months ended September 30, 2015 compared with $16,000 for the comparable period in 2014.

Net Loss

As a result of the net effects of the foregoing, net loss increased approximately $1,640,000, or 9%, to approximately $19,472,000 for the three months ended September 30, 2015, compared with approximately $17,832,000 for the three months ended September 30, 2014. Net loss per share of Common Stock, basic and diluted, was $0.11 for the three months ended September 30, 2015, compared with $0.12 per share of Common Stock for the three months ended September 30, 2014.

Nine months ended September 30, 2015 compared with nine months ended September 30, 2014

Revenues and Cost of Goods Sold

Revenues for the nine months ended September 30, 2015 increased approximately $3,744,000, or 35%, to approximately $14,513,000, compared with approximately $10,769,000 for the nine months ended September 30, 2014. Of this $3,744,000 increase, approximately $2,818,000, or 75 %, was attributable to an increase in the number of units sold and approximately $926,000, or 25%, was attributable to product mix and an increase in the average net sales price of our products. Cost of goods sold increased approximately $479,000, or 17%, to approximately $3,271,000 for the nine months ended September 30, 2015, compared with approximately $2,792,000 for the nine months ended September 30, 2014. Cost of goods sold as a percentage of revenue was approximately 23% and 26% for the nine months ended September 30, 2015 and 2014, respectively, which was primarily attributable to a favorable change in product mix.

Operating Expenses

Our principal operating costs include the following items as a percentage of total operating expenses.

*Prior year numbers have been reclassified to conform to current year’s presentation

Operating expenses increased by approximately $33,220,000 or 73%, to approximately $78,923,000 for the nine months ended September 30, 2015, from approximately $45,703,000 for the nine months ended September 30, 2014 as a result of the following items: