Dare Bioscience Inc.

03/26/2026 | Press release | Distributed by Public on 03/26/2026 14:02

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included in Part II, Item 8 of this report. This following discussion includes forward-looking statements. See PART I "CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS," above. Forward-looking statements are not guarantees of future performance and our actual results may differ materially from those currently anticipated and from historical results depending upon a variety of factors, including, but not limited to, those discussed in Part I, Item 1A of this report under the heading "Risk Factors," which are incorporated herein by reference.
Business Overview
We are a purpose-driven health biotech company solely focused on closing the gap in women's health between promising science and real-world solutions. Every innovation we advance is based in advanced science and backed by rigorous, peer-reviewed research. From contraception to menopause, pelvic pain to fertility, vaginal health to infectious disease, we're working to close critical gaps in care using science that serves her needs.
In March 2025, we announced an expansion of our business model to include a dual-path approach to bringing new products to market. For select proprietary formulations, we are pursuing both traditional FDA approval
and earlier market access via Section 503B compounding. We believe this strategy allows us to respond to clinician and patient demand for timely access while continuing to generate the data necessary to seek FDA approval and support long-term value creation. In addition to prescription-based offerings - both FDA-approved products and compounded drugs- we intend to bring to market select consumer health products that do not require a physician's prescription, where appropriate based on product profile and market opportunity.
Section 503B Compounding
Our proprietary topical cream formulation of sildenafil is our first product to market under Section 503B. The compounded drug is branded as DARE to PLAY Sildenafil Cream and became available for pre-order fulfillment by prescription in the U.S. in December 2025. Prescription fulfillment and payment will occur once the product is available for pharmacy dispensing. We expect pharmacy dispensing to commence, and to begin recording revenue from sales of DARE to PLAY in the second quarter of 2026. Because we are in the early stages of executing against our Section 503B compounding strategy and, as an organization, we have no experience in or infrastructure for commercializing products, the amount of potential revenue we may generate during 2026 remains uncertain. We invested approximately $1.0 million to launch DARE to PLAY in 2025, which has been utilized to support a 503B-registered outsourcing facility with technology-transfer activities specific to DARE to PLAY, activate an awareness campaign, and facilitate access to DARE to PLAY as an option for providers and women.
We are also taking action to bring our estradiol progesterone intravaginal ring to market under Section 503B. The compounded product will be branded as DARE to RECLAIM. We are targeting to have DARE to RECLAIM available in early 2027. There are no FDA-approved products that provide estradiol and progesterone together in a non-oral monthly form.
See Item 1. "BUSINESS," in Part I of this report for additional information regarding our Section 503B compounding strategy.
Consumer Health Products - DARE to RESTORE
The first product in our DARE to RESTORE vaginal probiotic suppositories product line, Flora Sync LF5, is expected to become commercially available in the U.S in the second quarter of 2026.
See Item 1. "BUSINESS," in Part I of this report for additional information regarding our consumer health products strategy.
Our Pipeline: Clinical Stage and Pre-Clinical Stage Programs
Our product candidates are in various stages of development, from pre-clinical through a pivotal Phase 3 clinical study, and will require review and approval from the FDA, or a comparable foreign regulatory authority, prior to being marketed and sold. The most clinically advanced product candidates we are developing are: Ovaprene®, an investigational, hormone-free, monthly intravaginal contraceptive currently being evaluated in a pivotal Phase 3 clinical study. Sildenafil Cream, 3.6%, or Sildenafil Cream, an investigational cream formulation of sildenafil, the active ingredient in Viagra®, for topical administration for the treatment of female sexual arousal disorder, or FSAD; DARE-HRT1, an intravaginal ring designed to deliver combination menopausal hormone therapy, bio-identical 17β-estradiol and progesterone together, continuously over a 28-day period for the treatment of moderate to severe vasomotor symptoms, also known as hot flashes; DARE-VVA1, an investigational formulation of tamoxifen in a soft gelatin capsule for intravaginal administration as a hormone-free alternative to estrogen-based therapies for the treatment of moderate-to-severe dyspareunia, or pain during sexual intercourse; and DARE-HPV, an investigational, proprietary fixed-dose formulation of lopinavir and ritonavir in a soft gel vaginal insert for the treatment of genital human papillomavirus (HPV) infection in women as well as treatment of cervical intraepithelial neoplasia (also known as cervical dysplasia), and other HPV-related pathologies.
See ITEM 1. "BUSINESS," in Part I of this report for additional information regarding our product candidates.
XACIATO®
The first FDA-approved product to emerge from our portfolio is XACIATO® (clindamycin phosphate) vaginal gel 2%, or XACIATO (pronounced zah-she-AH-toe). XACIATO was approved by the FDA in December 2021, three years after we acquired rights to the program, as a single-dose prescription medication for the treatment of bacterial vaginosis in females 12 years of age and older. In 2022, we licensed exclusive worldwide rights to develop,
manufacture and commercialize XACIATO to Organon. In January 2024, Organon announced that XACIATO was available nationwide in the U.S. In April 2024, we sold our rights to all royalty and potential milestone payments based on net sales of XACIATO under our agreement with Organon to XOMA. See Note 3 "Strategic Agreements" and Note 13 "Royalty Purchase Agreements" to the consolidated financial statements included in this report for information regarding our exclusive license agreement with Organon and our royalty purchase agreements with XOMA, respectively.
Operations
Our primary operations consist of research and development activities to advance our portfolio of product candidates through late-stage clinical development and/or regulatory approval, and commercialization activities for the 503B and consumer health products we seek to bring to market. Until we secure additional capital to fund our operating needs, we will focus our research and development resources primarily on advancement of Ovaprene. In addition, we expect to incur significant research and development expenses for the DARE-LARC1 and DARE-HPV programs, but we also expect such expenses will be supported by non-dilutive funding, with respect to DARE-LARC1, through December 2027, and with respect to DARE-HPV, through October 2026. See Note 15, "Grant Awards" to the accompanying consolidated financial statements for additional information.
We do not have sales, marketing or distribution infrastructure, and currently, we do not intend to build our own sales force or marketing and distribution infrastructure. However, reflecting the shift in our business model, we have been and will be allocating resources to support commercial execution activities, including entering into and maintaining relationships with 503B-registered outsourcing facilities, dispensing pharmacies, telehealth providers and other third parties to help bring our proprietary formulations to market.
As discussed below, we will need to raise substantial additional capital to continue to fund our operations and execute our current business strategy. Our business is subject to a number of risks common to biopharmaceutical companies (see ITEM 1A. RISK FACTORS in Part I of this report) and the process of developing and obtaining regulatory approvals for prescription drug and drug/device products in the United States and in foreign jurisdictions is inherently uncertain and requires the expenditure of substantial financial resources without any guarantee of success. The commercialization of a product and compliance with applicable laws and regulations requires the expenditure of further substantial financial resources without any guarantee of commercial success. The amount of post-approval financial resources required for commercialization and the potential revenue we may receive from sales of any product will vary significantly depending on many factors, including whether, and the extent to which, we establish our own sales and marketing capabilities and/or enter into and maintain commercial collaborations with third parties with established commercialization infrastructure.
Recent Events
Receipt of Payment Under October 2024 Grant Award
In February 2026, we received a $2.0 million payment from CMF under the agreement we entered into with CMF in October 2024 to support the development of DARE-HPV. For a discussion of this agreement, see Note 15, "Grant Awards" to the accompanying consolidated financial statements for additional information. Taking into account this payment, we have received a cumulative total of approximately $7.5 million of the up to $10.0 million in potential funding under the grant award.
Regulation A Offering
On January 27, 2026, we completed the initial closing of our Regulation A offering of up to 4,854,000 units, each consisting of one share of our Series A convertible preferred stock, which is convertible into two shares of our common stock, and two warrants, each exercisable for one share of our common stock at an exercise price of $4.00 per share. The offering price of each unit is $5.00.
The offering is being conducted on a "best efforts" basis pursuant to a selling agency agreement, dated January 5, 2026, between us and Digital Offering, LLC, acting as the lead selling agent for the offering. Digital Offering is not required to sell any specific number or dollar amount of units in the offering.
As of the date of this report, we have issued an aggregate of 65,640 units to investors in the offering, consisting of 65,640 shares of Series A convertible preferred stock and warrants to purchase up to 131,280 shares of our common stock, for gross proceeds of approximately $328,200.
For additional information regarding the Regulation A offering and our agreement with Digital Offering, see Note 17, "Subsequent Events" to the accompanying consolidated financial statements.
Termination of Bayer License Agreement
In January 2020, we entered into a license agreement with Bayer, under which Bayer was supporting the Ovaprene program by providing the equivalent of two experts to advise us in clinical, regulatory, preclinical, commercial, chemistry, manufacturing and controls, and product supply matters, and Bayer had the right to obtain an exclusive license with regard to the commercialization of Ovaprene in the U.S. for human contraception by paying us an additional $20 million fee. We received a notice of termination of the license agreement from Bayer in November 2025, and we agreed with Bayer to terminate the license agreement effective December 2, 2025. Bayer's election to terminate the license agreement was due to its strategic prioritization. We do not expect the termination of the license agreement to have a material impact on the ongoing pivotal Phase 3 study of Ovaprene. If Ovaprene were to receive marketing approval from the FDA, we will need to enter into an agreement with a third party to commercialize Ovaprene, which could delay the commercialization of Ovaprene. As noted above, we do not have sales, marketing or distribution infrastructure, and we currently do not intend to build such an infrastructure.
Receipt of Grant Funding Installment to Support the Ovaprene Phase 3 Study and Identification & Development of a New Non-Hormonal Contraceptive Candidate
In November 2025, we received a payment of $3.6 million as the latest installment under a grant of up to approximately $10.7 million to support (i) expansion of the number of study sites in the ongoing Phase 3 clinical trial of Ovaprene, and (ii) activities that will aid in the identification and development of a novel non-hormonal intravaginal contraceptive candidate, suitable for and acceptable to women in low- and middle-income country settings who need or would prefer to use such a product to avoid an unplanned pregnancy. Additional payments are contingent upon our achievement of specified development and reporting milestones during the term of the grant agreement, which extends through March 2027. See Note 15, "Grant Awards--Other Non-Dilutive Grant Funding--2024 Contraceptive Product Candidate Grant Agreement" to the accompanying consolidated financial statements for additional information regarding the grant agreement.
Nasdaq Listing
On July 24, 2025, we received a letter from the Nasdaq Office of General Counsel confirming that we had demonstrated compliance with the stockholders' equity requirement in Nasdaq Listing Rule 5550(b)(1) that our stockholders' equity be at least $2.5 million, or the Stockholders' Equity Rule, and that we are therefore in compliance with the Nasdaq Capital Market's continued listing requirements. We are subject to a mandatory monitoring period of one-year from July 24, 2025. If, within that one-year period, the Nasdaq Listing Qualifications Staff determines that we fall out of compliance with the Stockholders' Equity Rule, the Staff will issue a delist determination letter, and we will have an opportunity to request a new hearing with Nasdaq's Hearing Panel. Notwithstanding Nasdaq Listing Rule 5810(c)(2), we will not be permitted to provide a plan of compliance to the Staff with respect to such non-compliance, the Staff will not be permitted to grant us additional time to regain compliance, and we will not be afforded a cure period pursuant to Nasdaq Listing Rule 5810(c)(3). We were in compliance with the Stockholders' Equity Rule as of December 31, 2025. Based on information currently available to us, our stockholders' equity is expected to be substantially less than $2.5 million as of March 31, 2026. We are actively pursuing initiatives to increase our stockholders' equity, including through our ongoing Regulation A offering and other potential capital-raising activities. If we are unable to demonstrate to Nasdaq that we have increased our stockholders' equity to at least $2.5 million prior to the filing of our quarterly report on Form 10-Q for the quarter ended March 31, 2026, we expect the Staff will issue a delist determination letter. In that event, we intend to request a new hearing with Nasdaq's Hearing Panel, though there can be no assurance that any such hearing would result in a favorable outcome. See the risk factor titled, There is no assurance that we will continue satisfying the listing requirements of the Nasdaq Capital Market, in Item 1A of Part II of this report.
Macroeconomic, Political, and Regulatory Environment Considerations
Our business, financial condition, operating results, and our ability to raise additional capital may be adversely affected by the uncertainty in the U.S. and global macroeconomic, political, and regulatory environments, such as inflation, trade disruptions and restrictive measures, including tariffs, high interest rates, slowed economic growth or recession, uncertainty with respect to the federal budget and debt ceiling, potential or prolonged U.S. government shutdowns, volatility in financial markets, changes in the regulatory landscape in the U.S., including due to significant reductions in funding and staffing of federal agencies and changes in leadership, and geopolitical factors. Unstable and unfavorable market and economic conditions may make it more difficult, more costly, and more dilutive to our stockholders to raise additional capital to fund our operations and execute against our business strategy, as well as
adversely impact market demand for the women's health solutions we bring to market. Further, the service providers, manufacturers, vendors, and collaborators on which we rely may be adversely affected by the foregoing risks, which could directly impact our ability to achieve our operating goals within planned timelines and budgets.
There may be significant future effects on the women's health sector and the pharmaceutical and biopharmaceutical industries as a result of federal policy and regulatory changes under the current U.S. presidential administration, including in areas relating to regulatory framework and oversight, research and development funding, drug pricing reform, global trade policy and tariffs, and others. Recent initiatives have resulted in material reductions in staffing levels at the FDA and NIH, including through workforce reductions and reorganizations, and have impacted the agencies' ability to retain remaining key personnel and hire additional personnel, disrupting their ability to perform routine activities or function in the normal course. A prolonged federal government shutdown with additional agency staff furloughed or laid off could exacerbate these risks. With respect to the FDA, this may result in delays or limitations on our ability to obtain guidance from agency staff, slow review times for applications we submit to commence clinical studies and obtain requisite regulatory approvals in the future, and consequently, negatively impact the cost and timelines for developing and obtaining regulatory approval of our product candidates. Moreover, our business strategy has included seeking non-dilutive sources of funding and collaborations to support product development, and we have benefited significantly from federal government funding through grants and other agreements in support of several of our development programs, including Ovaprene and DARE-HPV. See Note 15 "Grant Awards" to the accompanying consolidated financial statements. Beginning in early 2025, the U.S. presidential administration took actions to freeze or terminate billions of dollars in NIH grants, and the future of the NIH's budget and research funding remains highly uncertain. These actions have already begun to adversely affect the broader research and development funding environment, and our business, financial condition and operating results may be significantly adversely affected if existing grants or other arrangements supporting our development programs are frozen or terminated or we are unable to secure additional grants or other federal government funding in the future. Given the high level of uncertainty regarding federal policy and enforcement and regulatory changes and that circumstances are rapidly evolving, including as a result of legal challenges to recent federal government actions, we are not able to reasonably predict the full extent of the potential impact on our business at this time. We continue to monitor these evolving developments and conditions and their potential impacts on our business, financial condition, and results of operations, and will attempt to adjust our plans, as appropriate, to mitigate risks. For additional information, see the risk factors described in Item 1A. Risk Factors of this report.
Financial Overview
Revenue
Our revenue for 2025 primarily relates to the license fee recognized upon termination of our license agreement with Bayer. Other revenue for 2025 and 2024 were royalties from net sales of XACIATO, which, since April 1, 2024, have been paid to UiE under our royalty interest financing agreement with UiE, and recognized as non-cash royalty revenue.
In the future, we may generate revenue from license fees, milestone payments, and research and development payments in connection with strategic collaborations, and from product sales, including sales of 503B compounded products, consumer health products, and FDA-approved products, if any. We expect to begin recording revenue from sales of DARE to PLAY and Flora Sync LF5 in the second quarter of 2026. Our ability to generate such revenue will depend on the extent to which we are successful in executing against our Section 503B and consumer health product business models, the extent to which the clinical development of our product candidates is successful, and whether we or a strategic collaborator receive the regulatory approvals necessary to market such product candidates, as well as the eventual commercial success of any FDA-approved products. If we fail to successfully achieve any of the foregoing, our ability to generate future revenue and our results of operations would be materially adversely affected.
Cost of Revenues
Cost of revenues primarily represent expenses associated with medical education and consumer awareness related to the commercialization of DARE to PLAY through our 503B business model.
Research and Development Expenses
Research and development, or R&D, represents a core operational focus. We are advancing multiple product candidates through preclinical and clinical development, supported in part by significant non-dilutive grant funding from governmental and non-governmental organizations.
Although our R&D activities remain substantial, as explained in more detail below, grant funding and other financial awards offset a significant portion of our R&D expenses. As a result, our reported operating expenses may appear to be weighted more heavily toward selling, general and administrative, or SG&A, expenses. However, this reflects the reduction to R&D expenses (contra R&D expense) as a result of grant funding and other financial awards, rather than a reduction in our commitment to or investment in R&D activities.
We expect our R&D expenses will continue to represent the majority of our operating expenses, on a pre-contra R&D expenses basis, for at least the next twelve months. R&D expenses consist primarily of:
•direct program costs, including:
•expenses incurred under agreements with clinical research organizations (CROs), investigative sites and other third parties that assist in the conduct of our clinical trials and nonclinical studies and conduct other R&D and regulatory affairs activities on our behalf,
•contract manufacturing expenses, primarily for the production of materials for use in our clinical trials and nonclinical studies;
•expenses related to production of select proprietary formulations by 503B-registered outsourcing facilities prior to commercial launch of the product via Section 503B compounding;
•transaction costs related to acquisitions of companies, technologies and related intellectual property, and other assets, and
•milestone payments due to third parties under acquisition and in-licensing arrangements based on our product candidates' achievement of R&D and regulatory milestones specified therein, and
•indirect costs, including:
•personnel-related costs, including salaries, bonuses, benefits, payroll taxes, and stock-based compensation expenses for employees engaged in R&D functions,
•the costs of services performed by third parties, including consulting services,
•facilities-related costs, including rent and maintenance costs, and insurance, depreciation, supplies, and miscellaneous expenses, and
•costs related to travel, conference participation, service contracts, information technology, dues and subscriptions.
We recognize R&D expenses as they are incurred. External expenses are recognized based on our evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the amount of services that has been performed at each reporting date. Nonrefundable payments we make prior to the receipt of goods or services to be used in R&D are recognized as an expense as the related goods are delivered or services are performed. Milestone payments to third parties under acquisition, license, and option agreements are recognized as they are incurred or when we deem their incurrence to be probable.
We generally track direct R&D costs on a specific basis and present direct costs for our key development programs on a program-by-program basis. We present direct costs for all other programs on a consolidated basis generally by stage of development. Specifically, we present consolidated direct costs for (a) such programs that are in (i) advanced clinical development (Phase 2-ready to Phase 3), (ii) Phase 1 clinical development or that we believe are Phase 1-ready, and (iii) preclinical stage, and (b) other development programs. We do not track indirect costs on a program-by-program basis because those costs generally are deployed across multiple development programs.
We recognize the Australian Research and Development Tax Incentive Program, or the Tax Incentive, as a reduction of R&D expenses (contra R&D expense). The amounts are determined based on our eligible R&D expenditures and are non-refundable, provided that in order to qualify for the Tax Incentive the filing entity must have revenue of less than AUD $20.0 million during the tax year for which a reimbursement claim is made and cannot be controlled by an income tax exempt entity. The Tax Incentive is recognized when there is reasonable assurance that the Tax Incentive will be received, the relevant expenditure has been incurred, and the amount can be reliably measured or reliably estimated.
We have received, and may in the future receive, funding through grants and other financial awards from governmental entities, private foundations and other organizations that support activities related to the development of certain of our product candidates. As we incur eligible expenses under those grants or awards, we recognize grant funding in our statements of operations as a reduction to R&D expenses (contra-R&D expense). For more information, see Note 2, "Basis of Presentation and Summary of Significant Accounting Policies - Grant Funding" to
the accompanying consolidated financial statements. For the years ended December 31, 2025 and 2024, we recognized contra-R&D expense of approximately $16.4 million and $8.8 million, respectively.
At any one time, we are working on multiple programs at various stages of development. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each development program on an ongoing basis based on our cash position and capital resources and in response to the results of ongoing and future clinical trials and preclinical studies, regulatory developments, and our ongoing assessments as to the commercial potential of each product candidate.
Investment in the development of and seeking regulatory approval for our clinical-stage and Phase 1-ready product candidates and the development of any other potential product candidates we may advance into and through clinical trials in the pursuit of regulatory approvals, will increase our R&D expenses. Activities associated with the foregoing will require a significant increase in investment in regulatory support, clinical supplies, inventory build-up related costs, and the payment of success-based milestones to licensors. In addition, we continue to evaluate opportunities to acquire or in-license other product candidates and technologies, which may result in higher R&D expenses due to, among other factors, milestone payments. Conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may not obtain regulatory approval for any product candidate on a timely or cost-effective basis, or at all. Our future R&D expenses and the probability of success of our product candidates may be affected by numerous factors, including the number, scope, rate of progress, expense, and results of our clinical trials and nonclinical R&D activities, the countries in which our clinical trials are conducted, the phase of clinical development of our product candidates, the cost and timing of manufacturing our product candidates, our ability to scale up manufacturing as needed to support later-stage clinical trials and, if approved, commercialization of our product candidates, the extent of changes in government regulation and regulatory guidance relating to development and approval of our product candidates, the timing, receipt, and terms of any clearances to conduct clinical trials and any marketing approvals from applicable regulatory authorities, competition and commercial viability of our product candidates, the extent to which we establish and maintain intellectual property rights, the extent to which we establish and maintain license, collaboration, or other arrangements. As a result, we cannot accurately determine the duration and completion costs of development projects or if, when and to what extent we will generate revenue from any products we develop.
Selling, General and Administrative Expenses
SG&A expenses consist of personnel costs, facility expenses, expenses for outside professional services, including legal, audit and accounting services, commercial-readiness expenses, including for Section 503B compounded drug products and consumer health products, and milestone expenses. Personnel costs consist of salaries, benefits and stock-based compensation. Facility expenses consist of rent and other related costs. Commercial-readiness expenses consist of consultant and advisor costs. Milestone expenses consist of amounts that become due to third parties under our in-license or other agreements under which we acquired rights to technology or other intellectual property we use in a product based on the product's achievement of commercial milestones specified therein.
Recently Issued Accounting Standards
A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations and cash flows is discussed in Note 2 to the accompanying consolidated financial statements.
Critical Accounting Policies and Estimates
Management's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements that we prepared in accordance with accounting principles generally accepted in the United States. Preparing these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, and related disclosures. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. Historically, revisions to our estimates have not resulted in a material change to our financial statements.
While our significant account policies are described in more detail in Note 2 to our consolidated financial statements included herein, we believe that the following accounting policies are most important to the portrayal of our
financial condition and results of operations and require management's most difficult, subjective and complex judgments.
•Revenue Recognition;
•Stock-Based Compensation;
•Liability Related to the Sale of Future Royalties
•Sale of Future Payments;
•Grant Funding; and
•Clinical Trial Expense Accruals.
Revenue Recognition
Under ASC Topic 606, or ASC 606, we recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers, we perform five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy our performance obligations. At contract inception, we assess the goods or services agreed upon within each contract, assess whether each good or service is distinct, and determines those that are performance obligations. We then recognize as revenue the amount of the transaction price allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
In a contract with multiple performance obligations, we develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation, which determines how the transaction price is allocated among the performance obligations. The estimation of the stand-alone selling price(s) may include estimates regarding forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success. We evaluate each performance obligation to determine if it can be satisfied at a point in time or over time. Any change made to estimated progress towards completion of a performance obligation and, therefore, revenue recognized will be recorded as a change in estimate. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.
Collaboration Revenues. We enter into collaboration and licensing agreements under which we out-license certain rights to our products or product candidates to third parties. The terms of these arrangements typically include payment of one or more of the following to us: non-refundable, up-front license fees; development, regulatory and/or commercial milestone payments; and royalties on net sales of licensed products. To date, we have not recognized any collaboration revenues.
License Fee Revenue. If the license to our intellectual property is determined to be distinct from the other performance obligations identified in a contract, we recognize revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. To date, we have recognized $12.8 million in license fee revenue, all of which, other than $1.0 million recognized upon the termination of the license agreement with Bayer, is from payments received under our license agreement with Organon to commercialize XACIATO.
Milestones.At the inception of each arrangement in which we are a licensor and that includes developmental, regulatory or commercial milestones, we evaluate whether achieving the milestones is considered probable and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments not within our control, such as where achievement of the specified milestone depends on activities of a third party or regulatory approval, are not considered probable of being achieved until the specified milestone occurs. To date, we have recognized $1.8 million of milestone revenue, which represents the $1.8 million milestone payment we received under our license agreement with Organon in connection with the first commercial sale of XACIATO.
Royalties.For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which
some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have recognized approximately $26,000 of royalty revenue.
Stock-Based Compensation
The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award (determined using a Black-Scholes option pricing model), and is recognized as an expense over the requisite service period (generally the vesting period of the award). Determining the fair value of stock-based awards at the grant date requires significant estimates and judgments, including estimating the market price volatility of our common stock, future stock option exercise behavior and requisite service periods. Due to our limited history of stock option exercises, we applied the simplified method prescribed by SEC Staff Accounting Bulletin 110, Share-Based Payment: Certain Assumptions Used in Valuation Methods - Expected Term, to estimate expected life.
Stock options or stock awards with performance conditions issued to non-employees who are not directors are measured on the grant date and recognized when the performance is complete. Refer to Note 10 to our consolidated financial statements included in this report for more information.
Liability Related to the Sale of Future Royalties
In December 2023, we entered into a royalty interest financing agreement with UiE, pursuant to which we sold to UiE an interest in royalty and milestone payments we receive based on net sales of XACIATO. We received $5.0 million from UiE in connection with entering into the royalty interest financing agreement. We account for the sale of future royalties related to the UiE arrangement as debt under ASC 470, Debt. We recognized the $5.0 million payment received as a liability on our consolidated balance sheet because we agreed to make payments to UiE until such time that UiE has received aggregate payments equaling a 12% internal rate of return on the $5.0 million. Interest expense for the liability related to the sale of future royalties is recognized using the effective interest rate method over the expected term of the royalty interest financing agreement. The accounting for this arrangement requires significant judgment in estimating the total amount and timing of future royalty payments expected to be paid over the life of the agreement. These estimates are based on a combination of internal forecasts and external market data, including assumptions regarding future product sales, market adoption, pricing, and other relevant factors that may impact royalty-generating revenues.
The estimated royalty stream is used to determine the effective interest rate applied to the liability, which drives the recognition of interest expense over the term of the arrangement. Because the effective interest rate is based on projected royalty payments, changes in the estimated amount or timing of future royalties could materially affect the amount and timing of interest expense recognized in future periods. We periodically reassess our estimates of expected royalty payments. If actual results differ from our estimates, or if our expectations regarding future royalty payments change, we prospectively adjust the effective interest rate and the recognition of interest expense over the remaining term of the arrangement. Refer to Note 12 to our consolidated financial statements included in this report for more information.
Sale of Future Payments
On April 29, 2024, we entered into and closed a traditional royalty purchase agreement and a synthetic royalty purchase agreement with XOMA pursuant to which we sold our right, title and interest in the following to XOMA (i) all future net royalty and potential net milestone payments we would otherwise receive from Organon based on net sales of XACIATO, (ii) a portion of future net sales of Ovaprene and a portion of the $20.0 million payment that we could have potentially received under our since terminated license agreement with Bayer relating to Ovaprene, and (iii) a portion of future net sales of Sildenafil Cream. We received $22.0 million from XOMA in connection with entering into the royalty purchase agreements. Under the terms of the royalty purchase agreements, if XOMA receives total payments under the royalty purchase agreements equal to an amount that exceeds $88.0 million, XOMA will pay $11.0 million to us for each successive $22.0 million XOMA receives under the royalty purchase agreements. If we earn any such payments, they will be accounted for as variable consideration under ASC 606, Revenue Recognition,and will be recorded as income when such payments are received.
We evaluated the expected cash flows to XOMA from royalties and milestone payments expected to be earned on XACIATO, Ovaprene and Sildenafil Cream over the period that we expected it would take for XOMA to receive total payments of $88.0 million under the royalty purchase agreements, and determined to allocate the $22.0 million we received from XOMA in connection with entering into the royalty purchase agreements, net of transaction costs of approximately $1.6 million, to the traditional royalty purchase agreement for XACIATO, and none of it to the synthetic royalty purchase agreement for Ovaprene and Sildenafil Cream. The cash flows to XOMA from royalties and milestone payments expected to be earned on Ovaprene and Sildenafil Cream were expected to be de
minimis over the period that we expected it would take for XOMA to receive total payments of $88.0 million under the royalty purchase agreements because, unlike XACIATO, Ovaprene and Sildenafil Cream were not commercial assets at the time the evaluation was made.
We determined that the traditional royalty purchase agreement represented a complete sale of a nonfinancial asset (our right, title and interest in and to future payments related to commercial sales of XACIATO) for which XOMA would bear all benefit and for which we had no obligations or involvement going forward, and therefore should be accounted for within the scope of Accounting Standards Codification ("ASC") 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets. The $22.0 million net of transaction costs of approximately $1.6 million was recorded as other income on our consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.
Grant Funding
We receive certain research and development funding under grants issued by the U.S. government and a not-for-profit foundation. In accordance with a policy we adopted in 2018, we recognize grant funding in the statements of operations as a reduction to R&D expense, or contra R&D, as the related costs are incurred to meet those obligations over the grant period. Grant funding payments received in advance of research and development expenses incurred are recorded as deferred grant funding liability in our consolidated balance sheets. For the years ended December 31, 2025 and December 31, 2024, there were no material adjustments to our prior period estimates of grant funded research and development expenses. Refer to Note 15 to our consolidated financial statements included in this report for more information.
Clinical Trial Expense Accruals
We estimate expenses resulting from our obligations under contracts with vendors, CROs and consultants and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts vary and may result in payment flows that do not match the periods over which materials or services are provided.
We record clinical trial expenses in the period in which services are performed and efforts are expended. We accrue for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. We estimate accruals through financial models taking into account discussion with applicable personnel and outside service providers as to the progress of trials. During the course of a clinical trial, we may adjust our clinical accruals if actual results differ from our estimates. We estimate accrued expenses as of each balance sheet date based on the facts and circumstances known at that time. Our clinical trial accruals are dependent upon accurate reporting by CROs and other third-party vendors. Although we do not expect our estimates to differ materially from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low for any particular period. For the years ended December 31, 2025 and December 31, 2024 there were no material adjustments to our prior period estimates of accrued expenses for clinical trials.
Results of Operations
Comparison of the Years ended December 31, 2025 and 2024
The following table summarizes our consolidated results of operations for the years ended December 31, 2025 and 2024, and the change in the applicable line item in terms of dollars and percentage:
Years Ended
December 31,
Change
2025 2024 $ %
Revenue
License fee and other revenue
$ 1,030,193 $ 9,784 $ 1,020,409 10,429 %
Total revenue 1,030,193 9,784 1,020,409 10,429 %
Cost of revenue
295,799 - 295,799 - %
Operating expenses
Selling, general and administrative expenses
8,763,376 9,156,061 (392,685) (4) %
Research and development expenses
5,523,352 14,305,208 (8,781,856) (61) %
Total operating expenses 14,286,728 23,461,269 (9,174,541) (39) %
Loss from operations (13,552,334) (23,451,485) 10,194,950 43 %
Other income (expense)
Sale of royalty and milestone rights, net - 20,379,376 (20,379,376) (100) %
Other income (expense), net
153,060 (981,490) 1,134,550 116 %
Net loss $ (13,399,274) $ (4,053,599) $ (9,345,675) 231 %
Revenues
The approximately $1.0 million increase in license fee and other revenue was primarily attributable to the $1.0 million of revenue recognized upon the termination of the license agreement with Bayer in December 2025.
Cost of revenues
Cost of revenues relates primarily to expenses associated with medical education and awareness related to the commercialization of DARE to PLAY.
Selling, general and administrative expenses
The decrease of approximately $0.4 million in SG&A expenses from 2024 to 2025 was primarily attributable to decreases in (i) stock-based compensation expense of approximately $0.5 million, (ii) personnel costs of approximately $0.3 million due to reduced compensation expense, and (iii) general corporate overhead expenses of approximately $0.3 million. Such decreases were partially offset by increases in commercial-readiness expenses of approximately $0.4 million primarily for DARE to PLAY and professional services expenses of approximately $0.3 million.
Research and development expenses
The following table summarizes our R&D expenses for the periods indicated, together with the changes in those items in terms of dollars and percentage:
Years Ended
December 31, 		Change
2025 2024 $ %
Direct program costs:
Ovaprene (1)
$ 5,016,187 $ 8,518,495 $ (3,502,308) (41) %
Sildenafil Cream (2)
1,143,221 2,361,052 (1,217,831) (52) %
Other advanced clinical stage programs 2,805,127 1,421,888 1,383,239 97 %
Phase 1 and Phase 1-ready clinical stage programs (1)
1,548,800 761,721 787,079 103 %
Preclinical stage programs (1)
6,365,438 4,233,762 2,131,676 50 %
Other development programs - 27,542 (27,542) (100) %
Contra R&D expenses (3)
(13,919,881) (7,685,533) (6,234,348) 81 %
Total direct program costs 2,958,892 9,638,927 (6,680,035) (69) %
Indirect costs:
Personnel-related (including stock-based compensation) 4,691,957 5,611,057 (919,100) (16) %
Outside services (including consulting) 21,378 543 20,835 3837 %
Facilities-related (including depreciation) 75,215 78,168 (2,953) (4) %
Other indirect R&D costs 185,194 176,061 9,133 5 %
Contra R&D expenses (2,409,284) (1,199,548) (1,209,736) 101 %
Total indirect R&D costs 2,564,460 4,666,281 (2,101,821) (45) %
Total R&D expenses $ 5,523,352 $ 14,305,208 $ (8,781,856) (61) %
(1)The applicable program(s) receive grant funding and/or the Tax Incentive. The amount of R&D expense for the period indicated is shown on a gross basis (i.e., without deducting the amount of contra R&D expense for the applicable program(s). See footnote (3) below.
(2)For 2025, the dollar amount also includes expenses for DARE to PLAY.
(3)These contra R&D expenses were recognized as follows for the years ended December 31, 2025 and 2024: (a) Ovaprene, $2.5 million, and $0.2 million, respectively; (b) Other advanced clinical stage programs, $2.9 million and $0, respectively, (c) Phase 1 and Phase 1-ready clinical stage programs, $0.4 million and $1.3 million, respectively; and (d) Preclinical stage programs, $8.1 million and $6.2 million, respectively.
The decrease of approximately $8.8 million in R&D expenses from 2024 to 2025 was primarily attributable to (i) an increase in contra-R&D expenses, (ii) a decrease in manufacturing costs related to Ovaprene, (iii) a decrease in costs related to development activities for Sildenafil Cream, (iv) a decrease in personnel costs, and (v) a decrease in costs related to development activities for DARE-HRT1 partially offset by increases in costs related to development activities for (A) our other advanced clinical stage programs -primarily attributable to our DARE-HPV program, (B) our pre-clinical and other development programs -primarily attributable to our DARE-LARC1 program, and (C) our Phase 1 and Phase 1-ready clinical stage programs -primarily attributable to our DARE-PTB1 program. Contra-R&D expenses for the year ended December 31, 2025 primarily offset direct program costs for DARE-LARC1, DARE-HPV and Ovaprene. Contra R&D expenses for the year ended December 31, 2024 primarily offset direct program costs for DARE-LARC1.
Other income (expense)
Sale of royalty and milestone rights, net
The $20.4 million of other net income for 2024 represents the $22.0 million payment to us in April 2024 under the royalty purchase agreements we entered into with XOMA, net of approximately $1.6 million in transaction costs.
Other income (expense), net
The increase of $1.1 million in other income (expense) for 2025 as compared to 2024 was primarily due to increased interest earned on cash balances in 2025 and the receipt in the current year of approximately $0.3 million of employee retention credits for applications filed during 2023, offset by a loss on the disposal of a fixed asset of $0.6 million in 2024.
Liquidity and Capital Resources
Plan of Operations and Future Funding Requirements
In the near term, we plan to focus primarily on: (a) our ongoing Ovaprene Phase 3 study; (b) executing against our Section 503B compounding and consumer health products business strategies, with a focus on DARE to PLAY, DARE to RECLAIM estradiol progesterone intravaginal ring and DARE to RESTORE vaginal probiotics; and (c) advancing the development of product candidates for which the costs are being supported by non-dilutive grant or other award funding, in particular DARE-LARC1 and DARE-HPV. We will also continue engagement with the FDA to align on the Phase 3 program for Sildenafil Cream and will continue to work on the development of our other clinical and preclinical-stage programs.
At December 31, 2025, we had cash and cash equivalents of approximately $24.7 million and working capital of approximately $3.4 million. We will need additional capital to fund our operating needs through the fourth quarter of 2026 and to meet our current obligations as they become due. Our cash and cash equivalents at December 31, 2025 included funds received under grant agreements that generally may be applied solely toward direct costs for the funded project under those grant agreements other than an approximately 5% to 22% indirect cost allowance, and as of December 31, 2025, our deferred grant funding liability was approximately $19.7 million, substantially all of which consisted of funds intended to support the DARE-LARC1 program, the Ovaprene Phase 3 clinical study, and the DARE-HPV program. For more information about these grant agreements, see "-Contractual Obligations and Other Commitments-Grant Agreements" below, and Note 2 "Basis of Presentation and Summary of Significant Accounting Policies-Grant Funding" and Note 15 "Grant Awards-Other Non-Dilutive Grant Funding" to the accompanying consolidated financial statements.
In addition to our ongoing Regulation A offering, we will continue to evaluate and may pursue various other capital raising options, including sales of equity, debt financings, government or other grant funding, collaborations, structured financings, and commercial collaborations or other strategic transactions. Our ability to obtain additional capital, including through our ongoing Regulation A offering, and the timing and terms thereof, depend on various factors, many aspects of which are not entirely within our control, and there can be no assurance that capital will be available when needed or, if available, on terms favorable to us and our stockholders. Raising additional capital may cause substantial dilution to our stockholders, restrict our operations or require us to relinquish rights in our technologies or product candidates and their future revenue streams. If we cannot raise capital when needed, on favorable terms or at all, we will need to reevaluate our planned operations and may need to delay, scale back or eliminate some or all of our product candidate programs and/or reduce expenses.
At December 31, 2025, our accumulated deficit was approximately $188.7 million, and we had a net loss of approximately $13.4 million and negative cash flows from operations of approximately $9.9 million for the year ended December 31, 2025. Because we are in the early stages of executing against our Section 503B compounding and consumer health products business strategies and, as an organization, we have no experience in or infrastructure for commercializing products, both the timing and amount of potential revenue we may generate remain uncertain. As a result, we may continue to incur significant losses from operations and negative cash flows from operations for the next several years, and may never generate sufficient revenues to finance our operations or achieve profitability. Based on our current analysis of the conditions described above, there is substantial doubt about our ability to continue as a going concern within the 12-month period from the issuance date of the accompanying consolidated financial statements. The accompanying consolidated financial statements were prepared on a going concern basis, which assumes that we will realize our assets and satisfy our liabilities in the normal course of business. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and reclassification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty of our ability to remain a going concern.
We expect our operating expenses will increase substantially in the future as we continue to develop and seek FDA approval for our product candidates and expand our capabilities to support our 503B compounding and consumer health business strategies. Our future capital requirements are difficult to predict because they will depend on many factors that are highly variable and difficult to predict, including, but not limited to, those discussed in the risk factors in Part I, Item 1A of this report under "Risks Related to Our Financial Position and Capital Needs."
Capital Resources
Historically, the cash used to fund our operations has come from a variety of sources and predominantly from sales of shares of our common stock. We have also received a significant amount of cash through non-dilutive grants, strategic collaborations and royalty monetization transactions.
We have an ongoing Regulation A offering in which are offering up to 4,854,000 units, each consisting of one share of our Series A convertible preferred stock, which is convertible into two shares of our common stock, and two warrants, each exercisable for one share of our common stock at an exercise price of $4.00 per share. The offering price of each unit is $5.00. As of the date of this report, we have issued an aggregate of 65,640 units to investors in the offering, consisting of 65,640 shares of Series A convertible preferred stock and warrants to purchase up to 131,280 shares of our common stock, for gross proceeds of approximately $328,200.
We have a sales agreement with Stifel, Nicolaus & Company, Incorporated, or Stifel, to sell shares of our common stock from time to time through an ATM offering under which Stifel acts as our agent. During 2025, we sold 4,329,116 shares of our common stock under the sales agreement for net proceeds of approximately $17.6 million. Shares of our common stock sold under the sales agreement were offered and sold under our shelf registration statement on Form S-3 (File No. 333-278380), declared effective by the SEC on May 10, 2024. Because the market value of our outstanding shares of common stock held by non-affiliates, or our public float, is less than $75.0 million, our use of a shelf registration statement is currently limited by what is known as the SEC's "baby shelf rule" to one-third of our public float in any 12-month period. Because of the "baby shelf rule" and based on sales of shares of our common stock under our ATM sales agreement, we do not expect to sell any additional shares under our ATM sales agreement during the approximately 12-month period from July 2025, unless and until our public float exceeds approximately $54.0 million, as determined in accordance with SEC rules.
We have a purchase agreement with Lincoln Park Capital Fund, LLC, or Lincoln Park, under which, subject to the conditions thereof, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase, up to $15.0 million in shares of our common stock. Such sales of our common stock to Lincoln Park, if any, are subject to certain limitations, and may occur from time to time, at our sole discretion, over the 24-month period commencing on November 27, 2024. We sold 1,470,000 shares of our common stock under this purchase agreement during 2025 for net proceeds of approximately $3.1 million. As of the filing date of this report, due to the limitations in the purchase agreement on the number of shares we can sell at an average price of less than $3.59, unless we obtain stockholder approval to do so, we do not expect to sell any more shares to Lincoln Park. See Note 9 "Stockholders' Equity-Equity Line " to the accompanying consolidated financial statements for additional information regarding these limitations.
We expect to begin recording revenue from sales of our 503B products and consumer health products when such products are commercially available for purchase and are shipped. Because we are in the early stages of executing against our Section 503B compounding and consumer health products strategy and, as an organization, we have no experience in or infrastructure for commercializing products, the amount of potential revenue we may generate during 2026 remains uncertain.
Cash Flows
The following table shows a summary of our cash flows for the periods indicated:
Years Ended
December 31,
2025 2024
Net cash (used in) provided by operating activities
$ (9,885,870) $ 5,473,555
Net cash used in investing activities (385,278) (573,046)
Net cash provided by financing activities 19,277,144 354,522
Effect of exchange rate changes on cash, cash equivalents and restricted cash
7,186 (67,913)
Net increase in cash, cash equivalents and restricted cash
$ 9,013,182 $ 5,187,118
Net cash used in operating activities
Cash used in operating activities during the year ended December 31, 2025 included the net loss of $13.4 million, decreased by non-cash stock-based compensation expense of approximately $1.5 million. Changes in
operating assets and liabilities included a decrease in deferred revenue of $1.0 million related to revenue recognized during the period for amounts previously received, which reduced operating cash. Components providing operating cash were an increase in deferred grant funding of approximately $3.1 million, a decrease in prepaid expenses of approximately $0.7 million, and an increase in interest payable of approximately $0.6 million related to our royalty interest financing agreement with UiE. Components reducing operating cash were (i) a decrease in accrued expenses of approximately $2.3 million primarily as a result of prior year accruals not present in the current year including a $1.0 million milestone due under a license agreement, approximately $0.5 million related to the construction of capital equipment, and approximately $0.8 million of accrued bonus expense, (ii) an increase in other receivables of approximately $0.3 million, and (iii) a decrease in accounts payable of approximately $0.3 million.
Cash provided by operating activities during the year ended December 31, 2024 included the net loss of $4.1 million, decreased by non-cash stock-based compensation expense of approximately $2.2 million. Components providing operating cash were a decrease in prepaid expenses of approximately $3.6 million, an increase in deferred grant funding of approximately $2.8 million, a decrease in other receivables of approximately $0.7 million, an increase in interest payable of approximately $0.5 million related to our royalty interest financing agreement with UiE, an increase in accrued expenses of $0.2 million, and a decrease in deposits of $0.4 million. Components reducing operating cash were a decrease in accounts payable of approximately $1.9 million and a decrease in other non-current assets of approximately $34,000.
Net cash used in investing activities
Net cash used in investing activities during the years ended December 31, 2025 and December 31, 2024 was related to purchases of property and equipment of approximately $0.4 million and $0.6 million, respectively.
Net cash provided by financing activities
Net cash provided by financing activities during the year ended December 31, 2025 primarily consisted of net proceeds of approximately $17.6 million and $3.1 million from the sale of our common stock under our ATM sales agreement and our equity line arrangement with Lincoln Park, respectively. These proceeds were partially offset by (i) principal payments of approximately $1.3 million related to our finance lease obligation, and (ii) payments of approximately $0.3 million for deferred offering costs associated with our capital-raising activities.
Net cash provided by financing activities during the year ended December 31, 2024 primarily consisted of proceeds from (i) the sale of our common stock under our ATM sales agreement and (ii) the financing of certain director and officer and other liability insurance premiums, partially offset by payments on the insurance financing payable.
Contractual Obligations and Other Commitments
License and Royalty Agreements
We have assembled our pipeline primarily through acquisitions, in-license agreements, and other collaborations. We agreed to make royalty and milestone payments, and in some cases annual license fee payments, under the license and development agreements under which we acquired rights to intellectual property from third parties. For information about these obligations see Note 3 "Strategic Agreements-Strategic Agreements for Pipeline Development" to the accompanying consolidated financial statements. The amount and timing of most of these payments are difficult to predict because the timing of milestone payments for pre-commercial programs generally depends on the progress of and success in development of a particular program, which is subject to many risks and uncertainties as discussed elsewhere in this report and difficult to predict, and the timing and amount of royalty and milestone payments related to commercial products generally depends on their commercial success, which may, as it is with XACIATO, be out of our control.
During 2026, based on our current expectations regarding the progress of development of our product candidates and sales of XACIATO and DARE to PLAY, we expect such payments to upstream licensors to be immaterial. With respect to our license agreement relating to XACIATO, royalties payable by us to upstream licensors will be funded by royalty payments made by our licensee, Organon. For further discussion of these potential payments, see Note 3 "Strategic Agreements-Strategic Agreements for Pipeline Development" to the accompanying consolidated financial statements. With respect to DARE to PLAY, for at least the first twelve months following its market introduction, we anticipate a mid single-digit royalty payment obligation to our upstream licensor on annual net sales.
Grant Agreements
For information regarding our grant agreements with the Foundation, see "--Deferred Grant Funding," above, and Note 2, "Basis of Presentation and Summary of Significant Accounting Policies-Grant Funding" and Note 15, "Grant Awards-Other Non-Dilutive Grant Funding" to the accompanying consolidated financial statements.
Royalty Purchase Agreements with XOMA
In April 2024, we entered into a traditional royalty purchase agreement and a synthetic royalty purchase agreement with XOMA pursuant to which, among other things, we sold our right, title and interest in the following to XOMA: (a) all of the royalties and potential milestone payments we would otherwise have the right to receive from and after April 1, 2024 under our exclusive license agreement with Organon based on net sales of XACIATO, net of our obligations to upstream licensors and UiE; and (b) a portion of future net sales of Ovaprene, Sildenafil Cream and DARE to PLAY.
For more information regarding our contractual obligations to XOMA, see ITEM 1. "BUSINESS- Royalty Monetization Transactions- Traditional and Synthetic Royalty Purchase Agreements with XOMA" in Part I of this report and Note 13 "Royalty Purchase Agreements" to the accompanying consolidated financial statements.
Royalty Interest Financing Agreement
In December 2023, we entered into a royalty interest financing agreement with UiE pursuant to which we sold to UiE an interest in the royalty and milestone payments we are entitled to receive in respect of net sales of XACIATO under our license agreement with Organon. In exchange for any payments to us from UiE under the agreement, we agreed to make payments to UiE out of royalty and milestone payments earned on net sales of XACIATO from Organon, net of our obligations to upstream licensors, until UiE receives a specified return on its investment, or using our other sources of assets or income to complete such payments if UiE has not received the specified return on its investment by the end of 2035. We have the right to make prepayments on or pay in full and retire all of our payment obligations to UiE.
For more information regarding our contractual obligations to UiE, see ITEM 1. "BUSINESS- Royalty Monetization Transactions-Royalty Interest Financing Agreement" in Part I of this report and Note 12 "Royalty Interest Financing" to the accompanying consolidated financial statements.
Leases
We have two operating leases for our laboratory and office spaces that each expire in 2027. As of December 31, 2025, we had future minimum lease payments under these leases of $1.2 million, $0.6 million of which is classified as current and $0.6 million of which is classified as long-term, the remainder of which represents future interest payments. We have one finance lease for our clean room space that expires in 2026. As of December 31, 2025, we had future minimum lease payments under this lease of $1.5 million, all of which is classified as current, the remainder of which represents future interest payments. For additional information on our lease obligations, See Note 11 "Leases" to the accompanying consolidated financial statements.
Other Contractual Obligations
We enter into contracts in the normal course of business with various third parties for research studies, clinical trials, testing and other services, and with Section 503B-registered outsourcing facilities, dispensing pharmacies, telehealth providers, and other third parties to help bring our proprietary formulations to market. These contracts generally provide for termination upon notice, and we do not believe that our non-cancelable obligations under these agreements are material.
For descriptions of additional contractual obligations and commitments, see Note 14 "Commitments and Contingencies" to the accompanying consolidated financial statements.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.
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