Company: DARE
Filing Date: 2025-04-24
Form Type: ARS
Source: 0001401914-25-000018
Chunk: 266

Company: Dare Bioscience, Inc.
Filing Date: 2025-04-24
Form: ARS
Chunk 266
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 to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Continued) Critical Audit Matter – Estimating the Allocation of Transaction Price in Other Income Recognition The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Description of the Critical Audit Matter During the year ended December 31, 2024, the Company entered into a traditional royalty purchase agreement and a synthetic royalty purchase agreement with XOMA (US) LLC (“XOMA”). The Company received $22.0 million from XOMA in connection with entering into the royalty purchase agreements, which was determined as the transaction price. As described in Note 2 to the consolidated financial statements, the Company recognized other income in accordance with the principles outlined in ASC 610-20, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets, which requires the allocation of the transaction price to each performance obligation based on their relative standalone selling prices. The observable standalone selling prices were not available, and therefore the Company estimated these prices using the adjusted market assessment approach. This fair value approach requires management to make significant estimates and judgments, including the timing and amounts of projected net sales, probabilities of success in product development and regulatory approvals, and appropriate discount and royalty rates. Estimating probabilities of success for early-stage assets is inherently uncertain. We identified the estimation of the allocation of the transaction price to multiple performance obligations in the Company’s contract with XOMA as a critical audit matter due to the complexity involved in determining the standalone selling price of each performance obligation, which directly affects the amount of other income recognized in each period. This in turn led to a high