10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

S                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

or

£                 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to

Commission File No. 000-54871

BIOPHARMX CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	59-3843182
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
1098 Hamilton Court, Menlo Park, California	94025
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: 650-889-5020 

Indicate by checkmark 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 S 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 S 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.

Large accelerated filer	£	Accelerated filer	£
Non-accelerated filer	£	Smaller reporting company	S

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

As of November 13, 2014, there were outstanding 11,226,936 shares of the registrant’s common stock, $.001 par value.

Documents incorporated by reference: None.

BIOPHARMX CORPORATION

Form 10-Q

Table of Contents

PART I – Financial Information
Item 1	Condensed Consolidated Financial Statements:	3
	Condensed Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013 (unaudited)	3
	Condensed Consolidated Statement of Operations and Comprehensive Loss for the three  and nine months ended September 30, 2014 and 2013 (unaudited)	4
	Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2014 and 2013 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3	Qualitative and Quantitative Disclosures About Market Risk	19
Item 4	Controls and Procedures	20
PART II – Other Information
Item 1	Legal Proceedings	21
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3	Defaults Upon Senior Securities	22
Item 4	Mine Safety Disclosures	22
Item 5	Other Information	22
Item 6	Exhibits	22
SIGNATURES		23

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PART I

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BioPharmX Corporation

Unaudited Condensed Consolidated Balance Sheets

as of September 30, 2014 and December 31, 2013

	September 30,			December 31,
	2014			2013
Assets
Current assets:
Cash	$	1,208,000		$	3,000
Prepaid expenses and other current assets		302,000			36,000
Total current assets		1,510,000			39,000
Property and equipment, net		188,000			32,000
Intangible assets		150,000			150,000
Other assets		50,000			150,000
Restricted cash		35,000			-
Total assets	$	1,933,000		$	371,000
Liabilities, Convertible Redeemable Preferred Stock and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued expenses	$	1,326,000		$	427,000
Payroll liabilities		85,000			64,000
Deferred rent		55,000			65,000
Convertible notes, short term		-			90,000
Related party payables		345,000			125,000
Total current liabilities		1,811,000			771,000
Convertible notes payable		-			938,000
Other long-term liabilities		-			32,000
Total liabilities		1,811,000			1,741,000
Commitments and contingencies (Note 8)
Series A convertible redeemable preferred stock, $0.001 par value; 10,000,000 shares
authorized; 2,176,387 and no shares issued and outstanding at September 30, 2014, and December 31, 2013, respectively (liquidation preference of $4,026,000 as of September 30, 2014)		3,637,000			-
Stockholders' deficit:
Common stock, $0.001 par value; 90,000,000 shares authorized;
11,057,249 and 7,025,000 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively		11,000			7,000
Additional paid-in capital		3,188,000			306,000
Accumulated deficit		(6,714,000	)		(1,683,000	)
Total stockholders' deficit		(3,515,000	)		(1,370,000	)
Total liabilities, convertible redeemable preferred stock and stockholders' deficit	$	1,933,000		$	371,000

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

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BioPharmX Corporation

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

for the three and nine months ended September 30, 2014 and 2013

	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Operating expenses:
Research and development	$	807,000		$	221,000		$	1,851,000		$	401,000
Sales and marketing		757,000			48,000			1,337,000			73,000
General and administrative		515,000			160,000			1,800,000			306,000
Total operating expenses		2,079,000			429,000			4,988,000			780,000
Loss from operations		(2,079,000	)		(429,000	)		(4,988,000	)		(780,000	)
Other income		16,000			-			31,000			-
Interest expense, net		(2,000	)		(22,000	)		(74,000	)		(42,000	)
Net and comprehensive loss		(2,065,000	)		(451,000	)		(5,031,000	)		(822,000	)
Deemed dividend on Series A convertible redeemable preferred stock		(37,000	)		-			(70,000	)		-
Net loss available to common stockholders	$	(2,102,000	)	$	(451,000	)	$	(5,101,000	)	$	(822,000	)
Basic and diluted net loss available to common stockholders per share	$	(0.20	)	$	(0.06	)	$	(0.52	)	$	(0.12	)
Shares used in computing basic and diluted net loss per share		10,630,000			7,025,000			9,844,000			7,025,000

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

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BioPharmX Corporation

Unaudited Condensed Consolidated Statements of Cash Flows

for the nine months ended September 30, 2014 and 2013

	Nine months ended September 30,
	2014			2013
Cash flows from operating activities:
Net loss	$	(5,031,000	)	$	(822,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		385,000			28,000
Depreciation expense		10,000			6,000
Warrants issued for services provided		99,000			-
Noncash interest expense		76,000			42,000
Changes in assets and liabilities:
Prepaid expenses and other assets		(166,000	)		(191,000	)
Accounts payable and accrued expenses		889,000			111,000
Payroll liabilities		21,000			33,000
Related party payables		220,000			123,000
Net cash used in operating activities		(3,497,000	)		(670,000	)
Cash flows from investing activities:
Change in restricted cash		(35,000	)		-
Purchases of property and equipment		(166,000	)		(24,000	)
Purchase of intellectual property		-			(50,000	)
Net cash used in investing activities		(201,000	)		(74,000	)
Cash flows from financing activities:
Proceeds from issuance of common stock		43,000			-
Net proceeds from issuance of convertible redeemable preferred stock		3,840,000			-
Proceeds from issuance of convertible notes payable		1,020,000			630,000
Net cash provided by financing activities		4,903,000			630,000
Net increase (decrease) in cash and cash equivalents		1,205,000			(114,000	)
Cash at beginning of period		3,000			138,000
Cash at end of period	$	1,208,000		$	24,000
Noncash investing and financing activities:
Intangible assets purchase accrued	$	90,000		$	100,000
Conversion of convertible notes payable to common stock	$	1,942,000		$	-
Fair value of beneficial conversion feature issued in connection with convertible notes payable	$	204,000		$	126,000
Issuance of common stock warrants in connection with Series A convertible redeemable preferred stock	$	273,000		$	-
Issuance of common stock warrants in connection with convertible notes payable	$	105,000		$	-

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

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BIOPHARMX CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

BioPharmX Corporation (“BioPharmX” or the “Company”) is a Silicon Valley-based company, registered in Delaware and originally incorporated on August 30, 2010 in Nevada under the name Thompson Designs, Inc. The Company has one wholly-owned subsidiary, BioPharmX, Inc., a Nevada corporation. The Company seeks to provide innovative products through unique, patented platform technologies for pharmaceutical and over-the-counter (“OTC”) applications in the fast growing dermatology and health and wellness markets.

The strategy of the Company begins with obtaining novel, patented, platform technologies through exclusive licensing, joint development or acquisition. BioPharmX then develops platform technologies that can be developed into product lines through specialized formulation and clinical protocol development with a bifurcated market penetration strategy, prescription for the high dose prescription version and OTC consumer for the low dose version. Identifying such technologies requires a strong knowledge of the markets served through technology assessment and evaluation of sell-side and buy-side opportunities through relationships with major pharmaceutical companies. BioPharmX’s products are formulated to address both market pathways to address unmet needs in well-defined, multi-billion dollar markets for licensing or direct commercialization for both pharmaceutical and OTC distribution and sales.

On January 23, 2014, the Company, BioPharmX Inc. and stockholders of BioPharmX, Inc. who collectively owned 100% of BioPharmX, Inc. (the “BioPharmX, Inc. Stockholders”) entered into and consummated transactions pursuant to a Share Exchange Agreement (the “Share Exchange Agreement,” such transaction referred to as the “Share Exchange Transaction”), whereby the Company issued to the BioPharmX, Inc. Stockholders an aggregate of 7,025,000 shares of its common stock, par value $0.001 (“Common Stock”), in exchange for 100% of the shares of BioPharmX, Inc. held by the BioPharmX, Inc. Stockholders. The shares of our Common Stock received by the BioPharmX, Inc. Stockholders in the Share Exchange Transaction constituted approximately 77.8% of our then issued and outstanding Common Stock giving effect to the issuance of shares pursuant to the Share Exchange Agreement.

As a result of the Share Exchange Transaction, BioPharmX, Inc. became a subsidiary of the Company. The acquisition was accounted for as a reverse merger and recapitalization effected by a share exchange. BioPharmX, Inc. is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill has been recognized.

On March 3, 2014, we completed the name change of the Company from Thompson Designs, Inc. to BioPharmX Corporation.

Effective May 16, 2014, BioPharmX Corporation, previously a Nevada corporation, was redomiciled as a Delaware corporation and effective June 26, 2014, BioPharmX, Inc, previously a Delaware corporation, was redomiciled as a Nevada corporation.

Basis of Presentation and Principles of Consolidation

These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and include the accounts of BioPharmX and its subsidiary. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed on March 31, 2014. The condensed consolidated balance sheet as of December 31, 2013, included herein, was derived from the audited consolidated financial statements as of that date.

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The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s statement of financial position as of September 30, 2014 and December 31, 2013, the Company’s results of operations and its cash flows for each of the three and nine months ended September 30, 2014 and 2013 and its cash flows for each of the nine months ended September 30, 2014 and 2013. The results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014. All references to September 30, 2014 or to the three and nine months ended September 30, 2014 and 2013 in the notes to the condensed consolidated financial statements are unaudited.

Reclassification
 

Certain prior year amounts have been reclassified to conform to the current year presentation. The amounts for the prior periods have been reclassified to be consistent with the current year presentation and have no impact on previously reported total assets, total stockholders’ deficit or net loss.

Recent Accounting Pronouncements 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09,Revenue from Contracts with Customers, (“ASU 2014-09”), which converges the FASB and the International Accounting Standards Board standards on revenue recognition. Areas of revenue recognition that will be affected include, but are not limited to, transfer of control, variable consideration, allocation of transfer pricing, licenses, time value of money, contract costs and disclosures. This guidance is effective for the fiscal years and interim reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact that the adoption of ASU 2014-09 will have on its consolidated financial statements and related disclosures.

On June 10, 2014, the FASB issued ASU 2014-10, Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation,, which eliminates the definition of a development stage entity, eliminates the development stage presentation and disclosure requirements under Accounting Standards Codification, or ASC, 915 Development Stage Entities, or ASC 915, and amends provisions of existing variable interest entity guidance under ASC 810 Consolidation . As a result of the changes, entities which meet the former definition of a development stage entity will no longer be required to: (1) present inception-to-date information in the statements of income, cash flows, and stockholder equity; (2) label the financial statements as those of a development stage entity; (3) disclose a description of the development stage activities in which the entity is engaged; and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. Furthermore, ASU 2014-10 clarifies disclosures about risks and uncertainties under ASC Topic 275, Risks and Uncertainties, that apply to companies that have not commenced planned principal operations. Finally, variable interest entity rules no longer contain an exception for development stage entities and, as a result, development stage entities will have to be evaluated for consolidation in the same manner as non-development stage entities.

Under ASU 2014-10, entities are no longer required to apply the presentation and disclosure provisions of ASC 915 during annual periods beginning after December 15, 2014. In addition, the revisions to the consolidation standards are effective for annual periods beginning after December 15, 2015 for public entities and are effective for annual periods beginning after December 15, 2016 for nonpublic entities. Early adoption is permitted for any annual reporting period or interim period for which the entity's financial statements have not yet been issued (public business entities) or made available for issuance (other entities). 

The Company has adopted ASU 2014-10 effective as of its issuance date. Adoption of this standard had no impact on its financial position, results of operations, or cash flows; however, the presentation of the consolidated financial statements and related disclosures in the notes to the consolidated financial statements has been changed to eliminate the disclosures that are no longer required.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (“ASU 2014-15”). This standard includes guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern within one year after the financial statements are issued. If conditions or events raise substantial doubt, the entity must disclose the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, management’s evaluation of those conditions or events, and management’s plans to mitigate the conditions or events. This update is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2014-15 will have on its consolidated financial statements and related disclosures.

We have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect is expected on the consolidated financial statements as a result of future adoption.

2. GOING CONCERN CONSIDERATIONS AND MANAGEMENT’S PLAN

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred recurring losses and negative cash flows from operations since inception. The Company has not generated revenues and has funded its operating losses through the issuance of convertible notes payable and convertible preferred stock. The Company has a limited operating history and its prospects are subject to risks, expenses and uncertainties frequently encountered by companies in the industry. These risks include, but are not limited to, the uncertainty of availability of additional financing and the uncertainty of achieving future profitability. Management of the Company intends to raise additional funds through the issuance of equity securities. There can be no assurance that such financing will be available or on terms which are favorable to the Company. Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not contain any adjustments that might result from the outcome of this uncertainty.

As shown in the accompanying financial statements, the Company incurred a net loss of $5.0 million and $822,000 during the nine months ended September 30, 2014 and 2013, respectively, and has an accumulated deficit of $6.7 million as of September 30, 2014. As of September 30, 2014, the Company had a working capital deficit of $301,000. As of December 31, 2013, the Company had a working capital deficit of $732,000. While management of the Company believes that it has a plan to fund on-going operations, there is no assurance that its plan will be successfully implemented.

Since 2012, the Company has obtained financing with convertible notes to invite early investors at a 20% discount to the share price in a future offering.  Additionally, during the first half of 2014, the Company has issued Series A convertible redeemable preferred stock and common stock warrants resulting in gross proceeds of $4.0 million (see details in Note. 9 -- “Convertible Redeemable Preferred Stock and Stockholders’ Equity”) and is looking to raise additional funds as a result of this offering prior to the end of the third quarter. While the Company has been able to secure a number of investors, there is continued risk in the Company’s ability to attract additional development-stage investors. Without access to continued funds for working capital, the Company may not be able to execute its product strategy and pursue research and development activities on its novel platform technologies. 

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The discovery of key raw materials to formulate novel products depends on the Company’s ability to identify, negotiate and secure procurement of such materials. This also depends on the Company’s ability to establish comprehensive and long term vendor contracts and relationships.

The Company’s ability to compete and to achieve its product platform strategy depends on its ability to protect its proprietary discoveries and technologies. The Company currently relies on a combination of copyrights, trademarks, trade secret laws and confidentiality agreements to protect its intellectual property rights. The Company also relies upon unpatented know-how and continuing technological innovation.

The Company’s continued operations are dependent upon its ability to identify, recruit and retain adequate management personnel and contractors to perform certain jobs such as research and development, patent generation, regulatory affairs and general administrative functions. The Company requires highly trained professionals of varying levels and experience along with a flexible work force.

Research and development for novel prescription or OTC based products can be very extensive and lengthy in nature; along with the clinical trial process with the Food and Drug Administration which can require significant funding and time consuming patient studies. The competitive landscape could change significantly over the time period to complete targeted product development milestones. The current competition for BioPharmX’s products could also turn into strategic partners or potential acquirers in the future.

The significant risks and uncertainties described above could have a significant negative impact on the financial viability of BioPharmX and raise substantial doubt about the Company’s ability to continue as a going concern. Management is working on the Company’s business model to increase working capital by managing its cash flow, securing financing and working towards bringing its first product to market.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These unaudited interim condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual financial statements and notes thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2013. There have been no significant changes in the Company’s significant accounting policies for the three months ended September 30, 2014, as compared to the significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2013.

4. PROPERTY, PLANT AND EQUIPMENT

Property and equipment, consisted of the following:

	September 30, 2014			December 31, 2013
Furniture and fixtures	$	18,000		$	11,000
Laboratory equipment		26,000			12,000
Computers and equipment		15,000			15,000
Software		145,000			-
		204,000			38,000
Less: accumulated depreciation		(16,000	)		(6,000	)
	$	188,000		$	32,000

Depreciation expense for the nine months ended September 30, 2014 and 2013 was $10,000 and $6,000.  

5. RESTRICTED CASH

The company has restricted cash in the amount of $35,000 held by Bank of America in a money market account to secure the credit line of the Company’s credit cards. 

6. RELATED-PARTY PAYABLES

Since inception, the founding executives of the Company have made advances to cover short-term operating expenses. Additionally, since the beginning of 2014 a portion of their compensation is being deferred and is included in this balance. These advances and deferred compensation are non-interest bearing.

As of September 30, 2014 and December 31, 2013, related party payables were $345,000 and $125,000, respectively.

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7. LONG-TERM OBLIGATIONS

Financing Arrangements

During the six months ended June 30, 2014, the Company issued convertible notes payable to twelve individuals in exchange for $1,020,000 in cash. The Notes carry an interest rate of 6% per annum and mature between January 2015 and March 2017, with principal and interest payable at maturity. Prior to 2014, the Company had issued $1,230,000 of convertible notes payable (the “Notes”).

The Notes automatically convert into common stock upon the Company entering into a qualified preferred stock financing at 80% of the price per share at which such preferred stock is issued in such an offering. Additionally, there is a special conversion that at maturity, unless the Company repays all outstanding principal and interest, the Notes shall be automatically converted into a number of shares of common stock of the Company at 80% of the then fair market value per share.

As a result of this beneficial conversion feature, the Company has recorded $204,000 and $246,000 as a debt discount during the nine months ended September 30, 2014 and year ended December 31, 2013. The debt discount is being amortized to interest expense over the term of the Notes using the effective interest rate method. The amortization expense related to the debt discount was $6,000 and $49,000 for the nine months ended September 30, 2014, respectively. The amortization expense related to the debt discount was $17,000 and $24,000 for the three and nine months ended September 30, 2013.

The Company entered into Subscription Agreements (the “Subscription Agreements”) for a private placement of shares of our Series A convertible redeemable preferred stock, par value $0.001 per share (“Series A”), and warrants (the “Warrants”) with two accredited investors on March 14, 2014 and April 1, 2014, respectively, whereby we sold an aggregate of 810,811 shares of Series A at a per share price of $1.85 for gross proceeds of $1,500,000 and issued to the investors for no additional consideration the Warrants to purchase in the aggregate 405,406 shares of the Company’s common stock, par value $0.001 per share, at an exercise price of $3.70 per share. The closing of the sale of the Series A and the Warrants under the Subscription Agreements occurred on April 11, 2014. See Note 9.

As a result, upon the closing, the 6% secured convertible notes in the aggregate principal amount of $2.25 million and accrued interest for one of the note holders were automatically converted into 1,526,001 shares of common stock of the Company (the “Conversion Shares”). The balance of accrued interest was waived. On April 11, 2014, the convertible notes payable balance, net of unamortized discounts, of $1,942,000 was converted to common stock. As of September 30, 2014, there were no remaining outstanding convertible notes.

8. COMMITMENTS AND CONTINGENCIES

Lease Arrangements

On August 23, 2013, the Company signed a lease for 10,800 square feet of office and laboratory space in Menlo Park, California. The term of the lease is 39 months from the lease commencement date of September 1, 2013. Future minimum commitments under this lease are as follows:

Three months remaining of 2014	$	70,000
2015		288,000
2016		271,000
Total	$	629,000

Legal Proceedings

The Company is not currently a party to any legal proceedings. The Company is not aware of any pending legal proceeding to which any of its officers, directors, or any beneficial holders of 5% or more of its voting securities are adverse to it or have a material interest adverse to it. 

9. CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

Common Stock

As described in Note 1, on January 23, 2014, the Company issued 7,025,000 shares of its common stock to BioPharmX, Inc. stockholders.  As described in Note 7, on April 11, 2014, the Company’s convertible notes and eligible interest were converted to 1,526,001 shares of common stock upon the first closing of the offer and sale of Series A Preferred Stock. During the nine months ended September 30, 2014, the Company issued 506,248 shares of common stock upon the exercise of stock options. At September 30, 2014, the Company has 11,057,249 shares of common stock currently issued and outstanding.

Series A Preferred Stock

The Company entered into Subscription Agreements (the “Subscription Agreements”) for a private placement of shares of our Series A convertible redeemable preferred Stock, par value $0.001 per share (“Series A”), and warrants (the “Warrants”) with 30 accredited investors through the third quarter of 2014 whereby we sold an aggregate of 2,176,387 shares of Series A at a per share price of $1.85 for gross proceeds of $4.0 million and issued to the investors for no additional consideration the Warrants to purchase in the aggregate 1,088,201 shares of the Company’s common stock, par value $0.001 per share, with an exercise price of $3.70 per share.

The Warrants with an allocated fair value of $273,000 were classified as additional paid in capital. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions: dividend rate of 0%, risk-free rate of 1.6% to 1.9%, contractual term of 5 years and expected volatility of 88.8%. These Warrants were immediately exercisable, and as of September 30, 2014, were all outstanding.

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In connection with the Subscription Agreements, the Company, the majority shareholders of the Company and the Investors entered into Investor Rights Agreements (the “Investor Rights Agreements”) with the Investors, whereby the Investors were granted certain rights including: (i) right to receive copies of quarterly and annual reports of the Company, (ii) right of inspection of the Company’s properties and records, (iii) right of participation in future securities offerings, (iv) tag-along rights in connection with sales of the Company’s stock by a major shareholder, and (v) board of directors representation rights for the subscribers who purchased at least 500,000 shares of Series A and hold at least 30% of such shares (the “Qualified Subscribers”). The Company made certain covenants under the agreement including: (i) uplisting to NYSE or NASDAQ within three years from the issuance shares of Series A, and (ii) increase of the board of directors to five members including one member to be appointed by the Qualified Subscribers. 

Significant terms of Series A are as follows:

· Holders of the Series A are entitled to interest payment at the rate of 6% of the purchase price per annum. The Company has the option to pay this interest in shares of common stock or in cash. As of September 30, 2014, $70,000 in interest has been accreted to the Series A. Holders of the Series A are entitled to receive dividends on an as converted basis with the holders of the Company’s common stock.

· The holders of the Series A are entitled to vote together with the holders of the Company’s common stock, with each such holder of Series A entitled to the number of votes equal to the number of shares of the Company’s common stock into which such Series A would be converted if converted on the record date for the taking of a vote.

· Each share of Series A is initially convertible, at any time at the sole option of the holder, into one share of the Company’s common stock, subject to future adjustments as provided for in the Series A Certificate. The Series A shall automatically convert into shares of the Company’s common stock upon the uplisting of the common stock to NYSE or NASDAQ within three years from the issuance of shares of Series A.

· If the Company fails to effect the uplisting within three years from the issuance of shares of Series A, the holders will have the right to require the Company to redeem all or a portion of the then outstanding Series A at a price per share equal to the Series A liquidation preference.

Warrants

In addition to the Warrants issued in conjunction with the Subscription Agreements, the Company issued warrants on May 15, 2014, to a service provider for 316,395 shares of common stock at an exercise price of $2.035 per share, which was valued at $99,000 and expensed. The Company also issued to a qualified investor as a part of his convertible loan package for 343,559 shares of common stock at an exercise price of $1.85 per share, which was valued at $105,000. These warrants expire after five years. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions: dividend rate of 0%, risk-free rate of 1.6%, contractual term of 5 years and expected volatility of 88.8%. These Warrants were immediately exercisable, and as of September 30, 2014, were all outstanding.

Equity Incentive Plan

On January 23, 2014, the Company adopted the 2014 Equity Incentive Plan (the “2014 Plan”) which permits the Company to grant stock options to directors, officers or employees of the Company or others to purchase shares of common stock of the Company through awards of incentive and nonqualified stock options (“Options”), stock (“Restricted Stock” or “Unrestricted Stock”) and stock appreciation rights (“SARs”). Options previously issued under the BioPharmX, Inc. 2011 Equity Incentive Plan were cancelled, and options under the 2014 Plan were issued to replace all cancelled BioPharmX, Inc. options.

The Company currently has time-based options outstanding. The time-based options generally vest in two to four years and expire ten years from the date of grant. Total number of shares reserved and available for grant and issuance pursuant to this Plan is 2,700,000. Shares issued under the Plan will be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company. At September 30, 2014, there were 79,000 shares available for grant under the Plan.

The following table summarizes the Company’s stock option activities for the nine month periods ended September 30, 2014 and 2013:

				Weighted Average
				Exercise		Remaining
				Price		Contractual
	Shares			Per Share		Term
Outstanding as of January 1, 2014		2,606,000		$	0.25
Granted		175,000			1.85
Exercised		(506,248	)		0.09
Cancelled		(160,000	)		0.37
Outstanding as of September 30, 2014		2,114,752		$	0.41		8.39
Vested and exercisable		1,149,809		$	0.32		8.09
Vested and expected to vest		2,114,752		$	0.41		8.39

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10. STOCK-BASED COMPENSATION

The following table summarizes the stock-based compensation expenses included in our Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss:

	For the three months ended of September 30				For the nine months ended of September 30
	2014		2013		2014		2013
Research and development	$	14,000	$	9,000	$	94,000	$	13,000
Sales and marketing		9,000		3,000		52,000		4,000
General and administrative expenses		49,000		6,000		239,000		11,000
Stock-based compensation expense	$	72,000	$	18,000	$	385,000	$	28,000

The Company estimates the fair value of time-based stock options, if any, granted using the Black-Scholes option pricing model. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Time-based and performance-based options, if any, typically have a ten-year life from date of grant and vesting periods of two to four years.

Valuation Assumptions

The fair value of stock-based awards to employees is calculated through the use of the Black-Scholes option pricing model, even though such model was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which differ significantly from the Company’s stock option awards. This model also requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values.

Expected Term

The expected term represents the period that the Company’s stock-based awards are expected to be outstanding. For awards granted subject only to service vesting requirements, the Company utilizes the simplified method for estimating the expected term of the stock-based award, instead of historical exercise data.

Expected Volatility

The Company uses the historical volatility of the price of the common shares of selected public companies in the biotechnology sector.

Expected Dividend

The Company has never paid dividends on its common shares and currently does not intend to do so and, accordingly, the dividend yield percentage is zero for all periods.

Risk-Free Interest Rate

The Company bases the risk-free interest rate used in the Black-Scholes option pricing model upon the implied yield curve currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

During the nine months ended September 30, 2014 and 2013, the Company issued options to non-employees for the purchase of 175,000 and 1,165,000 shares of common stock in exchange for services. During the nine months ended September 30, 2014, the options were issued with an exercise price of $1.85 per share. The options issued during the nine months ended September 30, 2013, were issued with a range of exercise prices from $0.05 to $0.35 per share. These options generally vest over four years. The Company accounts for these options as variable awards. The options were valued using the Black-Scholes option pricing model. The total stock based compensation related to nonemployees amounted to $381,000 and $18,000 for the nine months ended September 30, 2014 and 2013.

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11. FAIR VALUE MEASUREMENTS

The Company recognizes and discloses the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). Each level of input has different levels of subjectivity and difficulty involved in determining fair value.

● Level 1 - Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date. Therefore, determining fair value for Level 1 investments generally does not require significant judgment, and the estimation is not difficult.

● Level 2 - Pricing is provided by third party sources of market information obtained through investment advisors. The Company does not adjust for or apply any additional assumptions or estimates to the pricing information received from its advisors.

● Level 3 - Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The determination of fair value for Level 3 instruments involves the most management judgment and subjectivity.

As of September 30, 2014 and December 31, 2013, the Company held no assets or liabilities with instrument valuations measured on a recurring basis.

12. INCOME TAXES

No federal income taxes were provided in the three and nine months ended September 30, 2014 and 2013 due to the Company’s net losses. State minimum income and franchise taxes are included in general and administrative expenses and were immaterial for the periods presented.  The Company evaluates its ability to recover deferred tax assets, in full or in part, by considering all available positive and negative evidence, including past operating results and our forecast of future taxable income on a jurisdictional basis. The Company bases its estimate of current and deferred taxes on the tax laws and rates that are currently in effect in the appropriate jurisdiction. Changes in laws or rates may affect the tax provision as well as the amount of deferred tax assets or liabilities.

Current tax laws impose substantial restrictions on the utilization of net operating loss and credit carry-forwards in the event of an “ownership change,” as defined by the Internal Revenue Code. If there should be an ownership change, the Company’s ability to utilize its carry-forwards could be limited.

As of September 30, 2014 and December 31, 2013, the Company did not have any material unrecognized tax benefits. The 2013 and 2012 tax years remain open for examination by the federal and state authorities.

13. NET LOSS PER SHARE

Basic net loss per share is computed by dividing income attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by adding other common stock equivalents, including common stock options, warrants, and convertible notes, in the weighted average number of common shares outstanding for a period, if dilutive. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. For the three and nine months ended September 30, 2014 and 2013, 6.0 million, 6.0 million, 1.0 million and 1.0 million potentially dilutive securities, respectively, were excluded from the computation of diluted loss per share because their effect on net loss per share was anti-dilutive. As a result of the net loss for each of the three and nine months ended September 30, 2014 and 2013 there is no dilutive impact to the net loss per share calculation for the periods.

14. SUBSEQUENT EVENTS

On November 10, 2014, the Company completed a private placement (the “Private Placement”) of shares of its Series A and warrants to purchase common stock (“Warrants”). The Private Placement was consummated in a series of closings that occurred between April 2014 and November 2014. In October and November 2014, the Company sold to accredited investors and non-U.S. persons an additional 3 million shares of Series A at a per share price of $1.85 and issued to the investors for no additional consideration the Warrants to purchase in the aggregate 1.5 million shares of the Company’s common stock, at an exercise price of $3.70 per share pursuant to a series of subscription agreements.

Additionally, under the subscription agreement with one of the investors, the investor commits them to purchasing an additional 1,081,081 shares of Series A at a per share price of $1.85 on the achievement of certain milestones which would raise another $2 million in gross proceeds for total proceeds of $9,537,546. The milestones include the Company receiving revenues of $2 million for its Violet product or uplisting of the Company’s stock to NYSE or NASDAQ. The Company, two majority shareholders of the Company and this Investor also entered into a Voting Agreement (the “Voting Agreement”), whereby the stockholders agreed to (i) vote in favor of any merger or sale of the Company which has been approved by the board of directors and holders of at least 50% of the then outstanding shares of Series A, and (ii) irrevocably grant to the Investor a proxy to vote in favor of such business combination transaction. The shareholders also agreed to sell their shares to a purchaser in a transaction approved by holders of at least 67% of shares of Series A or 67% of shares of common stock and Series A.

On November 7, 2014, the Company increased the stock available to the 2014 Equity Incentive Plan for options grants from 2,700,000 shares to 4,500,000 shares.

On November 10, 2014, Mr. Ping Wang was appointed as a director of the Company. Mr. Wang is a principal of Korea Investment Partners.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q and other written reports and oral statements made from time to time by the Company may contain so-called “forward-looking statements,” all of which are subject to risks and uncertainties. One can identify these forward-looking statements by their use of words such as “expect,” “plan,” “will,” “may,” “anticipate,” “believe,” “estimate,” “should,” “intend,” “forecast,” “project” the negative or plural of these words, and other comparable terminology. One can identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address the Company’s growth strategy, financial results and product and development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ from the Company’s forward-looking statements. These factors include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. The Company does not assume the obligation to update any forward-looking statement. One should carefully evaluate such statements in light of factors described in the Company’s filings with the SEC, especially the Company’s Annual Report on Form 10-K and the Company’s Quarterly Reports on Form 10-Q. In various filings the Company has identified important factors that could cause actual results to differ from expected or historic results. One should understand that it is not possible to predict or identify all such factors. Consequently, the reader should not consider any such list to be a complete list of all potential risks or uncertainties.

The following discussion is presented on a consolidated basis, and analyzes our financial condition and results of operations for the three months ended September 30, 2014 and 2013. Unless the context indicates or suggests otherwise, reference to “we”, “our”, “us” and the “Company” in this section refers to the consolidated operations of BioPharmX Corporation and BioPharmX, Inc., as defined in Note 1 —Description of Business and Basis of Presentation to the financial statements.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is intended to help the reader understand our results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes to the financial statements and other disclosures included in this Quarterly Report on Form 10-Q. Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles and are presented in U.S. dollars.

Overview

BioPharmX Corporation, a Delaware corporation, was originally incorporated in Nevada on August 30, 2010 under the name “Thompson Designs, Inc.”  The business plan of the Company was originally to design and build custom signs for residential and commercial properties. Immediately after the completion of the Share Exchange Transaction (see details below), the Company discontinued its custom signs business and changed its business plan to development of novel delivery mechanisms and routes of administration for known drugs and tissues.

BioPharmX, Inc., a Nevada corporation, was originally incorporated in Delaware on August 18, 2011, and is headquartered in Menlo Park, California. It is a wholly-owned subsidiary of the Company. It is a research-based biopharmaceutical company that seeks to provide innovative products through unique, proprietary platform technologies for pharmaceutical and over-the-counter, or OTC, applications in the fast growing health and wellness markets, including women’s health, dermatology, and otolaryngology (ears, nose & throat).

We are primarily a research and development, or R&D, company focusing on the development of novel delivery mechanisms and novel routes of administration for known drugs and tissues.  We have expertise in formulation development, intellectual property generation, clinical trial execution, and regulatory strategy definition.  Our business model is to outsource much of its manufacturing and commercialization activities in order to maintain its focus on technology sourcing, acquisitions, and partner development to create new products to address unmet needs in well-defined, multi-billion dollar markets.

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Share Exchange Agreement

On January 23, 2014, we, BioPharmX, Inc. and stockholders of BioPharmX, Inc., who collectively owned 100% of BioPharmX, Inc., or the BiopharmX, Inc. Stockholders, entered into and consummated transactions pursuant to a Share Exchange Agreement referred to as the Share Exchange Transaction, whereby we issued to the BioPharmX, Inc. Stockholders an aggregate of 7,025,000 shares of its common stock, par value $0.001, in exchange for 100% of the shares of BioPharmX, Inc. held by the BioPharmX, Inc. Stockholders. The shares of our common stock received by the BioPharmX, Inc. Stockholders in the Share Exchange Transaction constituted approximately 77.8% of our then issued and outstanding common stock giving effect to the issuance of shares pursuant to the Share Exchange Agreement.

Series A Preferred Stock

During the nine months ended September 30, 2014, we entered into Subscription Agreements for a private placement of shares of our Series A convertible redeemable preferred Stock, par value $0.001 per share, or Series A, and warrants with 28 accredited investors through the third quarter of 2014 whereby we sold an aggregate of 2,176,387 shares of Series A at a per share price of $1.85 for gross proceeds of $4.0 million and issued to the investors for no additional consideration the warrants to purchase in the aggregate 1,088,201 shares of our common stock, par value $0.001 per share, at an exercise price of $3.70 per share.

In connection with the Subscription Agreements, we, the majority of our shareholders and our investors entered into the Investor Rights Agreement with the Investors, whereby the Investors were granted certain rights including: (i) right to receive copies of our quarterly and annual reports, (ii) right of inspection of our properties and records, (iii) right of participation in future securities offerings, (iv) tag-along rights in connection with sales our stock by a major shareholder, and (v) board of directors representation rights for the subscribers who purchased at least 500,000 shares of Series A and hold at least 30% of such shares, or the Qualified Subscribers. We made certain covenants under the agreement including: (i) uplisting to NYSE or NASDAQ within three years from the issuance shares of Series A, and (ii) increase of the board of directors to five members including one member to be appointed by the Qualified Subscribers.

Upon the first closing of the Private Placement on April 11, 2014, the 6% secured convertible notes in the aggregate principal amount of $2.25 million and $8,000 in eligible accrued interest previously issued were automatically converted into 1,526,001 shares of our common stock.

Critical Accounting Policies

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States, or GAAP. GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

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Our significant accounting policies are summarized in Note 1 of our audited financial statements which are included in our Annual Report on Form 10-K for the year ended December 31, 2013. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the periods presented in this report.

We believe the following critical accounting policies and procedures, among others, affect our more significant judgments and estimates used in the preparation of our financial statements:

Results of Operations

Three and nine months ended September 30, 2014 and 2013

Revenue

For September 30, 2014, we have not had any revenues.  We are in the research and development stage, but we project our molecular iodine dietary supplement product will be released in late 2014.

Research and Development Expenses 

Three months ended September 30,									Nine months ended September 30,
2014		2013		Change		%			2014		2013		Change		%
$	807,000	$	221,000	$	586,000		265	%	$	1,851,000	$	401,000	$	1,450,000		362	%

Research and development expenses for the three months ended September 30, 2014 and 2013 increased $586,000. Headcount when comparing these periods increased by 7 scientists which increased payroll and consulting costs by approximately $261,000 and stock compensation expense by $5,000. For the same period we increased expenses by $242,000 for one-time tooling, travel and quality costs related with the initial production run of our Violet breast health supplement and an increase in laboratory costs of $20,000. Allocated occupancy cost overhead increased by $54,000.

Research and development expenses for the nine months ended September 30, 2014 and 2013 increased $1.5 million. Headcount, when comparing these periods, increased by 7 scientists which increased payroll costs by approximately $810,000 and stock compensation expense by $81,000. For the same period we increased expenses by $279,000 for one-time tooling, travel and quality costs related with the initial production run of our Violet breast health supplement and an increase in laboratory costs of $90,000. Allocated occupancy cost overhead increased by $142,000.

As of September 30, 2014, we had 10 full-time employees in Research and Development (“R&D”). Since the end of the quarter, we have hired two additional employees in R&D.

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Sales and Marketing Expenses

Three months ended September 30,								Nine months ended September 30,
2014		2013		Change		%		2014		2013		Change		%
$	757,000	$	48,000	$	709,000		1477%	$	1,337,000	$	73,000	$	1,264,000		1732%

Sales and Marketing expenses for the three months ended September 30, 2014 and 2013 increased $712,000. Consultants, agencies and stock compensation expense accounted for almost $465,000 of the increase from period to period. As a precursor to introducing our breast health supplement, we spent approximately $102,000 more on programs to educate medical professionals on fibrocystic breast condition and the options for treating it and an increase of $62,000 for related advertising and tradeshows. An increase in travel accounted for $34,000 of the increase and $51,000 of increased allocated occupancy overhead.

Sales and Marketing expenses for the nine months ended September 30, 2014 and 2013 increased $1,264,000. Consultants, agencies and stock compensation expense accounted for about $762,000 of the increase from period to period. As a precursor to introducing our breast health supplement, we spent approximately $306,000 more on programs to educate medical professionals on fibrocystic breast condition and the options for treating it and an increase of $56,000 for related advertising and tradeshows. The remaining $58,000 increase was attributable to travel and overhead. An increase in travel accounted for $64,000 increase and $81,000 of increased allocated occupancy overhead. 

As of September 30, 2014, we had one employee in sales and marketing. Since the end of the quarter, we have hired two of our consultants bringing the department total to 3.

General and Administrative Expenses

Three months ended September 30,									Nine months ended September 30,
2014		2013		Change		%			2014		2013		Change		%
$	515,000	$	160,000	$	355,000		222	%	$	1,800,000	$	306,000	$	1,494,000		488	%

General and administrative expenses for the three months ended September 30, 2014 and 2013 increased $355,000. Headcount when comparing these periods increased by 4 employees and additional consultants causing a $248,000 increase in payroll and consulting costs, along with a $43,000 increase to stock compensation expense. Also contributing to the increase was a $10,000 increase for quarterly audit fees, $36,000 for corporate public and investor relations and an approximately $50,000 increase in allocated corporate occupancy costs.

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General and administrative expenses for the nine months ended September 30, 2014 and 2013 increased $1.5 million. Headcount when comparing these periods increased by 3 employees and additional consultants causing a $760,000 increase in payroll and consulting costs and a $228,000 increase for stock compensation expense. Also contributing to the increase was a $87,000 increase in audit and legal fees, $222,000 for corporate public and investor relations, $99,000 for the value of warrants issued for services related to the reverse merger and an approximately $50,000 increase in allocated corporate occupancy costs. 

As of September 30, 2014, the company had 4 full-time employees in general and administrative.

Loss from Operations

Loss from operations for the three months ended September 30, 2014 and 2013 was $2.1 million and $429,000, respectively.  The increase in the loss from year-to-year is due to ramping up research and development, one-time costs related to bringing our Violet breast health supplement to production, increased payroll expense and legal costs related to the requirements of public companies.

Loss from operations for the nine months ended September 30, 2014 and 2013 was $5.0 million and $780,000, respectively.  The increase in the loss from year-to-year is due to ramping up research and development, one-time costs related to bringing our Violet breast health supplement to production, increased payroll, and legal and audit costs related to the reverse acquisition we completed in the first quarter of 2014 and other operations.

Net Loss

Net loss for the three months ended September 30, 2014 and 2013 was $2.1 million and $451,000, respectively. Net loss for the nine months ended September 30, 2014 and 2013 was $5.0 million and $822,000, respectively

Inflation did not have a material impact on our operations for either of the periods. Other than the foregoing, we know of no trends, demands, or uncertainties that are reasonably likely to have a material impact on our results of operations. 

Capital Resources and Liquidity

A summary of the sources and uses of cash and cash equivalents is as follows:

	For the nine months ended of September 30,
	2014			2013
Net cash used in operating activities	$	(3,497,000	)	$	(670,000	)
Net cash used in investing activities		(201,000	)		(74,000	)
Net cash used in financing activities		4,903,000			630,000
Net increase (decrease) in cash and cash equivalents	$	1,205,000		$	(114,000	)

At September 30, 2014, we had working capital deficit of $301,000.

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Net cash used for operating activities for the nine months ended September 30, 2014 was $3.5 million.  Cash used in operating activities was primarily due to net loss for the nine months ended September 30, 2014 of $5.0 million which was partially offset by changes in operating assets and liabilities of $964,000, non-cash interest expense of $76,000, warrants issued for services of $99,000 and stock-based compensation of $385,000. Net cash used in investing activities was primarily due to the change in restricted cash and for acquisition of fixed assets.

Net cash used for operating activities for the nine months ended September 30, 2013 was $670,000.  Cash used in operating activities was primarily due to net loss for the nine months ended September 30, 2013 of $822,000 which was partially offset by changes in operating assets and liabilities of $76,000, non-cash interest expense of $42,000 and stock-based compensation of $28,000. Cash used in investing activities was primarily for acquisition of intellectual property and fixed assets.

Net cash obtained through all financing activities for the nine months ended September 30, 2014 and 2013 was $4.9 million and $630,000, respectively, primarily in proceeds from issuing convertible redeemable preferred stock and convertible notes payable, respectively.

Between September 2012 and March 2014, we issued 6% unsecured convertible notes to investors in the aggregate principal amount of $2.3 million. In April 2014, the notes were automatically converted into common stock after the completion of the reverse acquisition and closing of a financing in the amount of $1,500,000 at a conversion price per share equal to 80% of the per share offering price of such financing.

During the first three quarters of 2014, we sold an aggregate of 2,176,387 million shares of our Series A at a per share price of $1.85 for gross proceeds of $4.0 million and issued to the investors for no additional consideration warrants to purchase 1,088,201 shares of our common stock in the aggregate at an exercise price of $3.70 per share.

Going Concern

As reflected in the accompanying financial statements, we had a net loss of $5.0 million and $822,000, respectively, for the nine months ended September 30, 2014 and 2013, respectively and a deficit accumulated of $6.7 million as of September 30, 2014.  The net cash used in operations for the nine months ended September 30, 2014 and 2013 was $3.5 million and $670,000, respectively.

Our ability to continue operations is dependent on our plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.  We may need to incur additional liabilities with certain related parties to sustain our existence.

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We may require additional funding to finance the growth of our current and expected future operations as well as to achieve our strategic objectives.  We believe our current available cash along with anticipated revenues may be insufficient to meet our cash needs for the near future if we do not receive the anticipated additional funding. There can be no assurance that financing will be available in acceptable amounts or terms, if at all. In that event, we would be required to change our growth strategy and seek funding on that basis, if at all.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.

In response to the above, management will:

● seek additional third party debt and/or equity financing;

● continue with the implementation of the business plan;

● seek to generate revenue through commercialization of the technology.

To date, all of our funding has been generated from private investments. During the next twelve months, we anticipate raising funding to continue expansion; however, as of this writing, we only have sufficient funds to proceed with basic company operations only. We do not have sufficient funds to fully implement our business plan until such time that we are able to raise additional funding, to which there is no guarantee. If we do not obtain the funds necessary for us to continue our business activities we may need to curtail or cease our operations until such time as we have sufficient funds.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Pursuant to Item 305(e) of Regulation S-K the Company, as a smaller reporting company, is not required to provide the information required by this item.

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this quarterly report.

Changes in Internal Controls over Financial Reporting

No change in our system of internal control over financial reporting occurred during the three and nine months ended September 30, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not currently a party to any legal proceedings. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the month of November, 2014, the Company received $45,000 to from accredited investors to purchase 24,324 shares of Series A Preferred Stock and warrants to purchase 12,162 shares of common stock at a price of $1.85 per share.

During the month of October, 2014, the Company received $2,466,230 to from accredited investors to purchase 1,333,097 shares of Series A Preferred Stock and warrants to purchase 666,548 shares of common stock at a price of $1.85 per share.

During the month of September, 2014, the Company received $1,546,319 to from accredited investors to purchase 835,848 shares of Series A Preferred Stock and warrants to purchase 417,924 shares of common stock at a price of $1.85 per share.

During the month of July, 2014, the Company received $130,000 to from accredited investors to purchase 70,270 shares of Series A Preferred Stock and warrants to purchase 35,135 shares of common stock at a price of $1.85 per share.

During the month of June, 2014, the Company received $100,000 to from accredited investors to purchase 54,054 shares of Series A Preferred Stock and warrants to purchase 27,027 shares of common stock at a price of $1.85 per share.

During the month of May, 2014, the Company received $200,000 to from accredited investors to purchase 108,108 shares of Series A Preferred Stock and warrants to purchase 54,054 shares of common stock at a price of $1.85 per share.

During the month of April, 2014, the Company received $1.1 million to from accredited investors to purchase 567,567 shares of Series A Preferred Stock and warrants to purchase 283,784 shares of common stock at a price of $1.85 per share.

During the month of March, 2014, the Company received $1.0 million to from accredited investors to purchase 540,540 shares of Series A Preferred Stock and warrants to purchase 405,406 shares of common stock at a price of $1.85 per share.

21

The above-referenced warrants have an initial exercise price of $3.70 per share, are exercisable for a five year period and entitle the holder to purchase fifty percent (50%) of the number of shares of common stock into which the shares of Series A Preferred stock held by the holder are convertible.

The foregoing issuances of the equity securities were effectuated pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) of the Securities Act and/or Regulation D promulgated thereunder as a transaction not involving a public offering and are restricted shares as defined in the Securities Act. The Company did no engage in any general solicitation or advertising in connection with the foregoing issuances.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit No.	Description
31.1	Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.DEF	XBRL Definition Linkbase Document
101.LAB	XBRL Label Linkbase Document
101.PRE	XBRL Presentation Linkbase Document

22

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

	BioPharmX Corporation
Date: November 14, 2014	By:	/s/ James Pekarsky
		Name: James Pekarsky
		Title: Chief Executive Officer, Chief Financial Officer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

23

EX-31

Exhibit 31.1

CERTIFICATION

I, James Pekarsky, certify that:

(1)	I have reviewed this quarterly report on Form 10-Q of BioPharmX Corporation;
(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
(4)	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the company's internal control over financial reporting that occurred during the company's most recent fiscal quarter (the company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and
(5)	I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.

Date: November 14, 2014	/s/ James Pekarsky
	James Pekarsky
	Chief Executive Officer, Chief Financial Officer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Form 10-K of BioPharmX Corporation (the “Company”) for the fiscal quarter ended June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in his capacity as an officer of the company, certifies, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2014	/s/ James Pekarsky
	James Pekarsky
	Chief Executive Officer, Chief Financial Officer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Convertible Redeemable Preferred Stock and Stockholders' Equity (Details) (Stock Option [Member], USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2012
Stock Option [Member]
Shares
Outstanding, Beginning	2,606,000	1,610,000	1,150,000
Granted	175,000
Exercised	(506,248)
Cancelled	(160,000)
Outstanding, Ending	2,114,752	1,610,000	1,150,000
Vested and excercisable	1,149,809
Vested and expected to vest	2,114,752
Weighted-Average Exercise Price Per Share
Outstanding, Beginning	$ 0.25	$ 0.11	$ 0.06
Granted	$ 1.85
Exercised	$ 0.09
Cancelled	$ 0.37
Outstanding, Ending	$ 0.41	$ 0.11	$ 0.06
Vested and exercisable	$ 0.32
Vested and expected to vest	$ 0.41
Oustanding, Remaining Contractual Term	8 years 4 months 21 days
Vested and exercisable, Remaining Contractual Term	8 years 1 month 2 days
Vested and expected to vest, Remaining Contractual Term	8 years 4 months 21 days

XML

Going Concern Considerations and Management's Plan (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2012	Dec. 31, 2013
Going Concern Considerations and Management's Plan [Abstract]
Net loss	$ (2,065,000)	$ (451,000)	$ (5,031,000)	$ (822,000)
Deficit accumulated during the development stage	6,714,000		6,714,000			1,683,000
Working capital deficit	301,000		301,000			732,000
Percentage of discount on share price					20.00%
Series A convertible redeemable preferred stock and warrants issued as consideration			$ 4,000,000

XML

Net Loss Per Share (Details) (USD $) Share data in Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net Loss Per Share [Abstract]
Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive	6.0	1.0	6.0	1.0
Dilutive impact to the net loss per share calculation for the periods	$ 0	$ 0	$ 0	$ 0

XML

Property Plant and Equipment

9 Months Ended

Sep. 30, 2014

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

4. PROPERTY, PLANT AND EQUIPMENT

Property and equipment, consisted of the following:

	September 30,  2014			December 31, 2013
Furniture and fixtures	$	18,000		$	11,000
Laboratory equipment		26,000			12,000
Computers and equipment		15,000			15,000
Software		145,000			-
		204,000			38,000
Less: accumulated depreciation		(16,000	)		(6,000	)
	$	188,000		$	32,000

Depreciation expense for the nine months ended September 30, 2014 and 2013 was $10,000 and $6,000. 

XML

Related Party Payables (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Related Party Payables [Abstract]
Related party payables	$ 345,000	$ 125,000

XML

Restricted Cash (Details) (USD $)	Sep. 30, 2014
Restricted Cash [Abstract]
Restricted cash	$ 35,000

XML

Long-Term Obligations (Details) (USD $)

0 Months Ended

3 Months Ended

6 Months Ended

9 Months Ended

6 Months Ended

9 Months Ended

0 Months Ended

9 Months Ended

Apr. 11, 2014

Sep. 30, 2014

Sep. 30, 2013

Jun. 30, 2014

Sep. 30, 2014

Sep. 30, 2013

Dec. 31, 2013

Jun. 30, 2014

Twelve Individuals Member [Member]

Sep. 30, 2014

Series A convertible redeemable preferred stock [Member]

Dec. 31, 2013

Series A convertible redeemable preferred stock [Member]

May 15, 2014

Warrant [Member]

Sep. 30, 2014

Private placement [Member]

Mar. 14, 2014

Private placement [Member]

Series A convertible redeemable preferred stock [Member]

Mar. 14, 2014

Private placement [Member]

Warrant [Member]

Sep. 30, 2014

Private placement [Member]

Warrant [Member]

Subsidiary, Sale of Stock [Line Items]

Convertible notes, aggregate principal amount

$ 2,250,000

$ 1,230,000

$ 1,020,000

Percentage of interest on convertible notes payable

6.00%

6.00%

Debt Instrument maturity date description

Mature between January 2015 and March 2017, with principal and interest payable at maturity.

Conversion rate of price per share

80.00%

Debt discount

204,000

204,000

246,000

Amortization expense related to debt discount

6,000

17,000

49,000

24,000

Preferred stock, par value

$ 0.001

$ 0.001

$ 0.001

Number of shares issued

2,176,387

810,811

405,406

1,088,201

Share sold, per share price

$ 1.85

Gross proceeds on transactions

1,500,000

Common stock, par value

$ 0.001

$ 0.001

$ 0.001

$ 0.001

Warrants exercise price

$ 2.035

$ 3.70

$ 3.70

Shares issued for conversion of notes payable

1,526,001

1,526,001

Conversion of convertible notes payable to common stock

$ 1,942,000

$ 1,942,000

XML

Commitments and Contigencies (Details) (USD $)	Sep. 30, 2014
Future minimum commitments under lease
Three months remaining of 2014	$ 70,000
2015	288,000
2016	271,000
Total	$ 629,000

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2014

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These unaudited interim condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual financial statements and notes thereto contained in the Annual Report on Form 10-K for the year ended December 31, 2013. There have been no significant changes in the Company’s significant accounting policies for the three months ended September 30, 2014, as compared to the significant accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2013.

XML

Commitments and Contigencies (Details Textual)

9 Months Ended

Sep. 30, 2014

sqft

Commitments and Contingencies [Abstract]

Area of office and laboratory space

10,800

Lease term

39 months

Lease commencement date

Sep. 01, 2013

Legal proceedings description

The Company is not currently a party to any legal proceedings. The Company is not aware of any pending legal proceeding to which any of its officers, directors, or any beneficial holders of 5% or more of its voting securities are adverse to it or have a material interest adverse to it.

XML

Unaudited Condensed Consolidated Balance Sheets (USD $)	Sep. 30, 2014	Dec. 31, 2013
Current assets:
Cash	$ 1,208,000	$ 3,000
Prepaid expenses and other current assets	302,000	36,000
Total current assets	1,510,000	39,000
Property and equipment, net	188,000	32,000
Intangible assets	150,000	150,000
Other assets	50,000	150,000
Restricted cash	35,000
Total assets	1,933,000	371,000
Current liabilities:
Accounts payable and accrued expenses	1,326,000	427,000
Payroll liabilities	85,000	64,000
Deferred rent	55,000	65,000
Convertible notes, short term		90,000
Related party payables	345,000	125,000
Total current liabilities	1,811,000	771,000
Convertible notes payable		938,000
Other long-term liabilities		32,000
Total liabilities	1,811,000	1,741,000
Commitments and contingencies (Note 8)
Series A convertible redeemable preferred stock, $0.001 par value; 10,000,000 shares authorized; 2,176,387 and no shares issued and outstanding at September 30, 2014, and December 31, 2013, respectively (liquidation preference of $4,026,000 as of September 30, 2014)	3,637,000
Stockholders' deficit:
Common stock, $0.001 par value; 90,000,000 shares authorized; 11,057,249 and 7,025,000 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively	11,000	7,000
Additional paid-in capital	3,188,000	306,000
Accumulated deficit	(6,714,000)	(1,683,000)
Total stockholders' deficit	(3,515,000)	(1,370,000)
Total liabilities, convertible redeemable preferred stock and stockholders' deficit	$ 1,933,000	$ 371,000

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Description of Business and Basis of Presentation

9 Months Ended

Sep. 30, 2014

Description of Business and Basis of Presentation [Abstract]

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

BioPharmX Corporation (“BioPharmX” or the “Company”) is a Silicon Valley-based company, registered in Delaware and originally incorporated on August 30, 2010 in Nevada under the name Thompson Designs, Inc. The Company has one wholly-owned subsidiary, BioPharmX, Inc., a Nevada corporation. The Company seeks to provide innovative products through unique, patented platform technologies for pharmaceutical and over-the-counter (“OTC”) applications in the fast growing dermatology and health and wellness markets.

The strategy of the Company begins with obtaining novel, patented, platform technologies through exclusive licensing, joint development or acquisition. BioPharmX then develops platform technologies that can be developed into product lines through specialized formulation and clinical protocol development with a bifurcated market penetration strategy, prescription for the high dose prescription version and OTC consumer for the low dose version. Identifying such technologies requires a strong knowledge of the markets served through technology assessment and evaluation of sell-side and buy-side opportunities through relationships with major pharmaceutical companies. BioPharmX’s products are formulated to address both market pathways to address unmet needs in well-defined, multi-billion dollar markets for licensing or direct commercialization for both pharmaceutical and OTC distribution and sales.

On January 23, 2014, the Company, BioPharmX Inc. and stockholders of BioPharmX, Inc. who collectively owned 100% of BioPharmX, Inc. (the “BioPharmX, Inc. Stockholders”) entered into and consummated transactions pursuant to a Share Exchange Agreement (the “Share Exchange Agreement,” such transaction referred to as the “Share Exchange Transaction”), whereby the Company issued to the BioPharmX, Inc. Stockholders an aggregate of 7,025,000 shares of its common stock, par value $0.001 (“Common Stock”), in exchange for 100% of the shares of BioPharmX, Inc. held by the BioPharmX, Inc. Stockholders. The shares of our Common Stock received by the BioPharmX, Inc. Stockholders in the Share Exchange Transaction constituted approximately 77.8% of our then issued and outstanding Common Stock giving effect to the issuance of shares pursuant to the Share Exchange Agreement.

As a result of the Share Exchange Transaction, BioPharmX, Inc. became a subsidiary of the Company. The acquisition was accounted for as a reverse merger and recapitalization effected by a share exchange. BioPharmX, Inc. is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of the acquired entity have been brought forward at their book value and no goodwill has been recognized.

On March 3, 2014, we completed the name change of the Company from Thompson Designs, Inc. to BioPharmX Corporation.

Effective May 16, 2014, BioPharmX Corporation, previously a Nevada corporation, was redomiciled as a Delaware corporation and effective June 26, 2014, BioPharmX, Inc, previously a Delaware corporation, was redomiciled as a Nevada corporation.

Basis of Presentation and Principles of Consolidation

These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and include the accounts of BioPharmX and its subsidiary. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed on March 31, 2014. The condensed consolidated balance sheet as of December 31, 2013, included herein, was derived from the audited consolidated financial statements as of that date.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s statement of financial position as of September 30, 2014 and December 31, 2013, the Company’s results of operations and its cash flows for each of the three and nine months ended September 30, 2014 and 2013 and its cash flows for each of the nine months ended September 30, 2014 and 2013. The results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014. All references to September 30, 2014 or to the three and nine months ended September 30, 2014 and 2013 in the notes to the condensed consolidated financial statements are unaudited.

Reclassification
 

Certain prior year amounts have been reclassified to conform to the current year presentation. The amounts for the prior periods have been reclassified to be consistent with the current year presentation and have no impact on previously reported total assets, total stockholders’ deficit or net loss.

Recent Accounting Pronouncements 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09,Revenue from Contracts with Customers, (“ASU 2014-09”), which converges the FASB and the International Accounting Standards Board standards on revenue recognition. Areas of revenue recognition that will be affected include, but are not limited to, transfer of control, variable consideration, allocation of transfer pricing, licenses, time value of money, contract costs and disclosures. This guidance is effective for the fiscal years and interim reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact that the adoption of ASU 2014-09 will have on its consolidated financial statements and related disclosures.

On June 10, 2014, the FASB issued ASU 2014-10, Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation,, which eliminates the definition of a development stage entity, eliminates the development stage presentation and disclosure requirements under Accounting Standards Codification, or ASC, 915 Development Stage Entities, or ASC 915, and amends provisions of existing variable interest entity guidance under ASC 810 Consolidation . As a result of the changes, entities which meet the former definition of a development stage entity will no longer be required to: (1) present inception-to-date information in the statements of income, cash flows, and stockholder equity; (2) label the financial statements as those of a development stage entity; (3) disclose a description of the development stage activities in which the entity is engaged; and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. Furthermore, ASU 2014-10 clarifies disclosures about risks and uncertainties under ASC Topic 275, Risks and Uncertainties, that apply to companies that have not commenced planned principal operations. Finally, variable interest entity rules no longer contain an exception for development stage entities and, as a result, development stage entities will have to be evaluated for consolidation in the same manner as non-development stage entities.

Under ASU 2014-10, entities are no longer required to apply the presentation and disclosure provisions of ASC 915 during annual periods beginning after December 15, 2014. In addition, the revisions to the consolidation standards are effective for annual periods beginning after December 15, 2015 for public entities and are effective for annual periods beginning after December 15, 2016 for nonpublic entities. Early adoption is permitted for any annual reporting period or interim period for which the entity's financial statements have not yet been issued (public business entities) or made available for issuance (other entities). 

The Company has adopted ASU 2014-10 effective as of its issuance date. Adoption of this standard had no impact on its financial position, results of operations, or cash flows; however, the presentation of the consolidated financial statements and related disclosures in the notes to the consolidated financial statements has been changed to eliminate the disclosures that are no longer required.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern (“ASU 2014-15”). This standard includes guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern within one year after the financial statements are issued. If conditions or events raise substantial doubt, the entity must disclose the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, management’s evaluation of those conditions or events, and management’s plans to mitigate the conditions or events. This update is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2014-15 will have on its consolidated financial statements and related disclosures.

We have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect is expected on the consolidated financial statements as a result of future adoption.

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Stock-Based Compensation (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Stock-Based Compensation [Abstract]
Research and development	$ 14,000	$ 9,000	$ 94,000	$ 13,000
Sales and marketing	9,000	3,000	52,000	4,000
General and administrative	49,000	6,000	239,000	11,000
Stock-based compensation expense	$ 72,000	$ 18,000	$ 385,000	$ 28,000

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Convertible Redeemable Preferred Stock and Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2014

Convertible Redeemable Preferred Stock and Stockholders' Equity [Abstract]

Stock option plan activity

				Weighted Average
				Exercise		Remaining
				Price		Contractual
	Shares			Per Share		Term
Outstanding as of January 1, 2014		2,606,000		$	0.25
Granted		175,000			1.85
Exercised		(506,248	)		0.09
Cancelled		(160,000	)		0.37
Outstanding as of September 30, 2014		2,114,752		$	0.41		8.39
Vested and exercisable		1,149,809		$	0.32		8.09
Vested and expected to vest		2,114,752		$	0.41		8.39

XML

Stock-Based Compensation (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation	$ 72,000	$ 18,000	$ 385,000	$ 28,000
Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of option issued to non employee for purchase of common stock			175,000	165,000
Option exercise price			$ 1.85
Stock option vesting period			4 years	4 years
Stock-based compensation			$ 381,000	$ 18,000
Stock Option [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option exercise price				$ 0.05
Stock Option [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option exercise price				$ 0.35

XML

Description of Business and Basis of Presentation (Details) (USD $)	9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Change in Accounting Estimate [Line Items]
Entity Incorporation, Date of Incorporation	Aug. 30, 2010
Common stock, par value	$ 0.001	$ 0.001
Payroll liabilities	$ 85,000	$ 64,000
Share Exchange Agreement [Member]
Change in Accounting Estimate [Line Items]
Number of shares issued	7,025,000
Equity interest percentage	100.00%
Common stock, par value	$ 0.001
Stock Purchase Agreement [Member]
Change in Accounting Estimate [Line Items]
Number of shares issued	7,000,000
Equity interest percentage	77.80%

XML

Going Concern Considerations and Management's Plan

9 Months Ended

Sep. 30, 2014

Going Concern Considerations and Management's Plan [Abstract]

GOING CONCERN CONSIDERATIONS AND MANAGEMENT'S PLAN

2. GOING CONCERN CONSIDERATIONS AND MANAGEMENT’S PLAN

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred recurring losses and negative cash flows from operations since inception. The Company has not generated revenues and has funded its operating losses through the issuance of convertible notes payable and convertible preferred stock. The Company has a limited operating history and its prospects are subject to risks, expenses and uncertainties frequently encountered by companies in the industry. These risks include, but are not limited to, the uncertainty of availability of additional financing and the uncertainty of achieving future profitability. Management of the Company intends to raise additional funds through the issuance of equity securities. There can be no assurance that such financing will be available or on terms which are favorable to the Company. Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending could have a material adverse effect on the Company’s ability to achieve its intended business objectives. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not contain any adjustments that might result from the outcome of this uncertainty.

As shown in the accompanying financial statements, the Company incurred a net loss of $5.0 million and $822,000 during the nine months ended September 30, 2014 and 2013, respectively, and has an accumulated deficit of $6.7 million as of September 30, 2014. As of September 30, 2014, the Company had a working capital deficit of $301,000. As of December 31, 2013, the Company had a working capital deficit of $732,000. While management of the Company believes that it has a plan to fund on-going operations, there is no assurance that its plan will be successfully implemented.

Since 2012, the Company has obtained financing with convertible notes to invite early investors at a 20% discount to the share price in a future offering.  Additionally, during the first half of 2014, the Company has issued Series A convertible redeemable preferred stock and common stock warrants resulting in gross proceeds of $4.0 million (see details in Note. 9 -- “Convertible Redeemable Preferred Stock and Stockholders’ Equity”) and is looking to raise additional funds as a result of this offering prior to the end of the third quarter. While the Company has been able to secure a number of investors, there is continued risk in the Company’s ability to attract additional development-stage investors. Without access to continued funds for working capital, the Company may not be able to execute its product strategy and pursue research and development activities on its novel platform technologies. 

The discovery of key raw materials to formulate novel products depends on the Company’s ability to identify, negotiate and secure procurement of such materials. This also depends on the Company’s ability to establish comprehensive and long term vendor contracts and relationships.

The Company’s ability to compete and to achieve its product platform strategy depends on its ability to protect its proprietary discoveries and technologies. The Company currently relies on a combination of copyrights, trademarks, trade secret laws and confidentiality agreements to protect its intellectual property rights. The Company also relies upon unpatented know-how and continuing technological innovation.

The Company’s continued operations are dependent upon its ability to identify, recruit and retain adequate management personnel and contractors to perform certain jobs such as research and development, patent generation, regulatory affairs and general administrative functions. The Company requires highly trained professionals of varying levels and experience along with a flexible work force.

Research and development for novel prescription or OTC based products can be very extensive and lengthy in nature; along with the clinical trial process with the Food and Drug Administration which can require significant funding and time consuming patient studies. The competitive landscape could change significantly over the time period to complete targeted product development milestones. The current competition for BioPharmX’s products could also turn into strategic partners or potential acquirers in the future.

The significant risks and uncertainties described above could have a significant negative impact on the financial viability of BioPharmX and raise substantial doubt about the Company’s ability to continue as a going concern. Management is working on the Company’s business model to increase working capital by managing its cash flow, securing financing and working towards bringing its first product to market.

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Unaudited Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	90,000,000	90,000,000
Common stock, issued	11,057,249	7,025,000
Common stock, shares outstanding	11,057,249	7,025,000
Series A convertible redeemable preferred stock
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, issued	2,176,387	0
Preferred stock, shares outstanding	2,176,387	0
Liquidation Preference	$ 4,026,000

XML

Income Taxes

9 Months Ended

Sep. 30, 2014

Income Taxes [Abstract]

INCOME TAXES

12. INCOME TAXES

No federal income taxes were provided in the three and nine months ended September 30, 2014 and 2013 due to the Company’s net losses. State minimum income and franchise taxes are included in general and administrative expenses and were immaterial for the periods presented.  The Company evaluates its ability to recover deferred tax assets, in full or in part, by considering all available positive and negative evidence, including past operating results and our forecast of future taxable income on a jurisdictional basis. The Company bases its estimate of current and deferred taxes on the tax laws and rates that are currently in effect in the appropriate jurisdiction. Changes in laws or rates may affect the tax provision as well as the amount of deferred tax assets or liabilities.

Current tax laws impose substantial restrictions on the utilization of net operating loss and credit carry-forwards in the event of an “ownership change,” as defined by the Internal Revenue Code. If there should be an ownership change, the Company’s ability to utilize its carry-forwards could be limited.

As of September 30, 2014 and December 31, 2013, the Company did not have any material unrecognized tax benefits. The 2013 and 2012 tax years remain open for examination by the federal and state authorities.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 13, 2014
Document and Entity Information
Entity Registrant Name	BioPharmX Corp
Entity Central Index Key	0001504167
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2014
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		11,226,936

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Net Loss Per Share

9 Months Ended

Sep. 30, 2014

Net Loss Per Share [Abstract]

NET LOSS PER SHARE

13. NET LOSS PER SHARE

Basic net loss per share is computed by dividing income attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by adding other common stock equivalents, including common stock options, warrants, and convertible notes, in the weighted average number of common shares outstanding for a period, if dilutive. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. For the three and nine months ended September 30, 2014 and 2013, 6.0 million, 6.0 million, 1.0 million and 1.0 million potentially dilutive securities, respectively, were excluded from the computation of diluted loss per share because their effect on net loss per share was anti-dilutive. As a result of the net loss for each of the three and nine months ended September 30, 2014 and 2013 there is no dilutive impact to the net loss per share calculation for the periods.

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Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Operating expenses:
Research and development	$ 807,000	$ 221,000	$ 1,851,000	$ 401,000
Sales and marketing	757,000	48,000	1,337,000	73,000
General and administrative	515,000	160,000	1,800,000	306,000
Total operating expenses	2,079,000	429,000	4,988,000	780,000
Loss from operations	(2,079,000)	(429,000)	(4,988,000)	(780,000)
Other income	16,000		31,000
Interest expense, net	(2,000)	(22,000)	(74,000)	(42,000)
Net and comprehensive loss	(2,065,000)	(451,000)	(5,031,000)	(822,000)
Deemed dividend on Series A convertible redeemable preferred stock	(37,000)		(70,000)
Net loss available to common stockholders	$ (2,102,000)	$ (451,000)	$ (5,101,000)	$ (822,000)
Basic and diluted net loss available to common stockholders per share	$ (0.2)	$ (0.06)	$ (0.52)	$ (0.12)
Shares used in computing basic and diluted net loss per share	10,630,000	7,025,000	9,844,000	7,025,000

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Long-Term Obligations

9 Months Ended

Sep. 30, 2014

Long-Term Obligations [Abstract]

LONG-TERM OBLIGATIONS

7. LONG-TERM OBLIGATIONS

Financing Arrangements

During the six months ended June 30, 2014, the Company issued convertible notes payable to twelve individuals in exchange for $1,020,000 in cash. The Notes carry an interest rate of 6% per annum and mature between January 2015 and March 2017, with principal and interest payable at maturity. Prior to 2014, the Company had issued $1,230,000 of convertible notes payable (the “Notes”).

The Notes automatically convert into common stock upon the Company entering into a qualified preferred stock financing at 80% of the price per share at which such preferred stock is issued in such an offering. Additionally, there is a special conversion that at maturity, unless the Company repays all outstanding principal and interest, the Notes shall be automatically converted into a number of shares of common stock of the Company at 80% of the then fair market value per share.

As a result of this beneficial conversion feature, the Company has recorded $204,000 and $246,000 as a debt discount during the nine months ended September 30, 2014 and year ended December 31, 2013. The debt discount is being amortized to interest expense over the term of the Notes using the effective interest rate method. The amortization expense related to the debt discount was $6,000 and $49,000 for the nine months ended September 30, 2014, respectively. The amortization expense related to the debt discount was $17,000 and $24,000 for the three and nine months ended September 30, 2013.

The Company entered into Subscription Agreements (the “Subscription Agreements”) for a private placement of shares of our Series A convertible redeemable preferred stock, par value $0.001 per share (“Series A”), and warrants (the “Warrants”) with two accredited investors on March 14, 2014 and April 1, 2014, respectively, whereby we sold an aggregate of 810,811 shares of Series A at a per share price of $1.85 for gross proceeds of $1,500,000 and issued to the investors for no additional consideration the Warrants to purchase in the aggregate 405,406 shares of the Company’s common stock, par value $0.001 per share, at an exercise price of $3.70 per share. The closing of the sale of the Series A and the Warrants under the Subscription Agreements occurred on April 11, 2014. See Note 9.

As a result, upon the closing, the 6% secured convertible notes in the aggregate principal amount of $2.25 million and accrued interest for one of the note holders were automatically converted into 1,526,001 shares of common stock of the Company (the “Conversion Shares”). The balance of accrued interest was waived. On April 11, 2014, the convertible notes payable balance, net of unamortized discounts, of $1,942,000 was converted to common stock. As of September 30, 2014, there were no remaining outstanding convertible notes.

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Related Party Payables

9 Months Ended

Sep. 30, 2014

Related Party Payables [Abstract]

RELATED PARTY PAYABLES

6. RELATED-PARTY PAYABLES

Since inception, the founding executives of the Company have made advances to cover short-term operating expenses. Additionally, since the beginning of 2014 a portion of their compensation is being deferred and is included in this balance. These advances and deferred compensation are non-interest bearing.

As of September 30, 2014 and December 31, 2013, related party payables were $345,000 and $125,000, respectively.

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2014

Stock-Based Compensation [Abstract]

Summary of stock based compensation expense

	For the three months  ended of  September 30				For the nine months  ended of  September 30
	2014		2013		2014		2013
Research and development	$	14,000	$	9,000	$	94,000	$	13,000
Sales and marketing		9,000		3,000		52,000		4,000
General and administrative expenses		49,000		6,000		239,000		11,000
Stock-based compensation expense	$	72,000	$	18,000	$	385,000	$	28,000

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Subsequent Events

9 Months Ended

Sep. 30, 2014

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

14. SUBSEQUENT EVENTS

On November 10, 2014, the Company completed a private placement (the “Private Placement”) of shares of its Series A and warrants to purchase common stock (“Warrants”). The Private Placement was consummated in a series of closings that occurred between April 2014 and November 2014. In October and November 2014, the Company sold to accredited investors and non-U.S. persons an additional 3 million shares of Series A at a per share price of $1.85 and issued to the investors for no additional consideration the Warrants to purchase in the aggregate 1.5 million shares of the Company’s common stock, at an exercise price of $3.70 per share pursuant to a series of subscription agreements.

Additionally, under the subscription agreement with one of the investors, the investor commits them to purchasing an additional 1,081,081 shares of Series A at a per share price of $1.85 on the achievement of certain milestones which would raise another $2 million in gross proceeds for total proceeds of $9,537,546. The milestones include the Company receiving revenues of $2 million for its Violet product or uplisting of the Company’s stock to NYSE or NASDAQ. The Company, two majority shareholders of the Company and this Investor also entered into a Voting Agreement (the “Voting Agreement”), whereby the stockholders agreed to (i) vote in favor of any merger or sale of the Company which has been approved by the board of directors and holders of at least 50% of the then outstanding shares of Series A, and (ii) irrevocably grant to the Investor a proxy to vote in favor of such business combination transaction. The shareholders also agreed to sell their shares to a purchaser in a transaction approved by holders of at least 67% of shares of Series A or 67% of shares of common stock and Series A.

On November 7, 2014, the Company increased the stock available to the 2014 Equity Incentive Plan for options grants from 2,700,000 shares to 4,500,000 shares.

On November 10, 2014, Mr. Ping Wang was appointed as a director of the Company. Mr. Wang is a principal of Korea Investment Partners.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2014

Stock-Based Compensation [Abstract]

STOCK-BASED COMPENSATION

10. STOCK-BASED COMPENSATION

The following table summarizes the stock-based compensation expenses included in our Unaudited Condensed Consolidated Statement of Operations and Comprehensive Loss:

	For the three months  ended of  September 30				For the nine months  ended of  September 30
	2014		2013		2014		2013
Research and development	$	14,000	$	9,000	$	94,000	$	13,000
Sales and marketing		9,000		3,000		52,000		4,000
General and administrative expenses		49,000		6,000		239,000		11,000
Stock-based compensation expense	$	72,000	$	18,000	$	385,000	$	28,000

The Company estimates the fair value of time-based stock options, if any, granted using the Black-Scholes option pricing model. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Time-based and performance-based options, if any, typically have a ten-year life from date of grant and vesting periods of two to four years.

Valuation Assumptions

The fair value of stock-based awards to employees is calculated through the use of the Black-Scholes option pricing model, even though such model was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which differ significantly from the Company’s stock option awards. This model also requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values.

Expected Term

The expected term represents the period that the Company’s stock-based awards are expected to be outstanding. For awards granted subject only to service vesting requirements, the Company utilizes the simplified method for estimating the expected term of the stock-based award, instead of historical exercise data.

Expected Volatility

The Company uses the historical volatility of the price of the common shares of selected public companies in the biotechnology sector.

Expected Dividend

The Company has never paid dividends on its common shares and currently does not intend to do so and, accordingly, the dividend yield percentage is zero for all periods.

Risk-Free Interest Rate

The Company bases the risk-free interest rate used in the Black-Scholes option pricing model upon the implied yield curve currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

During the nine months ended September 30, 2014 and 2013, the Company issued options to non-employees for the purchase of 175,000 and 1,165,000 shares of common stock in exchange for services. During the nine months ended September 30, 2014, the options were issued with an exercise price of $1.85 per share. The options issued during the nine months ended September 30, 2013, were issued with a range of exercise prices from $0.05 to $0.35 per share. These options generally vest over four years. The Company accounts for these options as variable awards. The options were valued using the Black-Scholes option pricing model. The total stock based compensation related to nonemployees amounted to $381,000 and $18,000 for the nine months ended September 30, 2014 and 2013.

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Commitments and Contigencies

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

8. COMMITMENTS AND CONTINGENCIES

Lease Arrangements

On August 23, 2013, the Company signed a lease for 10,800 square feet of office and laboratory space in Menlo Park, California. The term of the lease is 39 months from the lease commencement date of September 1, 2013. Future minimum commitments under this lease are as follows:

Three months remaining of 2014	$	70,000
2015		288,000
2016		271,000
Total	$	629,000

Legal Proceedings

The Company is not currently a party to any legal proceedings. The Company is not aware of any pending legal proceeding to which any of its officers, directors, or any beneficial holders of 5% or more of its voting securities are adverse to it or have a material interest adverse to it.

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Convertible Redeemable Preferred Stock and Stockholders' Equity

9 Months Ended

Sep. 30, 2014

Convertible Redeemable Preferred Stock and Stockholders' Equity [Abstract]

CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

9. CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

Common Stock

As described in Note 1, on January 23, 2014, the Company issued 7,025,000 shares of its common stock to BioPharmX, Inc. stockholders.  As described in Note 7, on April 11, 2014, the Company’s convertible notes and eligible interest were converted to 1,526,001 shares of common stock upon the first closing of the offer and sale of Series A Preferred Stock. During the nine months ended September 30, 2014, the Company issued 506,248 shares of common stock upon the exercise of stock options. At September 30, 2014, the Company has 11,057,249 shares of common stock currently issued and outstanding.

Series A Preferred Stock

The Company entered into Subscription Agreements (the “Subscription Agreements”) for a private placement of shares of our Series A convertible redeemable preferred Stock, par value $0.001 per share (“Series A”), and warrants (the “Warrants”) with 30 accredited investors through the third quarter of 2014 whereby we sold an aggregate of 2,176,387 shares of Series A at a per share price of $1.85 for gross proceeds of $4.0 million and issued to the investors for no additional consideration the Warrants to purchase in the aggregate 1,088,201 shares of the Company’s common stock, par value $0.001 per share, with an exercise price of $3.70 per share.

The Warrants with an allocated fair value of $273,000 were classified as additional paid in capital. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions: dividend rate of 0%, risk-free rate of 1.6% to 1.9%, contractual term of 5 years and expected volatility of 88.8%. These Warrants were immediately exercisable, and as of September 30, 2014, were all outstanding.

In connection with the Subscription Agreements, the Company, the majority shareholders of the Company and the Investors entered into Investor Rights Agreements (the “Investor Rights Agreements”) with the Investors, whereby the Investors were granted certain rights including: (i) right to receive copies of quarterly and annual reports of the Company, (ii) right of inspection of the Company’s properties and records, (iii) right of participation in future securities offerings, (iv) tag-along rights in connection with sales of the Company’s stock by a major shareholder, and (v) board of directors representation rights for the subscribers who purchased at least 500,000 shares of Series A and hold at least 30% of such shares (the “Qualified Subscribers”). The Company made certain covenants under the agreement including: (i) uplisting to NYSE or NASDAQ within three years from the issuance shares of Series A, and (ii) increase of the board of directors to five members including one member to be appointed by the Qualified Subscribers. 

Significant terms of Series A are as follows:

· Holders of the Series A are entitled to interest payment at the rate of 6% of the purchase price per annum. The Company has the option to pay this interest in shares of common stock or in cash. As of September 30, 2014, $70,000 in interest has been accreted to the Series A. Holders of the Series A are entitled to receive dividends on an as converted basis with the holders of the Company’s common stock.

· The holders of the Series A are entitled to vote together with the holders of the Company’s common stock, with each such holder of Series A entitled to the number of votes equal to the number of shares of the Company’s common stock into which such Series A would be converted if converted on the record date for the taking of a vote.

· Each share of Series A is initially convertible, at any time at the sole option of the holder, into one share of the Company’s common stock, subject to future adjustments as provided for in the Series A Certificate. The Series A shall automatically convert into shares of the Company’s common stock upon the uplisting of the common stock to NYSE or NASDAQ within three years from the issuance of shares of Series A.

· If the Company fails to effect the uplisting within three years from the issuance of shares of Series A, the holders will have the right to require the Company to redeem all or a portion of the then outstanding Series A at a price per share equal to the Series A liquidation preference.

Warrants

In addition to the Warrants issued in conjunction with the Subscription Agreements, the Company issued warrants on May 15, 2014, to a service provider for 316,395 shares of common stock at an exercise price of $2.035 per share, which was valued at $99,000 and expensed. The Company also issued to a qualified investor as a part of his convertible loan package for 343,559 shares of common stock at an exercise price of $1.85 per share, which was valued at $105,000. These warrants expire after five years. The Company determined the fair value using the Black-Scholes option pricing model with the following assumptions: dividend rate of 0%, risk-free rate of 1.6%, contractual term of 5 years and expected volatility of 88.8%. These Warrants were immediately exercisable, and as of September 30, 2014, were all outstanding.

Equity Incentive Plan

On January 23, 2014, the Company adopted the 2014 Equity Incentive Plan (the “2014 Plan”) which permits the Company to grant stock options to directors, officers or employees of the Company or others to purchase shares of common stock of the Company through awards of incentive and nonqualified stock options (“Options”), stock (“Restricted Stock” or “Unrestricted Stock”) and stock appreciation rights (“SARs”). Options previously issued under the BioPharmX, Inc. 2011 Equity Incentive Plan were cancelled, and options under the 2014 Plan were issued to replace all cancelled BioPharmX, Inc. options.

The Company currently has time-based options outstanding. The time-based options generally vest in two to four years and expire ten years from the date of grant. Total number of shares reserved and available for grant and issuance pursuant to this Plan is 2,700,000. Shares issued under the Plan will be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company. At September 30, 2014, there were 79,000 shares available for grant under the Plan.

The following table summarizes the Company’s stock option activities for the nine month periods ended September 30, 2014 and 2013:

				Weighted Average
				Exercise		Remaining
				Price		Contractual
	Shares			Per Share		Term
Outstanding as of January 1, 2014		2,606,000		$	0.25
Granted		175,000			1.85
Exercised		(506,248	)		0.09
Cancelled		(160,000	)		0.37
Outstanding as of September 30, 2014		2,114,752		$	0.41		8.39
Vested and exercisable		1,149,809		$	0.32		8.09
Vested and expected to vest		2,114,752		$	0.41		8.39

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Fair Value Measurements

9 Months Ended

Sep. 30, 2014

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

11. FAIR VALUE MEASUREMENTS

The Company recognizes and discloses the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). Each level of input has different levels of subjectivity and difficulty involved in determining fair value.

● Level 1 - Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date. Therefore, determining fair value for Level 1 investments generally does not require significant judgment, and the estimation is not difficult.

● Level 2 - Pricing is provided by third party sources of market information obtained through investment advisors. The Company does not adjust for or apply any additional assumptions or estimates to the pricing information received from its advisors.

● Level 3 - Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The determination of fair value for Level 3 instruments involves the most management judgment and subjectivity.

As of September 30, 2014 and December 31, 2013, the Company held no assets or liabilities with instrument valuations measured on a recurring basis.

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Convertible Redeemable Preferred Stock and Stockholders' Equity (Details Textual) (USD $)

0 Months Ended

9 Months Ended

9 Months Ended

9 Months Ended

0 Months Ended

9 Months Ended

Apr. 11, 2014

Sep. 30, 2014

Sep. 30, 2013

Jan. 23, 2014

Dec. 31, 2013

Sep. 30, 2014

Employee Stock Option [Member]

Sep. 30, 2014

2014 Plan [Member]

Sep. 30, 2014

Series A Preferred Stock [Member]

Sep. 30, 2014

Subscription Agreement [Member]

Series A Preferred Stock [Member]

Sep. 30, 2014

Stock Purchase Agreement [Member]

Sep. 30, 2014

Share Exchange Agreement [Member]

May 15, 2014

Warrant [Member]

Sep. 30, 2014

Common Stock [Member]

Employee Stock Option [Member]

Proceeds from Issuance of Private Placement

$ 4,000,000

Par value, preferred stock

$ 0.001

Share Price

$ 1.85

$ 1.85

Number of shares issued

2,176,387

7,000,000

7,025,000

Warrants exercise price

$ 3.70

$ 2.035

Warrants issued upon conversion of shares

1,088,201

316,395

Warrant issued upon conversion of shares, issuance cost

99,000

Preferred Stock, Participation Rights

(i) right to receive copies of quarterly and annual reports of the Company, (ii) right of inspection of the Company's properties and records, (iii) right of participation in future securities offerings, (iv) tag-along rights in connection with sales of the Company's stock by a major shareholder, and (v) board of directors representation rights for the subscribers who purchased at least 500,000 shares of Series A and hold at least 30% of such shares (the "Qualified Subscribers"). The Company made certain covenants under the agreement including: (i) uplisting to NYSE or NASDAQ within three years from the issuance shares of Series A, and (ii) increase of the board of directors to five members including one member to be appointed by the Qualified Subscribers.

Common stock, issued

11,057,249

7,025,000

7,025,000

Common stock, shares outstanding

11,057,249

7,025,000

Time-based and performance-based options, Description

Time-based options generally vest in two to four years and expire ten years from the date of grant.

Number of shares reserved and available for grant and issuance pursuant

2,700,000

79,000

Shares issued for conversion of notes payable

1,526,001

1,526,001

Fair value of warrants

273,000

Preferred stock dividend rate, percentage

6.00%

Series A Preferred stock dividend

70,000

Dividend rate

0.00%

0.00%

Risk-free interest rate

0.89%

1.60%

Risk free interest rate, Minimum

1.60%

Risk free interest rate, Maximum

1.90%

Contractual term

6 years 29 days

5 years

5 years

Expected volatility

82.10%

88.80%

88.80%

Share issued for conversion of Loan package

343,559

Share issued for conversion of Loan package , Value

$ 105,000

Common stock upon the exercise of stock options, Shares

(506,248)

506,248

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Commitments and Contigencies (Tables)

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies [Abstract]

Future minimum commitments under lease

Three months remaining of 2014	$	70,000
2015		288,000
2016		271,000
Total	$	629,000

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Property Plant and Equipment (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Total	$ 204,000	$ 38,000
Less: accumulated depreciation	(16,000)	(6,000)
Property and equipment, net	188,000	32,000
Furniture and fixtures [Member]
Property, Plant and Equipment [Line Items]
Total	18,000	11,000
Laboratory equipment [Member]
Property, Plant and Equipment [Line Items]
Total	26,000	12,000
Computers and equipment [Member]
Property, Plant and Equipment [Line Items]
Total	15,000	15,000
Software [Member]
Property, Plant and Equipment [Line Items]
Total	$ 145,000

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Unaudited Condensed Consolidated Statements of Cash Flows (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Cash flows from operating activities:
Net loss	$ (5,031,000)	$ (822,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	385,000	28,000
Depreciation expense	10,000	6,000
Warrants issued for services provided	99,000
Noncash interest expense	76,000	42,000
Changes in assets and liabilities:
Prepaid expenses and other assets	(166,000)	(191,000)
Accounts payable and accrued expenses	889,000	111,000
Payroll liabilities	21,000	33,000
Related party payables	220,000	123,000
Net cash used in operating activities	(3,497,000)	(670,000)
Cash flows from investing activities:
Change in restricted cash	(35,000)
Purchases of property and equipment	(166,000)	(24,000)
Purchase of intellectual property		(50,000)
Net cash used in investing activities	(201,000)	(74,000)
Cash flows from financing activities:
Proceeds from issuance of common stock	43,000
Net proceeds from issuance of convertible redeemable preferred stock	3,840,000
Proceeds from issuance of convertible notes payable	1,020,000	630,000
Net cash provided by financing activities	4,903,000	630,000
Net increase (decrease) in cash and cash equivalents	1,205,000	(114,000)
Cash at beginning of period	3,000	138,000
Cash at end of period	1,208,000	24,000
Noncash investing and financing activities:
Intangible assets purchase accrued	90,000	100,000
Conversion of convertible notes payable to common stock	1,942,000
Fair value of beneficial conversion feature issued in connection with convertible notes payable	204,000	126,000
Issuance of common stock warrants in connection with Series A convertible redeemable preferred stock	273,000
Issuance of common stock warrants in connection with convertible notes payable	$ 105,000

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Restricted Cash

9 Months Ended

Sep. 30, 2014

Restricted Cash [Abstract]

RESTRICTED CASH

5. RESTRICTED CASH

The company has restricted cash in the amount of $35,000 held by Bank of America in a money market account to secure the credit line of the Company’s credit cards. 

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Property Plant and Equipment (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 10,000	$ 6,000

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Subsequent Events (Details) (USD $)

9 Months Ended

0 Months Ended

1 Months Ended

0 Months Ended

Sep. 30, 2014

Private Placement [Member]

Nov. 07, 2014

Subsequent Event [Member]

Minimum [Member]

Nov. 07, 2014

Subsequent Event [Member]

Maximum [Member]

Nov. 10, 2014

Subsequent Event [Member]

Private Placement [Member]

Oct. 31, 2014

Subsequent Event [Member]

Private Placement [Member]

Nov. 10, 2014

Subsequent Event [Member]

Series A Preferred Stock [Member]

Subsequent Event [Line Items]

Number of shares issued

2,176,387

3,000,000

3,000,000

1,081,081

Share sold, per share price

$ 1.85

$ 1.85

$ 1.85

Proceed from issuance of shares

$ 2,000,000

Net proceed on private plaement transaction

$ 9,537,546

Purchase of warrants

1,500,000

1,500,000

Warrants exercise price

$ 3.70

$ 3.70

Voting rights agreement

(i) vote in favor of any merger or sale of the Company which has been approved by the board of directors and holders of at least 50% of the then outstanding shares of Series A, and (ii) irrevocably grant to the Investor a proxy to vote in favor of such business combination transaction. The shareholders also agreed to sell their shares to a purchaser in a transaction approved by holders of at least 67% of shares of Series A or 67% of shares of common stock and Series A.

Number of option granted

2,700,000

4,500,000

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Property Plant and Equipment (Tables)

9 Months Ended

Sep. 30, 2014

Property, Plant and Equipment [Abstract]

Summary of property and equipment

	September 30,  2014			December 31, 2013
Furniture and fixtures	$	18,000		$	11,000
Laboratory equipment		26,000			12,000
Computers and equipment		15,000			15,000
Software		145,000			-
		204,000			38,000
Less: accumulated depreciation		(16,000	)		(6,000	)
	$	188,000		$	32,000