UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | ||
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED SeptemberJune 30, 20212022
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
Commission File Number 001-38538
electroCore, Inc.
(Exact name of Registrant as specified in its charter)
Delaware |
| 20-3454976 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
200 Forge Way, Suite 205, Rockaway, NJ 07866
(Address of principal executive offices, including zip code)
(973) 290-0097
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Common Stock, par value $0.001 per share |
| ECOR |
| The Nasdaq |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ |
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| Accelerated filer | ☐ |
Non-accelerated filer | ☒ |
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| Smaller reporting company | ☒ |
Emerging growth company | ☒ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of NovemberAugust 1, 20212022 the registrant had 70,697,68071,121,078 shares of common stock outstanding.
1 |
2 |
REFERENCES TO ELECTROCORE
In this Quarterly Report on Form 10-Q, unless otherwise stated or the context otherwise requires, references to the “Company,” “electroCore,” “we,” “us” and “our” refer to electroCore, Inc. a Delaware corporation and its subsidiaries and affiliate.subsidiaries.
This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to them. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, (i) risks and uncertainties related to the impact of the COVID-19 pandemic on general political and economic conditions, including as a result of efforts by governmental authorities to mitigate the COVID-19 pandemic, such as travel bans, vaccine mandates, shelter in place orders and third-party business closures and resource allocations, manufacturing and supply chains and patient access to commercial products; our ability to execute our operational and budget plans in light of the COVID-19 pandemic, and (ii) those included in our Form 10-Qs, our Annual Report on Form 10-K for the year ended December 31, 2020,2021, in our other filings with the U.S. Securities and Exchange Commission or in materials incorporated by reference therein, including the information in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in such filings. Furthermore, any such forward-looking statements in this Quarterly Report speak only as of the date of this report. Except as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of such statements.
The electroCore logo, gammaCore and other trademarks of electroCore, Inc. appearing in this Quarterly Report are the property of electroCore, Inc. All other trademarks, service marks and trade names in this Quarterly Report are the property of their respective owners. We have omitted the ® and ™ designations, as applicable, for the trademarks used in this Quarterly Report.
3 |
ELECTROCORE, INC., AND SUBSIDIARIES AND AFFILIATE
(unaudited)
(in thousands, except share data)
|
| September 30, |
| December 31, |
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| June 30, |
| December 31, |
| ||||||
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| 2021 |
| 2020 |
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| 2022 |
| 2021 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
| $ | 37,995,008 |
| $ | 4,241,937 |
|
| $ | 26,330 |
| $ | 34,689 |
| ||
Marketable securities |
|
| 1,001,080 |
| 18,386,160 |
| ||||||||||
Restricted cash | 250 | 0— | ||||||||||||||
Accounts receivable, net |
|
| 329,778 |
| 270,546 |
|
|
| 575 |
| 438 |
| ||||
Inventories, net |
|
| 1,082,325 |
| 876,436 |
|
|
| 1,739 |
| 1,361 |
| ||||
Prepaid expenses and other current assets |
|
| 1,476,348 |
|
| 1,288,588 |
|
|
| 230 |
|
| 1,053 |
| ||
Total current assets |
|
| 41,884,539 |
|
|
| 25,063,667 |
|
|
| 29,124 |
|
|
| 37,541 |
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Inventories, noncurrent |
|
| 4,349,009 |
| 4,865,181 |
|
|
| 2,905 |
| 3,941 |
| ||||
Property and equipment, net |
|
| 171,028 |
| 244,047 |
|
|
| 99 |
| 147 |
| ||||
Operating lease right of use assets |
|
| 539,728 |
| 517,257 |
| ||||||||||
Operating lease right of use assets, net |
|
| 592 |
| 613 |
| ||||||||||
Other assets, net |
|
| 626,445 |
|
| 828,011 |
|
|
| 761 |
|
| 591 |
| ||
Total assets |
| $ | 47,570,749 |
| $ | 31,518,163 |
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| $ | 33,481 |
| $ | 42,833 |
| ||
Liabilities and Equity |
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Current liabilities: |
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Accounts payable |
| $ | 1,250,534 |
| $ | 2,078,699 |
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| $ | 2,053 |
| $ | 938 |
| ||
Accrued expenses and other current liabilities |
|
| 4,429,843 |
| 2,965,702 |
|
|
| 3,523 |
| 4,486 |
| ||||
Note payable, current |
|
| 0— |
| 311,354 |
| ||||||||||
Current portion of operating lease liabilities |
|
| 58,482 |
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| 534,547 |
|
|
| 68 |
|
| 61 |
| ||
Total current liabilities |
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| 5,738,859 |
|
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| 5,890,302 |
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|
| 5,644 |
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|
| 5,485 |
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Noncurrent liabilities: |
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Operating lease liabilities, noncurrent |
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| 715,530 |
| 885,333 |
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| 664 |
| 700 |
| ||||
Note payable, noncurrent | 0— | 1,097,946 | ||||||||||||||
Total liabilities |
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| 6,454,389 |
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| 7,873,581 |
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| 6,308 |
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| 6,185 |
| ||
Commitments and contingencies |
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| 0— |
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| 0— |
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| 0— |
| 0— |
| |||
Stockholders' equity: |
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Preferred Stock, par value $0.001 per share; 10,000,000 shares authorized at September 30, 2021 and December 31, 2020; 0 shares issued and outstanding at September 30, 2021 and December 31, 2020 |
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| 0— |
| 0— |
| ||||||||||
Common Stock, par value $0.001 per share; 500,000,000 shares authorized at September 30, 2021 and December 31, 2020; 70,442,309 shares issued and outstanding at September 30, 2021 and 45,559,765 shares issued and outstanding at December 31, 2020 |
|
| 70,442 |
| 45,560 |
| ||||||||||
Preferred Stock, par value $0.001 per share; 10,000,000 shares authorized at June 30, 2022 and December 31, 2021; 0 shares issued and outstanding at June 30, 2022 and December 31, 2021 |
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| 0— |
| 0— |
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Common Stock, par value $0.001 per share; 500,000,000 shares authorized at June 30, 2022 and December 31, 2021; 71,119,471 shares issued and outstanding at June 30, 2022 and 70,704,123 shares issued and outstanding at December 31, 2021 |
|
| 71 |
| 71 |
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Additional paid-in capital |
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| 159,796,442 |
| 130,205,027 |
|
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| 162,301 |
| 160,772 |
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Accumulated deficit |
|
| (119,261,417 | ) |
| (106,990,148 | ) |
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| (135,127 | ) |
| (124,208 | ) | ||
Accumulated other comprehensive loss |
|
| (124,717 | ) |
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| (251,467 | ) |
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| (72 | ) |
|
| 13 | |
Total stockholders' equity |
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| 40,480,750 |
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| 23,008,972 |
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Noncontrolling interest |
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| 635,610 |
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| 635,610 |
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Total equity |
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| 41,116,360 |
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| 23,644,582 |
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|
| 27,173 |
| 36,648 |
| |||
Total liabilities and equity |
| $ | 47,570,749 |
| $ | 31,518,163 |
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| $ | 33,481 |
| $ | 42,833 |
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See accompanying notes to unaudited condensed consolidated financial statements.
4 |
ELECTROCORE, INC., AND SUBSIDIARIES AND AFFILIATE
(Unaudited)(unaudited)
(in thousands, except per share data)
| Three months ended September 30, |
| Nine months ended September 30, |
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||
| 2021 | 2020 |
| 2021 |
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| 2020 |
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||
Net sales | $ | 1,487,093 | $ | 1,080,841 |
| $ | 3,960,401 |
| $ | 2,567,567 |
| $ | 2,157 | $ | 1,269 | $ | 4,056 | $ | 2,473 | |||||||||||
Cost of goods sold | 355,046 | 347,504 |
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| 1,093,304 |
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| 918,605 |
| 358 | 374 | 718 | 738 | ||||||||||||||||
Gross profit | 1,132,047 | 733,337 |
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| 2,867,097 |
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| 1,648,962 |
| 1,799 | 895 | 3,338 | 1,735 | ||||||||||||||||
Operating expenses |
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Research and development | 470,275 | 629,002 |
| 1,794,146 |
| 3,182,646 |
| 1,341 | 825 | 2,275 | 1,324 | |||||||||||||||||||
Selling, general and administrative | 4,646,815 | 4,592,936 |
| 15,644,324 |
| 16,426,991 |
| 6,278 | 5,272 | 12,464 | 10,997 | |||||||||||||||||||
Restructuring and other severance related charges | 0— | 0— |
|
| 0— |
|
| 464,606 |
| |||||||||||||||||||||
Total operating expenses | 5,117,090 | 5,221,938 |
|
| 17,438,470 |
|
| 20,074,243 |
| 7,619 | 6,097 | 14,739 | 12,321 | |||||||||||||||||
Loss from operations | (3,985,043 | ) | (4,488,601 | ) |
|
| (14,571,373 | ) |
|
| (18,425,281 | ) | (5,820 | ) | (5,202 | ) | (11,401 | ) | (10,586 | ) | ||||||||||
Other (income) expense |
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Gain on extinguishment of debt | 0— | 0— | (1,422,214 | ) | 0— | 0— | (1,422 | ) | 0— | (1,422 | ) | |||||||||||||||||||
Interest and other income | (3,834 | ) | (5,719 | ) |
| (8,493 | ) |
| (80,460 | ) | (38 | ) | (1) | (42 | ) | (1 | ) | |||||||||||||
Other expense | 3,771 | 3,522 |
|
| 7,293 |
|
| 13,350 |
| 0— | 0— | 5 | 0— | |||||||||||||||||
Total other (income) expense | (63 | ) | (2,197 | ) |
|
| (1,423,414 | ) |
|
| (67,110 | ) | (38 | ) | (1,423 | ) | (37 | ) | (1,423 | ) | ||||||||||
Loss before income taxes | (3,984,980 | ) | (4,486,404 | ) | (13,147,959 | ) | (18,358,171 | ) | (5,782 | ) | (3,779 | ) | (11,364 | ) | (9,163 | ) | ||||||||||||||
(Provision) benefit from income taxes (see Note 14) | (8,705 | ) | 0— | 876,690 | 1,170,890 | |||||||||||||||||||||||||
Benefit from income taxes | 445 | 885 | 445 | 885 | ||||||||||||||||||||||||||
Net loss | $ | (3,993,685 | ) | $ | (4,486,404 | ) |
| $ | (12,271,269 | ) |
| $ | (17,187,281 | ) | $ | (5,337 | ) | $ | (2,894 | ) | $ | (10,919 | ) | $ | (8,278 | ) | ||||
Net loss per share of common stock - Basic and Diluted (see Note 12) | $ | (0.06 | ) | $ | (0.10 | ) |
| $ | (0.22 | ) |
| $ | (0.47 | ) | ||||||||||||||||
Weighted average common shares outstanding - Basic and Diluted (see Note 12) | 69,511,498 | 44,030,685 |
| 55,308,381 |
| 36,847,548 |
| |||||||||||||||||||||||
Net loss per share of common stock - Basic and Diluted (see Note 8) | $ | (0.08 | ) | $ | (0.06 | ) | $ | (0.15 | ) | $ | (0.17 | ) | ||||||||||||||||||
Weighted average common shares outstanding - Basic and Diluted (see Note 8) | 70,816 | 48,520 | 70,744 | 48,089 |
See accompanying notes to unaudited condensed consolidated financial statements.
5 |
ELECTROCORE, INC., AND SUBSIDIARIES AND AFFILIATE
(Unaudited)(unaudited)
(in thousands)
| Three months ended September 30, | Nine months ended September 30, |
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||
| 2021 | 2020 | 2021 |
|
| 2020 |
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||
Net loss | $ | (3,993,685 | ) | $ | (4,486,404 | ) | $ | (12,271,269 | ) |
| $ | (17,187,281 | ) | $ | (5,337 | ) | $ | (2,894 | ) | $ | (10,919 | ) | $ | (8,278 | ) | ||||
Other comprehensive (loss) income: |
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|
|
|
| ||||||||||||||||||||||||
Foreign currency translation adjustment | (22,282 | ) | (81,602 | ) |
| 124,366 |
| (145,617 | ) | (58 | ) | 5 | (85 | ) | 147 | ||||||||||||||
Unrealized gain (loss) on securities, net of taxes as applicable | 27 | (2,210 | ) |
| 2,384 |
|
| (3,443 | ) | 0— | 0— | 0— | 2 | ||||||||||||||||
Other comprehensive (loss) income | (22,255 | ) | (83,812 | ) |
| 126,750 |
|
| (149,060 | ) | (58 | ) | 5 | (85 | ) | 149 | |||||||||||||
Comprehensive loss | $ | (4,015,940 | ) | $ | (4,570,216 | ) | $ | (12,144,519 | ) |
| $ | (17,336,341 | ) | $ | (5,395 | ) | $ | (2,889 | ) | $ | (11,004 | ) | $ | (8,129 | ) |
See accompanying notes to unaudited condensed consolidated financial statements.
6 |
ELECTROCORE, INC., AND SUBSIDIARIES AND AFFILIATE
(unaudited)
(Unaudited)(in thousands)
| Common |
|
| Additional |
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| Accumulated other |
| Total electroCore, Inc. |
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| Common |
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| Additional |
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| Accumulated other |
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| Stock |
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| paid-in |
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| Accumulated |
| comprehensive |
| stockholders' |
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| Noncontrolling |
| Total |
| Stock |
|
| paid-in |
| Accumulated |
| comprehensive |
| Total |
| ||||||||||||||||||||||||||
| Shares |
|
| Amount |
|
| capital |
|
| deficit |
| income (loss) |
| equity |
|
| interest |
| equity |
| Shares |
|
| Amount |
|
| capital |
| deficit |
| income (loss) |
| equity |
| ||||||||||||||||||||
Balances as of January 1, 2021 | 45,559,765 | $ | 45,560 | $ | 130,205,027 | $ | (106,990,148 | ) | $ | (251,467 | ) | $ | 23,008,972 | $ | 635,610 | $ | 23,644,582 | |||||||||||||||||||||||||||||||||||||
Balance, January 1, 2022 | 70,704 | $ | 71 | $ | 160,772 | $ | (124,208 | ) | $ | 13 | $ | 36,648 | ||||||||||||||||||||||||||||||||||||||||||
Net loss | — | 0— | 0— | (5,383,832 | ) | 0— | (5,383,832 | ) | 0— | (5,383,832 | ) | — | 0— | 0— | (5,582 | ) | 0— | (5,582 | ) | |||||||||||||||||||||||||||||||||||
Other comprehensive income | — | 0— | 0— | 0— | 144,144 | 144,144 | 0— | 144,144 | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock (see Note 11) | 2,750,000 | 2,750 | 6,917,600 | 0— | 0— | 6,920,350 | 0— | 6,920,350 | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | 0— | 0— | 0— | (27 | ) | (27 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock related to employee compensation plans, net of forfeitures | 17,599 | 18 | (18 | ) | 0— | 0— | 0— | 0— | 0— | 14 | 0— | 0— | 0— | 0— | 0— | |||||||||||||||||||||||||||||||||||||||
Settlement of accrued bonus | 165,413 | 165 | 399,832 | 0— | 0— | 399,997 | 0— | 399,997 | ||||||||||||||||||||||||||||||||||||||||||||||
Share based compensation | — | 0— | 942,183 | 0— | 0— | 942,183 | 0— | 942,183 | — | 0— | 777 | 0— | 0— | 777 | ||||||||||||||||||||||||||||||||||||||||
Balances as of March 31, 2021 | 48,492,777 | $ | 48,493 | $ | 138,464,624 | $ | (112,373,980 | ) | $ | (107,323 | ) | $ | 26,031,814 | $ | 635,610 | $ | 26,667,424 | |||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | 70,718 | $ | 71 | $ | 161,549 | $ | (129,790 | ) | $ | (14 | ) | $ | 31,816 | |||||||||||||||||||||||||||||||||||||||||
Net loss |
| — |
|
|
| 0— |
|
|
| 0— |
|
|
| (2,893,752 | ) |
|
| 0— |
|
| (2,893,752 | ) |
|
| 0— |
|
| (2,893,752 | ) |
| — |
| 0— |
|
|
| 0— |
| (5,337 | ) |
| 0— |
|
| (5,337 | ) | ||||||||
Other comprehensive income |
| — |
|
|
| 0— |
|
|
| 0— |
|
|
| 0— |
|
|
| 4,861 |
|
| 4,861 |
|
| 0— |
|
| 4,861 | — | 0— | 0— | 0— | (58 | ) | (58 | ) | |||||||||||||||||||
Issuance of stock related to employee compensation plans, net of forfeitures |
| 197,647 |
|
|
| 197 |
|
|
| (197 | ) |
|
| 0— |
|
|
| 0— |
|
| 0— |
|
|
| 0— |
|
| 0— |
| 401 | 0— | 0— | 0— | 0— | 0— | |||||||||||||||||||
Share based compensation |
| — |
|
|
| 0— |
|
|
| 837,973 |
|
|
| 0— |
|
|
| 0— |
|
| 837,973 |
|
|
| 0— |
|
| 837,973 |
| — | 0— | 752 | 0— | 0— | 752 | |||||||||||||||||||
Balances as of June 30, 2021 |
| 48,690,424 |
|
| $ | 48,690 |
|
| $ | 139,302,400 |
|
| $ | (115,267,732 | ) |
| $ | (102,462 | ) |
| $ | 23,980,896 |
|
| $ | 635,610 |
| $ | 24,616,506 |
| ||||||||||||||||||||||||
Net loss |
| — |
|
|
| 0— |
|
|
| 0— |
|
|
| (3,993,685 | ) |
|
| 0— |
|
| (3,993,685 | ) |
|
| 0— |
|
| (3,993,685 | ) | |||||||||||||||||||||||||
Other comprehensive income | — | 0— | 0— | 0— | (22,255 | ) | (22,255 | ) | 0— | (22,255 | ) | |||||||||||||||||||||||||||||||||||||||||||
Issuance of stock, net of related expenses (see Note 11) | 20,700,000 | 20,700 | 18,744,182 | 0— | 0— | 18,764,882 | 0— | 18,764,882 | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock to satisfy legal fee obligation (see Note 11) | 952,380 | 952 | 989,523 | 0— | 0— | 990,475 | 0— | 990,475 | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock related to employee compensation plan, net of forfeitures | 99,505 | 100 | (100 | ) | 0— | 0— | 0— | 0— | 0— | |||||||||||||||||||||||||||||||||||||||||||||
Share based compensation | — | 0— | 760,437 | 0— | 0— | 760,437 | 0— | 760,437 | ||||||||||||||||||||||||||||||||||||||||||||||
Balances as of September 30, 2021 | 70,442,309 | $ | 70,442 | $ | 159,796,442 | $ | (119,261,417 | ) | $ | (124,717 | ) | $ | 40,480,750 | $ | 635,610 | $ | 41,116,360 | |||||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | 71,119 | $ | 71 | $ | 162,301 | $ | (135,127 | ) | $ | (72 | ) | $ | 27,173 | |||||||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements
7 |
ELECTROCORE, INC., AND SUBSIDIARIES AND AFFILIATE
(unaudited) Common Additional Accumulated other Total electroCore, Inc. Stock paid-in Accumulated comprehensive stockholders' Noncontrolling Total Shares Amount capital deficit income (loss) equity interest equity Net loss Other comprehensive income Equity financing commitment fee* Issuance of stock related to employee compensation plans, net of forfeitures Share based compensation Net loss — 0— 0— (4,741,528 0— (4,741,528 0— (4,741,528 Other comprehensive income — 0— 0— 0— (116,396 (116,396 0— (116,396 Issuance of stock (see Note 11) Equity financing commitment fee* 181,273 181 (181 0— 0— 0— 0— 0— Financing fees Issuance of stock related to employee compensation plans, net of forfeitures 184,073 184 (184 0— 0— 0— 0— 0— Share based compensation — 0— 1,002,758 0— 0— 1,002,758 0— 1,002,758 Balances as of June 30, 2020 38,815,145 $ 38,815 $ 117,154,945 $ (96,179,975 ) $ (106,543 $ 20,907,242 $ 635,610 $ 21,542,852 Net loss — 0— 0— (4,486,404 0— (4,486,404 0— (4,486,404 Other comprehensive income — 0— 0— 0— (83,812 (83,812 0— (83,812 Issuance of stock (see Note 11) 6,079,676 6,080 11,197,581 0— 0— 11,203,661 0— 11,203,661 Equity financing commitment fee* 49,565 49 (49 0— 0— 0— 0— 0— Financing fees — 0— (23,199 0— 0— (23,199 0— (23,199 Issuance of stock related to employee compensation plans, net of forfeitures 254,702 255 (255 0— 0— 0— 0— 0— Share based compensation — 0— 742,928 0— 0— 742,928 0— 742,928 45,199,088 45,199 129,071,951 (100,666,379 (190,355 28,260,416 635,610 28,896,026 Additional Total electroCore, Inc. Stock paid-in Accumulated comprehensive stockholders' Noncontrolling Total Shares Amount capital deficit income (loss) equity interest equity Net loss Other comprehensive income Issuance of stock Issuance of stock related to employee compensation plans, net of forfeitures Settlement of accrued bonus Share based compensation Net loss — 0— 0— (2,894 0— (2,894 0— Other comprehensive income — 0— 0— 0— 5 5 0— 5 Issuance of stock related to employee compensation plans, net of forfeitures 197 0— 0— 0— 0— 0— 0— 0— Share based compensation — 0— 0— 0— 838 0— 838 Balances as of June 30, 2021 48,690 $ 48 $ $ (115,268 ) $ $ $ 635 $ 24,616 ELECTROCORE, INC. (in thousands) Nine months ended September 30, 2021 2020 Six months ended June 30, 2022 2021 Cash flows from operating activities: Net loss $ (12,271,269 $ (17,187,281 ) $ (10,919 $ (8,278 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation 2,540,593 2,490,551 1,529 1,780 Depreciation and amortization 286,448 288,589 247 191 Amortization of marketable securities discount 141,159 23,422 0— 114 (Gain) loss on legal fee obligation settled with stock Net noncash lease expense 56,151 273,070 21 41 39,478 Other 0— 14,893 Changes in operating assets and liabilities: Accounts receivable, net (59,232 320,186 (137 (98 Inventories 270,805 (15,922 ) 658 174 Prepaid expenses and other current assets 703,257 561,248 823 1,082 Accounts payable 171,835 (1,631,839 1,115 220 Accrued expenses and other current liabilities 324,316 (1,407,813 ) (963 363 Net cash used in operating activities (9,273,543 (16,469,736 ) (8,024 (5,826 Cash flows from investing activities: Purchase of marketable securities (5,082,730 (22,166,376 0— (5,083 Proceeds from maturities of marketable securities 22,300,000 10,500,000 0— 14,300 Net cash provided by (used in) investing activities 17,217,270 (11,666,376 Net cash provided by investing activities 0— 9,217 Cash flows from financing activities: Proceeds from note issued Shares issued Net cash provided by financing activities 25,685,232 18,550,087 0— 6,920 Effect of changes in exchange rates on cash and cash equivalents 124,112 (145,312 (85 146 Net increase (decrease) in cash and cash equivalents 33,753,071 (9,731,337 Net (decrease) increase in cash and cash equivalents (8,109 10,457 Cash and cash equivalents – beginning of period 4,241,937 13,563,791 34,689 4,242 Cash and cash equivalents – end of period $ 37,995,008 $ 3,832,454 Cash and cash equivalents and restricted cash – end of period $ 26,580 $ 14,699 Supplemental cash flows disclosures: 1,425,935 Interest paid 4,649 $ 9,366 4 $ 0— 0— 400 Accounts payable paid through issuance of common stock See accompanying notes to unaudited condensed consolidated financial statements. ELECTROCORE, INC. Note electroCore electroCore, headquartered in Rockaway, New Jersey, has Note 2. Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying condensed consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and with instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments necessary for a fair presentation of the Company’s condensed consolidated financial position and results of operations for the interim periods presented. Certain information and disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, (b) Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of electroCore and its wholly owned (c) Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of (d) (in thousands) Cash and cash equivalents 26,330 250 Total cash, cash equivalents and restricted cash (e) The Company's restricted cash consists of cash that the Company is contractually obligated to maintain in accordance with the terms of its new corporate credit card arrangement with Citibank. (f) Reclassification of Balance Sheet Item Certain Note 3. Significant Risks and Uncertainties Liquidity The Company has experienced significant net losses and cash used in operations, and it expects to continue to incur net losses and cash used in operations for the near future as it works to increase market acceptance of its gammaCore The Company’s expected cash requirements for the next 12 months and beyond are largely based on the commercial success of its products. There are significant risks and uncertainties as to its ability to achieve these operating results. Concentration of Revenue Risks The Company earns a significant amount of its revenue (i) in the United States from the Department of Veterans Affairs and Department of Defense ("VA/DoD") pursuant to its qualifying contract under the Federal Supply Schedule and open market sales to individual Department of Veterans Affairs facilities, and (ii) in the United Kingdom from the National Health Service. The VA/DoD and National Health Service were the Company’s sole customers accounting for 10% Nine months ended September 30, 2021 2020 Revenue channel: Department of Veterans Affairs and Department of Defense National Health Service 25.6% 28.1% Three months ended June 30, Six months ended June 30, Revenue channel: VA/DoD National Health Service The Company has foreign currency exchange risk related to revenue and operating expenses in currencies other than the local currencies in which it operates. The Company is exposed to currency risk from the potential changes in functional currency values of its assets, liabilities, and cash flows denominated in foreign currencies. COVID-19 Risks and Uncertainties The Company continues to monitor the impact of the coronavirus pandemic on all aspects of its business and geographies, including how it will impact business Note Geographical Net Sales The following table presents net sales disaggregated by geographic Three months ended September 30, Nine months ended September 30, 2021 2020 Geographic Market (in thousands) Product revenue United States $ 2,810,152 $ 1,759,477 United Kingdom 1,037,908 801,055 Total Net Sales $ 3,960,401 $ 2,567,567 Performance Obligations Revenue is recognized when delivery of the product is completed. The Company deems control to have transferred upon the completion of delivery because that is the point in which (1) it has a present right to payment for the product, (2) it has transferred the physical possession of the product, (3) the customer has legal title to the product, (4) the customer has risks and rewards of ownership and (5) the customer has accepted the product. After the products have been delivered and control has transferred, the Company has Trade credits are discounts that are contingent upon a timely remittance of payment and are estimated based on historical experience. For the three and Contract Balances The Company generally invoices the customer and recognizes revenue once its performance obligations are satisfied, at which point payment is unconditional. Accordingly, under ASC 606, the Company’s contracts with customers did not give rise to contract assets or liabilities during the three and Agreed upon payment terms with customers are within (Unaudited)(in thousands)Balances as of January 1, 2020 29,835,183 $ 29,835 $ 107,752,066 $ (83,479,098 ) $ (41,295 ) $ 24,261,508 $ 635,610 $ 24,897,118 — 0— 0— (7,959,349 ) 0— (7,959,349 ) 0— (7,959,349 ) — 0— 0— 0— 51,148 51,148 0— 51,148 461,676 462 (462 ) 0— 0— 0— 0— 0— 124,568 125 (125 ) 0— 0— 0— 0— 0— — 0— 744,865 0— 0— 744,865 0— 744,865 Balances as of March 31, 2020 30,421,427 $ 30,422 $ 108,496,344 $ (91,438,447 ) $ 9,853 $ 17,098,172 $ 635,610 $ 17,733,782 ) ) ) ) ) ) 8,028,372 8,028 7,823,507 0— 0— 7,831,535 0— 7,831,535 ) — 0— (167,299 ) 0— 0— (167,299 ) 0— (167,299 ) ) ) ) ) ) ) ) ) ) ) ) ) ) Balances as of September 30, 2020 $ $ $ ) $ ) $ $ $ *Reflects commitment shares issued in accordance with the Company's equity facility purchase agreement with Lincoln Park. For additional information see Note 11. Lincoln Park Stock Purchase Agreement. Common Accumulated other Balances as of January 1, 2021 45,560 $ 45 $ 130,205 $ (106,990 ) $ (251 ) $ 23,009 $ 635 $ 23,644 — 0— 0— (5,384 ) 0— (5,384 ) 0— (5,384 ) — 0— 0— 0— 144 144 0— 144 2,750 3 6,918 0— 0— 6,921 0— 6,921 18 0— 0— 0— 0— 0— 0— 0— 165 0— 400 0— 0— 400 0— 400 — 0— 942 0— 0— 942 0— 942 Balances as of March 31, 2021 48,493 $ 48 $ 138,465 $ (112,374 ) $ (107 ) $ 26,032 $ 635 $ 26,667 ) ) (2,894 ) 838 139,303 (102 ) 23,981 8 , AND SUBSIDIARIES AND AFFILIATE(Unaudited)(unaudited)(revised) ) ) Gain on extinguishment of debt (1,422,214 ) 0— 0— (1,422 ) (9,525 ) 156,434 Inventory reserve charge 0— 0— 39 ) ) ) ) ) Right of use operating leases (78,622 ) 0— 0— (78 ) Operating lease liabilities 33,277 (355,274 ) (29 ) 46 Other assets (369 ) 0— ) ) ) ) ) ) ) Shares issued, net of related expenses 25,685,232 17,139,563 0— 1,410,524 0— 6,920 ) ) ) ) Proceeds from sale of state net operating losses $ $ 1,170,890 $ 445 $ 1,425 $ $ Income taxes paid $ 38,622 $ 3,254 Supplemental schedule of noncash activity: 2020 Accrued bonus awarded in equity $ 399,997 $ $ 0— $ $ 1,000,000 $ 1,548,702 9 , AND SUBSIDIARIES AND AFFILIATE(Unaudited)(unaudited)1.1. The CompanyInc. (“electroCore” or the “Company”) isa commercial stage medical device companyengaged with a proprietary non-invasive vagus nerve stimulation, or nVNS, therapy, called gammaCore. nVNS is a platform bioelectronic medical therapy that modulates neurotransmitters and immune function through its effects on both the peripheral and central nervous systems. The Company is focused on utilizing gammaCore in the commercializationmanagement and developmenttreatment of a platform non-invasiveVagusNerveStimulation (“nVNS”)therapy that can be self-administered by patients.electroCorewasfoundedin 2005and has primarily focused onprimary headache conditions(migraineandclusterheadache).conditions. two2 wholly owned subsidiaries: electroCore Germany GmbH, and electroCore UK Ltd. The Company has ceased its operations in Germany, although sales to Germany are still supported by electroCore UK Ltd.20202021 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 202110, 2022. The results for the three and ninesix months ended SeptemberJune 30, 20212022 are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period. subsidiary.subsidiaries. electroCore Australia was consolidated with the non-controlled equity presented as non-controlling interest in the Company's Condensed Consolidated Statement of Equity for the three and six months ended June 30, 2021. The Company terminated its affiliation with electroCore Australia on November 2, 2021 and, as such, this dormant entity was not included in the Company's Condensed Consolidated Statement of Equity for the six months ended June 30, 2022. All intercompany balances and transactions have been eliminated in consolidation.these condensedthe consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include allowances for doubtful accounts, trade credits, rebates, co-payment assistance and sales returns, valuation of inventory, stock compensation, incremental borrowing rate and contingencies. Revision of Statement of Cash, Flows Activity Cash Equivalents and Restricted CashIn preparationThe following table provides a reconciliation of its financial statementscash, cash equivalents and restricted cash to the balance reflected on the Condensed Consolidated Statement of Cash Flows for the quarter ended March 31, 2021, the Company realized that proceeds from its July 1, 2020 Commercial Insurance Premium Finance and Security Agreement should have been treated as a noncash activity instead of grossed up on the accompanying condensed consolidated statement of cash flows. Even though the amount was not considered material, the financial statements have been revised. As a result, cash used in operating and cash provided by financing activities for the ninesix months ended SeptemberJune 30, 2020, decreased by approximately $600,000.2022:Six months ended June 30, 2022 $ Restricted cash $ 26,580 Reclassification of Statement ofRestricted Cash Flows Activity prior periodaccounts payable amounts reported at December 31, 2021 have been reclassified to conform to current period presentation. The reclassifications did not have an impactA total of approximately $605,000 of legal fees accrued at December 31, 2021 were reported on net loss as previously reported.the line Accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheet at December 31, 2021. See Note 7. Accrued Expenses and Other Current Liabilities.10 therapy for the acute treatment of episodic cluster headache (“eCH”), the prevention of cluster headache in adults, and the preventive and acute treatment of migraine in adults and adolescents.therapy. The Company has never been profitable and has incurred net losses and cash used in operations in each year since its inception. The Company incurred net losses of $12.3 million$10.9 and $17.2$8.3 million for the ninesix months ended SeptemberJune 30, 2022 and 2021, respectively. Net cash used in operating activities for the six months ended June 30, 2022and 2020,2021was $8.0 million and $5.8 million, respectively.results, including as a result of the adverse impact on its headache business from the ongoing COVID-19 pandemic. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.The Company has historically funded its operations from the sale of its common stock. During the nine months ended September 30, 2021, the Company received net proceeds of approximately $25.7 million from such sales and as of September 30, 2021, the Company’s cash, cash equivalents and marketable securities totaled $39.0 million. The Company believes that the substantial doubt of its ability to continue as a going concern is alleviated based on proceeds received from its common stock offerings. The Company believes its cash and marketable securitiescash equivalents on hand will enable it to fund its operating expenses and capital expenditure requirements, as currently planned, for at least the next 12 months from the date the accompanying financial statements are issued.Each of these 2 channels accounted for 10% or more of total net sales during the three and six months ended June 30, 2022 and 2021. The following table reflects the respective concentration as a percentage of the Company's net sales as summarized below:sales: Three months ended September 30, 2021 2020 63.6% 59.8% 60.7% 59.0% 24.1% 24.2% 2022 2021 2022 2021 55.1% 61.3% 60.4% 59.0% 16.4% 27.0% 15.3% 26.4% SeptemberJune 30, 2022 and 2021, 3 and 2020 4 and 5 specific6 VA/DoDDOD facilities represented approximately 53.9%53.1% and 58.6%64.4%, respectively, of the Company’s revenue from this channel,total VA/DOD net sales and 2 facilities accounted for more than 10% individually, respectively. of total VA/DOD net sales in both periods. During the ninesix months ended SeptemberJune 30, 2022 and 2021, 3 and 2020 4 and 3 specific VA/DoDDOD facilities represented approximately 52.1%51.9% and 41.0%51.0%, respectively, of the Company’s revenue from this channel,total VA/DOD net sales and 3 and 2 facilities accounted for more than 10% individually,of total VA/DOD net sales, respectively.partners.partners, customers, and the global supply chain. While the Company experienced disruptions during the three and ninesix months ended SeptemberJune 30, 2022 and 2021 and 2020 from the coronavirus pandemic, it is unable to predict the full impact that the coronavirus pandemic may have on its financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. COVID-19The coronavirus pandemic has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. Depending upon the duration and severity of the pandemic, the continuing effect on the Company's results and outlook over the long term remains uncertain.11 4.4. Revenue Recognitionarea: market: Three months ended June 30, Six months ended June 30, 2021 2020 2022 2021 2022 2021 $ 1,103,604 $ 800,767 $ 1,690 $ 882 $ 3,284 $ 1,706 366,966 278,340 355 354 621 671 Other 16,523 1,734 112,341 7,035 64 33 103 96 License revenue Japan 48 0— 48 0— $ 1,487,093 $ 1,080,841 $ 2,157 $ 1,269 $ 4,056 $ 2,473 Revenue,The Company’s net revenue represents total revenue, net of discounts, vouchers, rebates, returns, and co-payment assistance, and certain fees for services related to its e-commerce platform. These adjustments represent variable consideration and are recorded for the Company’s estimate of cash consideration expected to be given by the Company to a customer that is solely generated from the salespresumed to be a reduction of the gammaCore products. transaction price of the Company’s products and, therefore, are characterized as a reduction of revenue. These adjustments are established by management as its best estimate of available information and will be adjusted to reflect known changes in the factors that impact such allowances. Adjustments for variable consideration are determined based on the contractual terms with customers, historical trends, the levels of inventory remaining in the distribution channel, as well as expectations about the market for the product. no0 remaining unsatisfied performance obligations.12Revenue is measured based on the consideration that the Company expects to receive in exchange for gammaCore, which represents the transaction price. The transaction price includes the fixed per-unit price of the product and variable consideration in the form of trade credits, rebates, and co-payment assistance. The per-unit price is based on the Company’s established wholesale acquisition cost less a contractually agreed upon distributor discount with the customer. nine sixmonths ended SeptemberJune 30, 20212022 and 2020,2021, the trade credits and discounts were immaterial.Reimbursement for co-payments made by patients under the co-payment assistance program is considered variable consideration. Effective March 1, 2020, the amount of monthly co-payment assistance was reduced to a maximum of $100 per prescription. For the three and nine months ended September 30, 2021 and 2020, net sales reflect a reduction for the reduced cost of therapy under the co-payment assistance program. The calculation of the accrual is based on an estimate of claims and the cost per claim that the Company expects to incur associated with inventory that exists in the distribution channel at period end.Managed care rebates represent our estimated obligations to pharmacy benefit managers. Rebate accruals are recognized in the same period the related revenue is recognized. Gross to net accruals based on estimated rebates were determined to be de minimis.ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.120generally within 30 days of shipment. Accordingly, contracts with customers do not include a significant financing component.
License Agreement with Teijin Limited
Note 5. Cash, Cash EquivalentsEffective March 29, 2022, the Company entered into an agreement with Teijin Limited (Teijin), to license certain exclusive rights to its nVNS technology for commercialization in Japan for a range of primary headache disorders.
Under the agreement, the Company will receive a non-refundable, upfront payment for the licenses and Marketable Securitiesrights granted to Teijin. The financial terms of the Teijin license agreement contain milestone payments, payable upon the decision by Teijin to commercialize the licensed product for specific indications. The Company also will receive an annual license fee commencing on the first anniversary of the agreement and payable annually until the first commercial sale on any approved indication. Upon favorable regulatory and payor coverage decisions in Japan, the parties plan to enter into an exclusive commercial supply agreement for gammaCore nVNS.
The following tables summarizeagreement contains customary terms and conditions, including renewal and termination provisions, as well as minimum purchase commitments once a commercial supply agreement is in place. Furthermore, Teijin is responsible for all costs associated with regulatory approval by the Company’s cash, cash equivalentsPharmaceuticals and marketable securities asMedical Devices Agency (PMDA), the Japanese FDA equivalent. As part of the agreement, Teijin will have the right of first negotiation for a license to additional indications in Japan. The Company began to recognize revenue from the non-refundable upfront payment over the 12-month period from the effective date due to the Company's continuing requirement to supply data under the agreement.September 30, 2021 and December 31, 2020.
As of September 30, 2021 |
| |||||||||||||||
|
| Amortized Cost |
|
| Unrealized Gain |
|
| Unrealized (Loss) |
|
| Fair Value |
| ||||
Cash and cash equivalents |
| $ | 37,995,008 |
|
| $ | 0— |
|
| $ | 0— |
| $ | 37,995,008 |
| |
Marketable securities: | ||||||||||||||||
U.S. Treasury Bonds |
| 1,001,506 |
|
| 0— |
|
| (426 | ) |
| 1,001,080 |
| ||||
Total cash, cash equivalents, and marketable securities |
| $ | 38,996,514 |
|
| $ | 0— |
|
| $ | (426 | ) |
| $ | 38,996,088 |
|
As of December 31, 2020 |
| |||||||||||||||
|
| Amortized Cost |
|
| Unrealized Gain |
|
| Unrealized (Loss) |
|
| Fair Value |
| ||||
Cash and cash equivalents |
| $ | 4,241,937 |
|
| $ | 0— |
|
| $ | 0— |
| $ | 4,241,937 |
| |
Marketable securities: | ||||||||||||||||
U.S. Treasury Bonds |
| 18,388,970 |
|
| 0— |
|
| (2,810 | ) |
| 18,386,160 |
| ||||
Total cash, cash equivalents, and marketable securities |
| $ | 22,630,907 |
|
| $ | 0— |
|
| $ | (2,810 | ) |
| $ | 22,628,097 |
|
Note 6. Fair Value Measurements5
Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three levels of the fair value hierarchy:
|
|
|
|
|
|
A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows:
|
|
|
|
| Fair Value Hierarchy |
| ||||||||||
September 30, 2021 |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 37,995,008 |
|
| $ | 37,995,008 |
|
| $ | 0— |
|
| $ | 0— |
|
Marketable Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury bonds |
|
| 1,001,080 |
|
|
| 1,001,080 |
|
|
| 0— |
|
|
| 0— |
|
Total |
| $ | 38,996,088 |
|
| $ | 38,996,088 |
|
| $ | 0— |
|
| $ | 0— |
|
|
|
|
|
| Fair Value Hierarchy |
| |||||||||
December 31, 2020 |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 4,241,937 |
|
| $ | 4,241,937 |
|
| $ | 0— |
|
| $ | 0— |
|
Marketable Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury bonds |
|
| 18,386,160 |
|
|
| 18,386,160 |
|
|
| 0— |
|
|
| 0— |
|
Total |
| $ | 22,628,097 |
|
| $ | 22,628,097 |
|
| $ | 0— |
|
| $ | 0— |
|
The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the nine months ended September 30, 2021 and year ended December 31, 2020. The carrying amount of the Company’s receivables and payables approximate their fair values due to their short maturities.
Note 7.. Inventories
As of SeptemberJune 30, 20212022and December 31, 20202021, inventories consisted of the following:
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||||||||||
(in thousands) |
| June 30, 2022 |
|
| December 31, 2021 |
| ||||||||||
Raw materials |
| $ | 820,227 |
| $ | 1,008,653 |
|
| $ | 865 |
| $ | 769 |
| ||
Work in process |
|
| 4,163,251 |
| 4,304,415 |
|
|
| 3,437 |
| 4,072 |
| ||||
Finished goods |
|
| 447,856 |
|
| 428,549 |
|
|
| 342 |
|
| 461 |
| ||
Total inventories, net |
|
| 5,431,334 |
|
| 5,741,617 |
|
|
| 4,644 |
| 5,302 |
| |||
Less: noncurrent inventories |
|
| 4,349,009 |
|
| 4,865,181 |
|
| 2,905 |
|
| 3,941 | ||||
Current inventories, net |
| $ | 1,082,325 |
| $ | 876,436 |
| |||||||||
Current inventories |
| $ | 1,739 |
| $ | 1,361 |
|
The reserve for obsolete inventory was $760,940$711,000 and $721,462$821,000 as of SeptemberJune 30, 20212022 and December 31, 20202021, respectively. The decrease in the reserve for obsolete inventory was due to the disposal of previously reserved inventory. The Company records charges for obsolete inventory in cost of goods sold. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, noncurrent inventory was comprised of approximately $1.1$0.6 million and $0.7$0.9 million of raw materials, respectively, and $3.22.3 million and $4.2$3.0 million of work in process, respectively. Inventory classified under the category work in process consists of prefabricated assembled product.
Note 8. 6. Leases
For the three and ninesix months ended SeptemberJune 30, 2021,2022 the Company recognized lease expense of $52,351$38,000 and $139,597,$76,000, respectively, and $149,731 $47,000 and $422,765 $87,000, for the three and ninesix months ended SeptemberJune 30, 2020, 2021 respectively. This expense does not include non-lease components associated with the lease agreements as the Company elected not to include such charges as part of the lease expense.
Supplemental Balance Sheet Information for Operating Leases:
On September 27, 2021, the Company entered into the Termination and Settlement Agreement ("Agreement") with the lessor associated with its former headquarters located in Basking Ridge, NJ. The Agreement provided for the immediate termination of the Basking Ridge lease in its entirety. In consideration for the lease termination, the Company agreed to pay the lessor a total of $500,000 in cash and issue to the lessor 200,000 shares of its common stock. As of September 30, 2021, the Company paid a total of $398,523 in cash to the lessor and accrued approximately $320,000 for the Company's remaining obligation under the Agreement. On October 4, 2021, the 200,000 shares of stock were issued to the lessor. On October 5, 2021, the Company paid to the lessor the remaining cash payment of $101,477.
The tables below provide the details of the right of use assets and lease liabilities as of September 30, 2021 and December 31, 2020:
| September 30, 2021 |
|
| December 31, 2020 |
| |||||||||||
(in thousands) | June 30, 2022 |
|
| December 31, 2021 |
| |||||||||||
Operating leases: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Operating lease right of use assets | $ | 539,728 |
| $ | 517,257 |
| $ | 592 |
| $ | 613 |
| ||||
Operating lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current portion of operating lease liabilities |
|
| 58,482 |
|
| 534,547 |
|
|
| 68 |
|
| 61 |
| ||
Noncurrent operating lease liabilities |
| 715,530 |
|
| 885,333 |
|
| 664 |
|
| 700 |
| ||||
Total operating lease liabilities | $ | 774,012 |
| $ | 1,419,880 |
| $ | 732 |
| $ | 761 |
| ||||
Weighted average remaining lease term (in years) |
| 7.3 |
|
| 5.7 |
|
| 6.7 |
| 6.9 |
| |||||
Weighted average discount rate |
| 13.8 | % |
| 13.8 | % |
| 13.8 | % |
| 13.8 | % |
Future minimum lease payments under non-cancellable operating leases as of SeptemberJune 30, 20212022:
(in thousands) | ||||
Remainder of 2022 |
| $ | 81 |
|
2023 |
|
| 164 |
|
2024 |
|
| 168 |
|
2025 |
|
| 171 |
|
2026 |
|
| 161 |
|
2027 and thereafter | 373 | |||
Total future minimum lease payments |
|
| 1,118 |
|
Less: Amounts representing interest |
|
| (386 | ) |
Total |
| $ | 732 |
|
Remainder of 2021 |
| $ | 39,414 |
|
2022 |
|
| 160,486 |
|
2023 |
|
| 163,962 |
|
2024 |
|
| 167,524 |
|
2025 and thereafter |
|
| 704,900 |
|
Total future minimum lease payments |
|
| 1,236,286 |
|
Less: Amounts representing interest |
|
| (462,274 | ) |
Total |
| $ | 774,012 |
|
13 |
Note 9.7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities as of SeptemberJune 30, 20212022 and December 31, 20202021 consisted of the following:
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Accrued professional fees |
| $ | 166,050 |
|
| $ | 270,543 |
|
Accrued bonuses |
|
| 1,400,403 |
|
|
| 1,424,878 |
|
Accrued insurance expense | 873,592 | 164,832 | ||||||
Other employee related expenses | 425,067 | 371,033 | ||||||
Accrued state taxes | 548,705 | 0— | ||||||
Lease settlement liability | 320,000 | 0— | ||||||
Other |
|
| 696,026 |
|
|
| 734,416 |
|
| $ | 4,429,843 |
|
| $ | 2,965,702 |
|
(in thousands) |
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Accrued professional fees |
| $ | 503 |
|
| $ | 468 |
|
Accrued bonuses and incentive compensation |
|
| 910 |
|
|
| 1,849 |
|
Accrued legal fees litigation expense | 947 | 605 | ||||||
Accrued insurance expense | 0— | 499 | ||||||
Accrued vacation and other employee related expenses | 642 | 455 | ||||||
Accrued international taxes | 85 | 263 | ||||||
Other |
|
| 436 |
|
|
| 347 |
|
| $ | 3,523 |
|
| $ | 4,486 |
Note 10. Notes Payable
Loan Under the PPP
On May 4, 2020, the Company received proceeds of $1.4 million in connection with a promissory note (the “Note”) entered into with Citibank, N.A. (the “Lender”) evidencing an unsecured loan (the “Loan”) under the Paycheck Protection Program ("PPP"). The PPP is a program of the Small Business Administration ("SBA") established under the CARES Act. Under the PPP, the proceeds of the Loan may be used for payroll and certain covered interest payments, lease payments and utility payments (“Qualifying Expenses”). The Company used the entire Loan amount for Qualifying Expenses under the PPP.
On May 18, 2021, the Company received notification from the Lender of SBA's approval of the Company's application for loan forgiveness. Accordingly, the Company is not required to repay the loan. The Company has recorded the loan forgiveness as a gain in the accompanying Condensed Consolidated Statements of Operations for the nine months ended September 30, 2021 under the caption Gain on extinguishment of debt.
Note 11. Stockholders’ Equity
Public Offering of Common Stock
On July 2, 2021, the Company completed a public offering of 20,700,000 shares of its common stock at a purchase price of $1.00 per share. The net proceeds of the offering to the Company were approximately $18.8 million, after deducting the underwriting discounts, commissions, and other offering expenses. The Company intends to use the net proceeds of the offering for sales and marketing, working capital, and general corporate purposes. While the Company has no current agreements or commitments for any specific acquisitions, in-licenses or investments at this time, it may use a portion of the net proceeds for these purposes.
Other Securities Purchase Agreements
On August 30, 2021, the Company entered into a Securities Purchase Agreement with its legal counsel pursuant to which the Company issued 952,380 shares of common stock, at a purchase price of $1.05 per share. Upon issuance of the shares, certain of the Company's outstanding financial obligations to its legal counsel were deemed paid and satisfied in full.
Lincoln Park Purchase Agreement
On March 27, 2020, the Company and Lincoln Park Capital Fund, LLC ("Lincoln Park") entered into an equity facility purchase agreement ("Purchase Agreement") pursuant to which the Company had the right to sell to Lincoln Park shares of its common stock having an aggregate value of up to $25,000,000, subject to certain limitations and conditions set forth in the Purchase Agreement.
Upon entering into the Purchase Agreement, the Company issued an aggregate of 461,676 shares of common stock to Lincoln Park as a commitment fee. The fair value of these shares on the date of issuance was approximately $186,300. During 2020, the Company issued an additional 230,838 shares of common stock to Lincoln Park as a further commitment fee based on the first $5,000,000 of shares of common stock issued to Lincoln Park under the Purchase Agreement as Purchase Shares (as such term is defined in the Purchase Agreement). The Company did not receive any cash proceeds from the issuance of any of the foregoing commitment shares.
During 2020, the Company sold 10,179,676 shares of its common stock under the Purchase Agreement, resulting in aggregate proceeds of approximately $15.5 million to the Company. In January 2021, the Company sold an additional 2,750,000 shares of its common stock under the Purchase Agreement, resulting in aggregate proceeds of approximately $6.9 million to the Company. The Company expects to use the proceeds from this agreement for general corporate purposes and working capital. On March 11, 2021, the Company terminated the Purchase Agreement and, accordingly, the Company will not sell any further shares of its common stock to Lincoln Park under the Purchase Agreement.
Settlement of Accrued Bonus
In January 2021, the Company issued 165,413 shares of its common stock as payment for certain executive incentive bonuses accrued in 2020.
Settlement of Lease Liability
On September 27, 2021, the Company agreed to issue 200,000 shares of its common stock in connection with the lease termination related to its former headquarters located in Basking Ridge, NJ. As of September 30, 2021, these shares were not issued (see Note 8).
Note 128. Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding adjusted to give effect to potentially dilutive securities. Restricted stock and unit awards, stock options, and warrants have not been included in the diluted loss per share calculation as their inclusion would have had an anti-dilutive effect.
The potential common stock equivalents that have been excluded from the computation of diluted loss per share consist of the following:
| Nine months ended September 30, | |||||||
|
| 2021 |
|
| 2020 | |||
Outstanding stock options |
|
| 5,131,263 |
|
|
| 3,693,943 | |
Nonvested restricted stock and unit awards | 1,153,364 |
| 1,230,651 | |||||
Stock purchase warrants |
| 216,944 |
| 715,199 | ||||
6,501,571 | 5,639,793 |
Number of Warrants | Exercise Price | Expiration Date | |
22,253 | $ | 5.68 | 3/30/2022 |
17,066 | $ | 12.60 | 6/30/2022 |
151,364 | $ | 12.60 | 8/18/2022 |
14,286 | $ | 12.60 | 8/31/2022 |
11,975 | $ | 15.30 | 12/22/2025 |
216,944 |
| Six months ended June 30, | |||||
(in thousands) |
| 2022 |
|
| 2021 | |
Outstanding stock options |
| 6,282 |
|
| 5,070 | |
Nonvested restricted stock and unit awards | 947 |
| 1,265 | |||
Stock purchase warrants |
| 178 |
| 217 | ||
7,407 | 6,552 |
Note 13.9. Income Taxes
The Company may be eligible, from time to time, to receive cash from the sale of its net operating losses under New Jersey's Department of the Treasury - Division of Taxation NOL Transfer Program. On April 14, 2022, the Company received a net cash amount of approximately $445,000 from the sale of its New Jersey state net operating losses. In 2021, the Company received a net cash amount of approximately $880,000 from the sale of its New Jersey state net operating losses and tax credits. These sale proceeds are included in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2022 and 2021, under the caption Benefit from income taxes.
Note 10. Stock Based Compensation
The following table presents a summary of activity related to stock options during the ninesix months ended SeptemberJune 30, 2021:2022:
| Number of Options |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term (Years) |
|
| Aggregate Intrinsic Value | Number of Options (in thousands) |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Term (Years) |
| ||||||
Outstanding, January 1, 2021 |
| 3,815,585 |
| $ | 5.56 |
|
| 8.9 |
| $ | 342,551 | |||||||||||||
Outstanding, January 1, 2022 | $ | 5,137 |
| $ | 4.61 |
|
| 8.0 |
| |||||||||||||||
Granted |
| 1,345,136 |
| 1.97 |
| 21,600 |
| 1,238 |
| 0.75 |
| |||||||||||||
Exercised |
| 0— |
| 0— |
| 0— |
| 0— |
| 0— |
| |||||||||||||
Cancelled |
| (29,458 | ) |
|
| 5.22 |
| * |
| (93 | ) |
|
| 1.98 |
|
|
| |||||||
Outstanding, September 30, 2021 | 5,131,263 |
| $ | 4.62 |
| 8.2 | $ | 73,800 | ||||||||||||||||
Exercisable, September 30, 2021 |
| 1,988,192 |
| $ | 7.67 |
| 7.6 |
| $ | 36,000 | ||||||||||||||
Outstanding, June 30, 2022 | $ | 6,282 |
| $ | 3.88 |
| 7.8 | |||||||||||||||||
Exercisable, June 30, 2022 | $ | 3,083 |
| $ | 6.17 |
|
| 7.0 |
|
* de minimis
The intrinsic value is calculated as the difference between the fair market value at SeptemberJune 30, 20212022 and the exercise price per share of the stock options. As of June 30, 2022, all options outstanding had 0no intrinsic value. The options granted to employees generally vest over a three or four-year year period.
The following table presents a summary of activity related to restricted stock awards (“RSAs”) granted during the nine months ended September 30, 2021:
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
|
| ||
Nonvested, January 1, 2021 |
|
| 25,645 |
|
| $ | 10.07 |
|
|
Granted |
|
| 165,413 |
|
|
| 2.41 |
|
|
Vested |
|
| (149,894 | ) |
|
| 2.82 |
|
|
Cancelled |
|
| (5,687 | ) |
|
| 6.38 |
|
|
Nonvested, September 30, 2021 |
|
| 35,477 |
|
| $ | 2.82 |
|
|
In general, RSAs granted to employees vest over a four-year period.
The following table presents a summary of activity related to restricted and deferred stock units (“Stock Units”) granted during the ninesix months ended SeptemberJune 30, 20212022:
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
| ||
Nonvested, January 1, 2021 |
|
| 1,014,123 |
|
| $ | 1.50 |
|
Granted |
|
| 438,316 |
|
|
| 2.07 |
|
Vested |
|
| (329,198 | ) |
|
| 1.67 |
|
Cancelled |
|
| (5,354 | ) |
|
| 1.97 |
|
Nonvested, September 30, 2021 |
|
| 1,117,887 |
|
| $ | 1.67 |
|
|
| Number of Shares (in thousands) |
|
| Weighted Average Grant Date Fair Value |
| ||
Nonvested, January 1, 2022 |
|
| 1,056 |
|
| $ | 1.66 |
|
Granted |
|
| 300 |
|
|
| 0.50 |
|
Vested |
|
| (416 | ) |
|
| 1.51 |
|
Cancelled |
|
| (5 | ) |
|
| 2.83 |
|
Nonvested, June 30, 2022 |
|
| 935 |
|
| $ | 1.34 |
|
In general, Stock Units granted to employees vest over two to four-year periods.
Immediately following the Company’s annual meeting of stockholders, the Company generally grants each non-employee director an equity award that vests over a 12-month period. Upon a non-employee director’s initial appointment or election to the board of directors, the Company grants such non-employee director an equity award subject to vesting as determined by the board of directors.
The Company recognized stock compensation expense for its equity awards as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| 2021 | 2020 | 2021 |
|
| 2020 | ||||||||||
Selling, general and administrative | $ | 658,314 | $ | 541,757 | $ | 2,171,122 |
|
| $ | 1,789,122 |
| |||||
Research and development | 87,222 | 179,664 |
| 314,710 |
|
|
| 649,485 |
| |||||||
Cost of goods sold | 14,901 | 21,507 |
| 54,761 |
|
|
| 51,944 |
| |||||||
Total expense | $ | 760,437 | $ | 742,928 | $ | 2,540,593 |
|
| $ | 2,490,551 |
|
| Three months ended June 30, | Six months ended June 30, | |||||||||||||
(in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||
Selling, general and administrative | $ | 676 | $ | 704 | $ | 1,381 | $ | 1,513 | |||||||
Research and development | 68 | 114 | 134 | 227 | |||||||||||
Cost of goods sold | 8 | 20 | 14 | 40 | |||||||||||
Total expense | $ | 752 | $ | 838 | $ | 1,529 | $ | 1,780 |
Total unrecognized compensation cost related to unvested awards as of SeptemberJune 30, 20212022 was $5.1$3.5 million and is expected to be recognized over the next 2.2two years.
Valuation Information for Stock-Based Compensation
The fair value of each stock option award during the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 was estimated on the date of grant using the Black-Scholes model. For the nine months ended September 30, 2021, expectedExpected volatility was based on historical common stock volatility of the Company’s peers. Expected volatility for the nine months ended September 30, 2020, was based on historical volatility of the Company’s common stock.Company's peers. The risk-free interest rate was based on the average U.S. Treasury rate that most closely resembled the expected life of the related award. The expected term of the award was calculated using the simplified method. No dividend was assumed as the Company does not pay regular dividends on its common stock and does not anticipate paying any dividends in the foreseeable future.
The weighted average assumptions used in the Black-Scholes option pricing model in valuing stock options granted in the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 are summarized in the table below.
Nine months ended September 30, | ||||||
2021 | 2020 | |||||
Fair value at grant date | $ | 1.33 |
| $ | 0.98 | |
Expected volatility | 80.2 | % | 142.1 | % | ||
Risk-free interest rate | 0.7 | % | 0.7 | % | ||
Expected holding period, in years | 6.0 |
| 6.1 | |||
Dividend yield |
| 0— | % | 0— | % |
Six months ended June 30, | ||||||
2022 | 2021 | |||||
Fair value at grant date | $ | 0.53 |
| $ | 1.36 | |
Expected volatility | 84.0 | % | 80.1 | % | ||
Risk-free interest rate | 1.7 | % | 0.7 | % | ||
Expected holding period, in years | 6.0 |
| 6.0 | |||
Dividend yield |
| 0— | % | 0— | % |
Note 14. Income Taxes
The Company may be eligible, from time to time, to receive cash from the sale of its net operating losses and research and development tax credits under New Jersey's Department of the Treasury - Division of Taxation NOL Transfer Program. On June 7, 2021, the Company received a net cash amount of approximately $1.4 million from the sale of its New Jersey state net operating lossesand tax credits and recorded a tax benefit of approximately $880,000 in connection with this receipt.On September 22, 2021, the Company received notification from the New Jersey's Department of the Treasury - Division of Taxation requesting the return of an overpayment of approximately $549,000 related to the June 7, 2021 cash payment. The Company returned this overpayment on October 6, 2021. On May 6, 2020, the Company received a net cash amount of approximately $1.2 million from the sale of its New Jersey state net operating losses and research and development tax credits related to the year ended December 31, 2018. These sale proceeds are included in the Condensed Consolidated Statement of Operations for the nine months ended September 30, 2021 and September 30, 2020, under the caption Benefit from income taxes.
Note 15.11. Commitments and Contingencies
Stockholders Litigation
On July 8, 2019 and August 1, 2019, purported stockholders of the Company served putative class action lawsuits in the Superior Court of New Jersey for Somerset County, captioned Paul Kuehl vs. electroCore, Inc., et al., Docket No. SOM-L 000876-19 and Shirley Stone vs. electroCore, Inc., et al., Docket No. SOM-L 001007-19, respectively. In addition to the Company, the defendants include present and past directors and officers, Evercore Group L.L.C., Cantor Fitzgerald & Co., JMP Securities LLC and BTIG, LLC, the underwriters for its IPO; and two of the Company’s stockholders. On August 15, 2019, the Superior Court entered an order consolidating the Kuehl and Stone actions, which proceeded under Docket No. SOM-L 000876-19. Each plaintiff was appointed a co-lead plaintiff. The plaintiffs filed a consolidated amended complaint, which sought certification of a class of stockholders who purchased common stock in the IPO or whose purchases are traceable to that offering. The consolidated amended complaint alleged that the defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act with respect to the registration statement and related prospectus for the IPO. The complaint sought unspecified compensatory damages, interest, costs and attorneys’ fees.
On October 31, 2019, the Company and the other defendants filed a motion to dismiss the complaint or in the alternative to stay the action in favor of the pending federal action (discussed below). On February 21, 2020, the court granted the defendants’ motion to dismiss the consolidated amended complaint with prejudice. On March 2, 2020 the court entered an amended order dismissing the consolidated amended complaint with prejudice. On March 27, 2020, the plaintiffs filed a notice of appeal with the N.J. Superior Court – Appellate Division. The appeal was argued on September 27, 2021. On October 8, 2021, the Appellate Division issued an order reversing the decision of the Superior Court. The case has been remanded to the Superior Court for oral argument on the motion to dismiss. On November 11, 2021 the defendants filed a supplemental motion to dismiss orbased on the alternative stay.forum selection clause in our certificate of incorporation's. On December 10, 2021, the Superior Court heard argument of the original motion to dismiss and the supplemental motion to dismiss based on the federal forum selection clause. On December 14, 2021, the Superior Court granted the supplemental motion to dismiss based on the federal forum selection clause with prejudice and granted the original motion to dismiss without prejudice. On January 27, 2022, the plaintiffs filed a notice of appeal to the Appellate Division. On April 15, 2022 the plaintiffs filed their appeal brief.The brief of defendant-appellees was filed on May 16, 2022. The appeal is fully briefed.No argument date for the appeal has been set.
On September 26, 2019 and October 31, 2019, purported stockholders of the Company served putative class action lawsuits in the United States District Court for the District of New Jersey captioned Allyn Turnofsky vs. electroCore, Inc., et al., Case 3:19-cv-18400, and Priewe vs. electroCore, Inc., et al., Case 1:19-cv-19653, respectively. In addition to the Company, the defendants include present and past directors and officers, and Evercore Group L.L.C., Cantor Fitzgerald & Co., JMP Securities LLC and BTIG, LLC, the underwriters for the IPO. The plaintiffs each seek to represent a class of stockholders who (i) purchased the Company’s common stock in the IPO or whose purchases are traceable to the IPO, or (ii) who purchased common stock between the IPO and September 25, 2019. The complaints each alleged that the defendants violated Sections 11 and 15 of the Securities Act and Sections 10(b) and 20(a) of the Exchange Act, with respect to (i) the registration statement and related prospectus for the IPO, and (ii) certain post-IPO disclosures filed with the SEC. The complaints sought unspecified compensatory damages, interest, costs and attorneys’ fees. ThePriewecase was voluntarily dismissed on February 19, 2020.
In the Turnofsky case, on November 25, 2019 several plaintiffs and their counsel moved to be selected as lead plaintiff and lead plaintiff’s counsel. On April 24, 2020, the Court granted the motion of Carole Tibbs and the firm Bragar, Eagel & Squire, P.C. On July 17, 2020 the plaintiffs filed an amended complaint in Turnofsky. In addition to the prior claims, the amended complaint added an additional director defendant and 2 investors as defendants and adds a claim against the Company and the underwriters for violating Section 12(a)(2) of the Securities Act. On September 15, 2020, the Company and the other defendants filed a motion to dismiss the amended complaint for failure to state a claim. On November 6, 2020, the plaintiffs filed their opposition to the motion to dismiss. The Company and the other defendants filed reply papers in support of the motion on December 7, 2020. Argument of the motion to dismiss occurred on June 18, 2021. On August 13, 2021, the Court dismissed the amended complaint with leave to re-plead. On October 4, 2021, the plaintiffs filed a second amended complaint. The parties are participatingcomplaint in a non-binding mediation with JAMS.A session with the JAMS mediator occurredTurnofsky case. Briefing on March 30, 2021.the motion was complete on January 7, 2022. On July 5, 2022, the case was reassigned to Judge Zahid N. Quraishi, who has ordered that he will consider the pending motion to dismiss in due course. Argument of the motion has not yet been scheduled.
The Priewe case was voluntarily dismissed on February 19, 2020.
On March 4, 2021, purported stockholder Richard Maltz brought a purported stockholder derivative action in the United States District Court for the District of New Jersey. The action is captioned Richard Maltz, derivatively on behalf of electroCore, Inc., vs. Francis R. Amato, et al., Case 3:21-cv-04135. The defendants include present and past directors and officers of the Company. The plaintiff purports to pursue derivative claims on behalf of the Company in connection with the IPO and actions occurring between the IPO and September 25, 2019. The complaint alleges that demand on the board of directors is excused. The complaint purports to allege claims against the defendants for violating Section 14(a) of the Exchange Act, breaching fiduciary duties, unjust enrichment and waste of corporate assets. The complaint also purports to allege claims for contribution in connection with the Turnofsky case described above, pursuant to Section 11(f) of the Securities Act and Sections 10(b) and 21D of the Exchange Act. The complaint seeks unspecified compensatory damages, interest, costs and attorneys’ fees; declaratory relief; and an order requiring changes to corporate governance and internal procedures and a vote on proposed amendments to the Bylaws and Certificate of Incorporation.
On March 8, 2021, purported stockholder Erin Yuson brought a purported stockholder derivative action in the United States District Court for the District of New Jersey. The action is captioned Erwin Yuson, derivatively on behalf of electroCore, Inc., vs. Francis R. Amato, et al., Case 3:21-cv-04481. The defendants include present and past directors and officers of the Company. The plaintiff purports to pursue derivative claims on behalf of the Company in connection with a 2019 proxy statement and actions occurring from the IPO through September 25, 2019. The complaint alleges that demand on the board of directors is excused. The complaint purports to allege claims against the defendants for violating Section 14(a) of the Exchange Act and breaching fiduciary duties. The complaint seeks unspecified compensatory damages, interest, costs and attorneys’ fees; declaratory relief; and an order requiring changes to corporate governance and internal procedures and a vote on proposed amendments to the Bylaws and Certificate of Incorporation.
The plaintiffs in the Maltz and Yuson derivative actions agreed to consolidate and stay those actions. The actions are stayed until and through the resolution of any motion for summary judgment in the Turnofsky federal securities class action. A stipulation to that effect was filed by the plaintiffs on April 14, 2021 and ordered by the court on April 30, 2021. These cases also have been re-assigned.
The Company intends to continue to vigorously defend itself in these matters. However, in light of, among other things, the preliminary stage of these litigation matters, the Company is unable to determine the reasonable probability of loss or a range of potential loss. Accordingly, the Company has not established an accrual for potential losses, if any, that could result from any unfavorable outcome, and there can be no assurance that these litigation matters will not result in substantial defense costs and/or judgments or settlements that could adversely affect the Company’s financial condition.
The Company is subject to various claims, complaints and legal actions in the normal course of business from time to time. The Company is not aware of any further currently pending litigation for which it believes the outcome could have a material adverse effect on its operations or financial position. The Company expenses associated legal fees including those relating to the stockholder litigation described in this Note 11 in the periodperiod they are incurred.
Note 12. Subsequent Event
On July 5, 2022, the Company entered into a Commercial Insurance Premium Finance and Security Agreement (the "2022 Agreement"). The 2022 Agreement provides for a single borrowing by the Company of approximately $783,000 thousand with a nine-month term and an annual interest rate of 2.49%. The proceeds from this transaction were used to partially fund the premiums due under certain of the Company's insurance policies. The amounts payable are secured by the Company's rights under such policies. The Company began to pay monthly installments of approximately $87,900 in July 2022.
You should read this section in conjunction with our unaudited interim condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 20202021 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or SEC. As discussed in the section titledtitled “Cautionary Note Regarding Forward-Looking Statements,” the following discussiondiscussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from thosethose expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those under the caption "Risk Factors" in the aforementioned Annual Report and this Form 10-Q. 10-Q.
Overview
We are a commercial-stagecommercial stage medical device company with a proprietary non-invasive vagus nerve stimulation, or nVNS, therapy.therapy, called gammaCore. nVNS is a platform bioelectronic medical therapy that modulates neurotransmitters and immune function through its effects on both the peripheral and central nervous systems. We are initially focused on neurology,utilizing gammaCore in the management and ourtreatment of primary headache conditions.
Our gammaCore nVNS therapy is the first non-invasive, hand-held medical therapy applied at the neck as an adjunctive therapy to treat migraine and cluster headache through the utilization of a mild electrical stimulation to the vagus nerve that passes through the skin. Designed as a portable, easy-to-use technology, gammaCore is clearedself-administered by patients, prophylactically or as needed, without the FDA for use by adults forpotential side effects associated with commonly prescribed drugs. When placed on a patient ’s neck over the following neurology indications:vagus nerve, gammaCore stimulates the acute treatmentnerve’s afferent fibers, which may lead to a reduction of pain associated with each of migraine and episodic cluster headache, or eCH,in patients. gammaCore (nVNS) is FDA cleared in the preventive treatment of migraine headache andUnited States for adjunctive use for the preventive treatment of cluster headaches, or CH. In February 2021, the FDA cleared the use of gammaCore for acute and preventive treatment of migraine in adolescents. In September 2021, the FDA cleared the use of gammaCore for the treatment of Paroxysmal Hemicrania (PH) and Hemicrania Continua (HC) in adults. PH and HC are rare forms of trigeminal autonomic cephalalgias that are typically debilitating and difficult to treat.
We are also considering the potential for several additional indications for our nVNS technology, which are being studied through several investigator-initiated studies. These indications include post traumatic headache stroke, traumatic brain injury, post-traumatic stress disorder, opioid use disorders and post-operative ileus.
Our strategy has been to focus on selling gammaCore to treat different forms of primary headache upon regulatory approval. Following our initial FDA clearance in early 2017, our commercial strategy was to establish gammaCore as a first-line treatment option for the acute treatment of episodic CH in adult patients, who have few alternative treatment options available to them. This strategy was supported by a product registry conducted from July 2017 through June 2018 to build advocacy among key opinion leaders in leading headache centers in the United States, and to generate patient demand in the form of prescriptions submitted to payers. We leveraged this advocacy during the registry period as we expanded into migraine and prepared for a full commercial launch of gammaCore and gammaCore Sapphire for the acute treatment of pain associated with eCH and migraineepisodic cluster headache in adult patients, which was accomplished in the third quarter of 2018. With the clearance of adjunctive use for the prevention of CH in December 2018, we continued to build upon our existing base of advocacy and patient support. In March 2020, the FDA cleared gammaCore for the preventive treatment of migraine headache in adult patients. In February 2021, gammaCore was cleared by the FDA for the acute and preventive treatment of migraine in adolescents betweenadults and adolescent (ages 12 and 17 yearsolder) patients, and paroxysmal hemicrania and hemicrania continua in adult patients. gammaCore is CE-marked in the United Kingdom and European Union for the acute and/or prophylactic treatment of age.primary headache (Migraine, Cluster Headache, Trigeminal Autonomic Cephalalgias and Hemicrania Continua) and Medication Overuse Headache in adults.
Since May 2019, we have primarily focused our sales efforts in two channels, the U.S. Department of Veterans Affairs and U.S. Department of Defense, and the United Kingdom.
More recently, we began making targeted investments to increase the adoption of our gammaCore therapy in both the United States and abroad. We continue to evaluate strategies to expand commercial adoption of gammaCore, including traditional reimbursement models as well as the potential use of telemedicinee-commerce and cash pay direct to physicianmodels through direct-to-physician and consumerdirect-to-consumer approaches. In future quarters, weWe expect to make continued targeted investments in the evaluation and possible execution of these strategies.strategies in future quarters. We are unable to predict the impact these strategies will have on our financial condition, results of operations and cash flows due to numerous uncertainties.
In April 2022, we announced that nVNS was selected for further study under the United States Department of Defense Biotech Optimized for Operational and Tactics (BOOST) research program conducted under the leadership of the 711 Human Performance Wing Performance Optimization Branch of the United States Air Force to provide accelerated training, sustained attention, reduced fatigue, and improved mood. The continued efforts of the BOOST Program may result in adoption by the United States Air Force of a device not intended for primary headache, which may result in the requirement by the Company to provide field devices to the United States Air Force in the future. We are unable to predict the impact the BOOST Program will have on our financial condition, results of operations and cash flows due to numerous uncertainties.
Recently,In addition, we have announced agreements with new distributors to make gammaCore Sapphire available in several countries beyond the U.S. and United Kingdom.Kingdom, as well as a licensing agreement enabling market access activities to begin in Japan.
Capital Activities
On July 2, 2021,January 18, 2022, we completedfiled a publicForm S-3 registration statement, or the 2022 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, up to an aggregate amount of $75 million. The 2022 Shelf Registration Statement was declared effective on January 25, 2022.The proposed maximum offering price per unit and the proposed maximum aggregate offering price per class of 20,700,000 sharessecurity will be determined from time to time by us in connection with the issuance by us of the securities registered under the 2022 Shelf Registration Statement. Until such time as the aggregate market value of our common stock at a purchasesecurities held by non-affiliates equals or exceeds $75 million, the aggregate maximum offering price of $1.00 per share. The net proceedsall securities issued by the us in any given 12-calendar month period pursuant to this and any of our other registration statements may not exceed one-third of the offeringaggregate market value of our securities held by non-affiliates.
19 |
License Agreement with Teijin Limited
On March 29, 2022, we entered into an agreement with Teijin Limited (Teijin), to us were approximately $18.8 million, after deductinglicense certain exclusive rights to its nVNS technology for commercialization in Japan for a range of primary headache disorders.
Under the underwriting discountsagreement, we will receive a non-refundable, upfront payment for the license and commissions and other estimated offering expenses.rights granted to Teijin, which we expect to receive in the third quarter of 2022. The Company began to recognize revenue for this upfront payment ratably over a period of one year commencing in the second quarter of 2022. The financial terms contain milestone payments, payable upon the decision by Teijin to commercialize the licensed product for specific indications. We intend to usewill also receive an annual license fee commencing on the net proceedsfirst anniversary of the offeringagreement and payable annually until the first commercial sale on any approved indication. Upon favorable regulatory and payor coverage decisions in Japan, the parties plan to enter into an exclusive commercial supply agreement for salesgammaCore nVNS.
The agreement contains customary terms and marketing, working capital,conditions, including renewal and general corporate purposes. In addition, we believe that opportunitiestermination provisions, as well as minimum purchase commitments once a commercial supply agreement is in place. Furthermore, Teijin is responsible for all costs associated with regulatory approval by the Pharmaceuticals and Medical Devices Agency (PMDA), the Japanese FDA equivalent. As part of the agreement, Teijin will have the right of first negotiation for a license to additional indications in Japan.
Sale of New Jersey Net Operating Losses
We may existbe eligible, from time to time, to expandreceive cash from the sale of our current business through acquisitions or in-licenses of, or investments in, complementary companies, medicines, intellectual property, or technologies. While we have no current agreements or commitments for any specific acquisitions, in-licenses or investments at this time, we may use a portionnet operating losses under New Jersey's Department of the Treasury - Division of Taxation NOL Transfer Program. On April 14, 2022, we received a net proceeds for these purposes.
On August 30, 2021, we entered into a Securities Purchase Agreement with our legal counsel pursuant to which we issued 952,380 sharescash amount of common stock, at a purchase price of $1.05 per share. Upon issuance ofapproximately $445,000 from the shares, certainsale of our outstanding financial obligations to our legal counsel were deemed paid and satisfied in full.New Jersey state net operating losses.
Impact of COVID-19COVID-19
We are closely monitoringcontinue to monitor the impact of the COVID-19coronavirus pandemic on all aspects of our business and geographies, including how it will impact business partners. In particular,partners, customers and the global supply chain. While we experienced disruptions during the three and six months ended June 30, 2022 and 2021 from the coronaviruspandemic, has resulted in a significant reduction in non-essential contact between patients and healthcare providers, shifting of focus by healthcare providers to the acute treatment of COVID-19 related illness regardless of specialty. We believe these restrictions have limited our sales force’s ability to generate additional interest in the Company’s products. Wewe are unable to predict the full impact that the COVID-19coronavirus pandemic may have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact the development, rollout and availability of effective treatments and vaccines, and the direct and indirect economic effects of the pandemic and containment measures, among others. The COVID-19coronavirus pandemic in many countries, including the United States, has significantly adversely impacted global economic activity. The global impact of the pandemicactivity and has been rapidly evolvingcontributed to significant volatility and many countries have reacted by instituting quarantines, mandating business and school closures and restricting travel. The federal government, certain states and cities, including those where our principal place of business is located and sales force seeks to operate, have also reacted by instituting quarantines, vaccine mandates, restrictions on travel, “shelternegative pressure in place” rules, and restrictions on types of business that may continue to operate. We cannot predict if the federal government or additional states and cities will implement similar or additional restrictions or when restrictions or mandates currently in place will expire. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including industries in which we operate. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown. See Item 1A. Risk Factors in this Form 10-Q, for discussion of certain risks associated with COVID-19 including the potential adverse effects on our workforce of the proposed U.S. Government vaccine mandate for employees, contractors, and subcontractors that service federal contracts. Additionally, see the section titled Risk Factors in our 2020 Annual Report on Form 10-K for discussion of risks related to COVID-19.
Because the COVID-19 pandemic affected, among other things, our access to prescribing physicians and their access to headache patients, we believe that our results for the nine months ended September 30, 2021 and 2020 reflect a negative impact from, among other things, the global pandemic. Moreover, our expectations for at least the remainder of 2021 have also been adversely affected by both the uncertainty and potential negative impact of the global pandemic.markets. Depending upon the duration and severity of the pandemic, the continuing effect on our results and outlook over the long term remains uncertain.
Critical Accounting Policies and Estimates
In July 2020, the Company received an EUA for useThe significant accounting policies and basis of its gammaCore Sapphire CV nVNS therapy for the acute treatmentpresentation of asthma exacerbationsour condensed consolidated financial statements are described in known or suspected COVID-19 patients. This EUA is expected to remain in effect for the durationNote 2 “Summary of Significant Accounting Policies” of the COVID-19 pandemic justifying emergency useconsolidated financial statements included with the annual report on Form 10-K.included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or SEC on March 10, 2022 ("2021 Annual Report"), and in Note 2 "Summary of these devices unless terminated or revoked by the FDA (after which products may no longer be used). The lengthSignificant Accounting Policies" of the effective period ofcondensed consolidated financial statements included within this EUA is uncertain. We did not recognize material revenue from the sales of gammaCore Sapphire CV during the nine months ended September 30, 2021 and we do not expect to recognize material revenue from the sales of gammaCore Sapphire CV in general.quarterly report on Form 10-Q.
The preparation of our financial statements is in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, require us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and other related disclosures. While we believe our estimates, assumptions and judgments are reasonable, they are based on information presently available. Actual results may differ significantly from these estimates due to changes in judgments, assumptions and conditions as a result of unforeseen events or otherwise, which could have a material impact on our financial position and results of operations.
The critical accounting policies that we believe, the judgements, estimates, and assumptions associated with such policies, have the greatest potential impact on the condensed consolidated financial statements are disclosed in the section titled Critical Accounting Policies and Estimates in Part II of our 2021 Annual Report.
Results of Operations
Comparison of the three months ended SeptemberJune 30, 20212022 to the three months ended SeptemberJune 30, 20202021
The following table sets forth amounts from our condensed consolidated statements of operations for the three months ended SeptemberJune 30, 20212022 and 20202021:
|
| For the three months ended September 30, |
|
|
|
|
| |||||
|
| 2021 |
|
| 2020 |
|
| Change |
| |||
|
| (in thousands) |
| |||||||||
Consolidated statements of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 1,487.1 |
|
| $ | 1,080.9 |
|
| $ | 406.2 | |
Cost of goods sold |
|
| 355.0 |
|
|
| 347.5 |
|
|
| 7.5 | |
Gross profit |
|
| 1,132.1 |
|
|
| 733.4 |
|
|
| 398.7 | |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 470.3 |
|
|
| 629.1 |
|
|
| (158.8 | ) |
Selling, general and administrative |
|
| 4,646.8 |
|
|
| 4,592.9 |
|
|
| 53.9 | |
Total operating expenses |
|
| 5,117.1 |
|
| 5,222.0 |
|
|
| (104.9 | ) | |
Loss from operations |
|
| (3,985.0 | ) |
|
| (4,488.6 | ) |
|
| 503.6 |
|
Other (income) expense |
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
| (3.8) |
|
| (5.8 | ) |
|
| 2.0 | ||
Other expense |
|
| 3.8 |
|
| 3.6 |
|
|
| 0.2 | ||
Total other (income) expense |
|
| — |
|
| (2.2 | ) |
|
| 2.2 | ||
Loss before income taxes | (3,985.0 | ) | (4,486.4 | ) | 501.4 | |||||||
Provision for income taxes | (8.7 | ) | — | (8.7 | ) | |||||||
Net loss |
| $ | (3,993.7 | ) |
| $ | (4,486.4 | ) |
| $ | 492.7 |
|
|
| For the three months ended June 30, |
|
|
|
|
| |||||
|
| 2022 |
|
| 2021 |
|
| Change |
| |||
|
| (in thousands) |
| |||||||||
Consolidated statements of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 2,157 |
|
| $ | 1,269 |
|
| $ | 888 | |
Cost of goods sold |
|
| 358 |
|
|
| 374 |
|
|
| (16 | ) |
Gross profit |
|
| 1,799 |
|
|
| 895 |
|
|
| 904 | |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 1,341 |
|
|
| 825 |
|
|
| 516 | |
Selling, general and administrative |
|
| 6,278 |
|
|
| 5,272 |
|
|
| 1,006 | |
Total operating expenses |
|
| 7,619 |
|
| 6,097 |
|
|
| 1,522 | ||
Loss from operations |
|
| (5,820 | ) |
|
| (5,202 | ) |
|
| (618 | ) |
Other (income) expense |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt | — | (1,422) | 1,422 | |||||||||
Interest and other income |
|
| (38 | ) |
|
| (1 | ) |
|
| (37 | ) |
Other expense |
|
| — |
|
| — |
|
|
| — | ||
Total other (income) expense |
|
| (38 | ) |
|
| (1,423 | ) |
|
| 1,385 | |
Loss before income taxes | (5,782 | ) | (3,779 | ) | (2,003 | ) | ||||||
Benefit from income taxes | 445 | 885 | (440 | ) | ||||||||
Net loss |
| $ | (5,337 | ) |
| $ | (2,894 | ) |
| $ | (2,443 | ) |
Net Sales
Net sales increased 38%70% for the three months ended SeptemberJune 30, 20212022 compared to the comparable prior year period. This increase of $406.2 thousand$888,000 is due to increased an increase in net sales across all major channels including Commercial, the U.S. Department of Veteran Affairs, U.S. commercial channel, and sales , andfrom outside the U.S. which includes licensing revenue of $48,000 in the United Kingdom,three months ended June 30, 2022. There was no licensing revenue in the comparable prior year. as well as salesRevenue from our new distributors outside the U.S. was adversely impacted due to the strengthening of the United States. ForU.S. dollar during the remainder of our 2021 fiscal year, wethree months ended June 30, 2022. We expect that the majority of our remaining 2022 fiscal year revenue will continue to come from the U.S. Department of Veterans Affairs and United Kingdom. Additionally, we expect to increase revenue from our commercial channel through cash pay models via direct-to-consumer approaches through our online stores in the U.S. and United Kingdom. We also expect revenues to expand from our cash pay propositions which include direct to physician models for traditional neurology headache specialists, as well as the wide range of medical providers who manage patients' headache conditions including primary care physicians, women's health, pain management, sports medicine, functional and integrative medicine professionals, as well as chiropractors, and PharmDs (Doctors of Pharmacy).
Gross Profit
Gross profit increased $398.7 thousandby $904,000 for the three months ended SeptemberJune 30, 20212022 compared to the comparable prior year period due to the increase in net sales. period. Gross margin was 76%83% and 68%71% for the three months ended SeptemberJune 30, 2022 and 2021, respectively. and 2020, respectively.Our evolving commercial strategy has resulted in the launch of cash payment models under which we license certain starter devices. The increasecost of the licensed starter device is being recognized as cost of goods sold over the estimated useful life of the starter device versus expensing the cost of goods at the time of sale. Moreover, in gross margin was largely due to increased salesrecent quarters, we have sold an increasing amount of longer duration therapy, resulting in a morehigher average selling price, as well as selling an increased number of refill kits with a lower cost of goods. These factors, including Teijin license revenue with no associated cost of goods, and favorable absorption of labor and overhead costs associated with the increased number of units sold contributed to the increase in gross margin. Gross profit and gross margin for the remainder of 2022 will be largely dependent on revenue levels, product mix.mix, any changes in the estimated useful lives of licensed starter devices, and the pricing levels of our therapy.
Research and Development
Research and development expense decreasedincreased by $158.8 thousand$516,000, or 25%63%, for the three months ended SeptemberJune 30, 20212022 compared to the prior year period. This reductionincrease was primarily due to significant reductions in investment in research and development offset by targeted investments to support the future iterations of our therapy delivery platform, including the use of our intellectual property around the delivery of smartphone-integrated and smartphone-connected non-invasive therapies.
21 |
Selling, General and Administrative
Selling, general and administrative expense of $6.3 million for the three months ended June 30, 2022 increased by $1.0 million, or 19%, compared to the comparable prior year period as we continued to make targeted investments to support our commercial efforts.
Other (Income) Expense
Other (income) expense for the three months ended June 30, 2021 primarily represents the gain of $1.4 million recorded by the Company in association with the forgiveness of its Paycheck Protection Program ("PPP") loan. For both the 2022 and 2021 periods, Interest and other income primarily consists of interest earned on cash, cash equivalents and marketable securities.
Benefit from Income Taxes
The Benefit from income taxes of $445,000 and $885,000 for the three months ended June 30, 2022 and 2021, respectively, represent primarily the sale of our 2022 and 2021 state net operating losses and research and development tax credits under the State of New Jersey’s NOL Transfer Program.
Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021
The following table sets forth amounts from our condensed consolidated statements of operations for the six months ended June 30, 2022 and 2021:
|
| For the six months ended June 30, |
|
|
|
|
| |||||
|
| 2022 |
|
| 2021 |
|
| Change |
| |||
|
| (in thousands) |
| |||||||||
Consolidated statements of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 4,056 |
|
| $ | 2,473 |
|
| $ | 1,583 | |
Cost of goods sold |
|
| 718 |
|
|
| 738 |
|
|
| (20 | ) |
Gross profit |
|
| 3,338 |
|
|
| 1,735 |
|
|
| 1,603 | |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 2,275 |
|
|
| 1,324 |
|
|
| 951 | |
Selling, general and administrative |
|
| 12,464 |
|
|
| 10,997 |
|
|
| 1,467 | |
Total operating expenses |
|
| 14,739 |
|
| 12,321 |
|
|
| 2,418 | ||
Loss from operations |
|
| (11,401 | ) |
|
| (10,586 | ) |
|
| (815 | ) |
Other (income) expense |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt | — | (1,422 | ) | 1,422 | ||||||||
Interest and other income |
|
| (42 | ) |
|
| (1 | ) |
|
| (41 | ) |
Other expense |
|
| 5 |
|
| — |
|
|
| 5 | ||
Total other (income) expense |
|
| (37 | ) |
|
| (1,423 | ) |
|
| 1,386 | |
Loss before income taxes | (11,364 | ) | (9,163 | ) | (2,201 | ) | ||||||
Benefit for income taxes | 445 | 885 | (440 | ) | ||||||||
Net loss |
| $ | (10,919 | ) |
| $ | (8,278 | ) |
| $ | (2,641 | ) |
Net Sales
Net sales increased 64% for the six months ended June 30, 2022 compared to the prior year period. The increase of $1.6 million is due net sales from all major channels including the U.S. Department of Veteran Affairs, U.S. commercial channel, andnet sales from outside the U.S. which include $48,000 of licensing revenue recognized in the six months ending June 30, 2022. Excluding the licensing revenue, net sales from outside the U.S. decreased by $43,000 due principally to the impact of the COVID-19 pandemic on our National Health Service (NHS) channel in the United Kingdom and the strengthening of the U.S. dollar in the six months ended 2022.We expect that the majority of our remaining 2022 fiscal year revenue will continue to come from the U.S. Department of Veterans Affairs and the NHS in the United Kingdom. However, we expect to increase revenue from our commercial channel through cash pay models via direct-to-consumer approaches through our online stores in the U.S. and United Kingdom. We also expect revenues to increase from our cash pay propositions which include direct to physician models for traditional neurology headache specialists, as well as the wide range of medical providers who manage patients' headache conditions including primary care physicians, women's health, pain management, functional and integrative medicine professionals, as well as chiropractors, and PharmDs (Doctors of Pharmacy).
22 |
Gross Profit
Gross profit increased $1.6 million for the six months ended June 30, 2022 compared to the prior year. Gross margin increased to 82% for the six months ended June 30, 2022 compared to 70% for the six months ended June 30, 2021. Our evolving commercial strategy has resulted in the launch of cash payment models under which we license certain investigator-initiated trials, scientific publicationsstarter devices. The cost of the licensed starter device is being recognized as cost of goods sold over the estimated useful life of the starter device versus expensing the cost of goods at the time of sale. Moreover, in recent quarters, we have sold an increasing amount of longer duration therapy, resulting in a higher average selling price, as well as selling an increased number of refill kits with a lower cost of goods. These factors, including Teijin license revenue with no associated cost of goods and favorable absorption of labor and overhead costs associated with the increased number of units sold contributed to the increase in gross margin. Gross profit and gross margin for the remainder of 2022 will be largely dependent on revenue levels, product development.mix, any changes in the estimated useful lives of licensed starter devices, and the pricing levels of our therapy.
Research and Development
Research and development expense increased by $1.0 million or 72% for the six months ended June 30, 2022 compared to the prior year period. This increase was primarily due to targeted investments to support the future iterations of our therapy delivery platform, including the use of our intellectual property around the delivery of smartphone-integrated and smartphone-connected non-invasive therapies.
Selling, General and Administrative
Selling, general and administrative expense was consistent with the prior year period. We expect an increase in our selling, general,$12.5 million and administrative expense for the remainder of our 2021 fiscal year as we may make targeted investments to support our commercial efforts.
Other (Income) Expense
Interest and other income of $3,834 and $5,719 for the three months ended September 30, 2021 and 2020, respectively, primarily consists of interest earned on cash, cash equivalents and marketable securities.
Comparison of the nine months ended September 30, 2021 to the nine months ended September 30, 2020
The following table sets forth amounts from our consolidated statements of operations for the nine months ended September 30, 2021 and 2020:
|
| For the nine months ended September 30, |
|
|
|
|
| |||||
|
| 2021 |
|
| 2020 |
|
| Change |
| |||
|
| (in thousands) |
| |||||||||
Consolidated statements of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 3,960.4 |
|
| $ | 2,567.6 |
|
| $ | 1,392.8 | |
Cost of goods sold |
|
| 1,093.3 |
|
|
| 918.6 |
|
|
| 174.7 | |
Gross profit |
|
| 2,867.1 |
|
|
| 1,649.0 |
|
|
| 1,218.1 | |
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| 1,794.1 |
|
|
| 3,182.7 |
|
|
| (1,388.6 | ) |
Selling, general and administrative |
|
| 15,644.3 |
|
|
| 16,427.0 |
|
|
| (782.7 | ) |
Restructuring and other severance related charges |
|
| — |
|
|
| 464.6 |
|
|
| (464.6 | ) |
Total operating expenses |
|
| 17,438.4 |
|
|
| 20,074.3 |
|
|
| (2,635.9 | ) |
Loss from operations |
|
| (14,571.3 | ) |
|
| (18,425.3 | ) |
|
| 3,854.0 |
|
Other (income) expense |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on extinguishment of debt | (1,422.2 | ) | — | (1,422.2 | ) | |||||||
Interest and other income |
|
| (8.4 | ) |
|
| (80.5 | ) |
|
| 72.1 |
|
Other expense |
|
| 7.3 |
|
| 13.4 |
|
|
| (6.1 | ) | |
Total other (income) expense |
|
| (1,423.3 | ) |
|
| (67.1 | ) |
|
| (1,356.2 | ) |
Loss before income taxes |
|
| (13,148.0 | ) |
|
| (18,358.2 | ) |
|
| 5,210.2 |
|
Benefit from income taxes |
|
| 876.7 |
|
|
| 1,170.9 |
|
|
| (294.2 | ) |
Net loss |
| $ | (12,271.3 | ) |
| $ | (17,187.3 | ) |
| $ | 4,916.0 |
|
Net Sales
Net sales increased 54% for the nine months ended September 30, 2021 compared to the prior year period. The increase of $1.4 million is due to increased sales across all major channels including Commercial, the U.S. Department of Veteran Affairs, and in the United Kingdom, as well as sales from our new distributors outside of the United States. For the remainder of our 2021 fiscal year, we expect the majority of our revenue will come from the U.S. Department of Veterans Affairs and United Kingdom.
Gross Profit
Gross profit increased $1.2$11.0 million for the ninesix months ended SeptemberJune 30, 2022 and 2021, compared to the prior year. Gross margin increased to 72% for the nine months ended September 30, 2021 compared to 64% for the nine months ended September 30, 2020.respectively, These increased gross profits were largely due to increased sales resulting in more favorable absorption of labor and overhead costs and product mix.
Research and Development
Research and development expense decreased by $1.4 million or 44% for the nine months ended September 30, 2021 compared to the prior year period. This reduction was primarily due to significant reductions in investment in research and development including the early termination of our Premium II clinical trial, offset by the initial payment for an investigator-initiated study for the treatment of post-traumatic headache, and targeted investments to support certain investigator-initiated trials, scientific publications and product development.
Selling, General and Administrative
Selling, general and administrative expense was $15.6 million and $16.4 million for the nine months ended September 30, 2021 and 2020, respectively. The $782.7 thousand decrease was primarily due to cost reductions associated with the outbreak of the COVID-19 pandemic, offset by reinvestment in the commercial business as the pandemic began to subside. We expect an increase in our selling, general, and administrative expense for the remainder of our 2021 fiscal year as we maycontinued to make targeted investments to support our commercial efforts.
Restructuring and Other Severance Related Charges
There were no restructuring and other severance related costs for the nine months ended September 30, 2021. Restructuring and other severance related costs for the nine months ended September 30, 2020 of $464,606 consisted of severance related expenses in connection with personnel changes.
Other (Income) Expense
Other (income) expense for the ninesix months ended SeptemberJune 30, 2021 primarily represents the gain of $1.4$1.4 million recorded by the Company in association with the forgiveness of its PPPPaycheck Protection Program ("PPP") loan. For both the 2022 and 2021 periods, Interest and other incomeof $8,493 and $80,460 for the nine months ended September 30, 2021 and 2020, respectively, primarily consists of interest earned on cash and cash equivalents and, in the prior year period, marketable securities. Other expense relates to borrowings used to partially fund the premiums due under certain of our insurance policies.
Benefit from Income Taxes
The benefitBenefit from income taxes of $0.9 million$445,000 and $1.2 million$885,000 for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, represent the sale of our 2019 and 2018 state net operating losses and research and development tax credits under the State of New Jersey's NOL Transfer Program.
Cash Flows
The following table sets forth the significant sources and uses of cash for the periods noted below:
| For the nine months ended September 30, |
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| For the six months ended June 30, |
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| 2021 |
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| 2020 |
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| 2022 |
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| 2021 |
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Net cash (used in) provided by |
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Operating activities |
| $ | (9.3 | ) |
| $ | (16.5 | ) |
| $ | (8,024 | ) |
| $ | (5,826 | ) |
Investing activities |
| $ | 17.2 |
| $ | (11.7 | ) |
| $ | — |
| $ | 9,217 | |||
Financing activities |
| $ | 25.7 |
| $ | 18.6 |
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| $ | — |
| $ | 6,920 |
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Operating Activities
Net cash used in operating activities was $9.3$8.0 million and $16.5$5.8 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. This favorable resultincrease is primarily due to a decreasethe increase in our net loss from operations, and less cash being used for working capital components such as inventory and accounts payable.operations.
23 |
Investing Activities
NetNo cash was provided by investing activities during the six months ended June 30, 2022. For the six months ended June 30, 2021, net cash provided by investing activities was $17.2$9.2 million for the nine months ended September 30, 2021 compared to $11.7 million used in investing activities for the nine months ended September 30, 2020, reflecting an increase in funds received from the maturity of marketable securities partially offset by a decrease in our purchases of marketable securities during the currentprior period.
Financing Activities
NetNo cash was provided by financing activities during the six months ended June 30, 2022. For the six months ended June 30, 2021, net cash provided by financing activities was $25.7$6.9 million for the nine months ended September 30, 2021, representing proceeds from the sale of our common stock.
Liquidity Outlook
As of SeptemberJune 30, 2021,2022, our cash and cash equivalents and marketable securitiesrestricted cash totaled $39.0$26.6 million.
We have experienced recurring losses since our inception. We incurred net losses of $12.3$10.9 million and $17.2$8.3 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. We expect to continue to incur substantial negative cash flows from operations for at least the next several years as we work to increase market acceptance of our gammaCore therapy for the acute treatment of eCH, the prevention of clusterprimary headache and the preventive and acute treatment of migraine in adults and adolescents. its other indications.
Our expected cash requirements for the next 12 months and beyond are largely based on the commercial success of our products.products and the level of targeted investment in our commercial strategies. There are significant risks and uncertainties as to our ability to achieve these operating results, including as a result of the adverse impact on itsour headache business from the ongoing COVID-19 pandemic. These conditions raise substantial doubt about our ability to continue as a going concern.
We have historically funded our operations from the sale of our common stock. During the nine months ended September 30, 2021, we received net proceeds of approximately $25.7 million from such sales and as of September 30, 2021, our cash, cash equivalents and marketable securities totaled $39.0 million.
We believe that the substantial doubt of our ability to continue as going concern is alleviated based on proceeds received from recent offerings of our common stock. We believe our current cash and marketable securitiescash equivalents will enable us to fund our operating expenses and capital expenditure requirements, as currently planned, for at least the next 12 months from the date the accompanying financial statements included in this Form 10-Q are issued.made available.
Beyond the next 12 months, we believe that our growth will depend, in part, on our ability to fund our commercial efforts for our gammaCore therapy; and to opportunistically pursue research and development activities for additional indications, and the next generation of our gammaCore therapy. Our existing resources are unlikely to allow us to conduct all the activities that we believe could be beneficial for our future growth. As a result, we will need to seek additional funds in the future or curtail or forgo some or all such activities. If we seek to and are unable to raise funds on favorable terms, or at all, we may not be able to support our commercialization efforts or research and development activities and the growth of our business may be negatively impacted. As a result, we may be unable to compete effectively. Changes, including those relating to the payer and competitive landscape, our commercialization strategy, our development activities and regulatory matters, may occur beyond our control that would cause us to consume our available capital more quickly.
In connection with the transfer of our common stock from the Nasdaq Global Select Market to the Nasdaq Capital Market effective June 23, 2022, we have been granted a 180-day grace period, or until December 19, 2022, to regain compliance with the Nasdaq requirement that the bid price per share of our common stock on the Nasdaq Capital Market be at least $1.00 for at least 10 consecutive business days on or prior to December 19, 2022. If we fail to regain compliance during the additional compliance period, the common stock could be delisted from the Nasdaq Capital Market. Such a delisting could have a negative effect on the price of our common stock, impair the ability of investors to sell or purchase our common stock when they wish to do so, and materially adversely affect our ability to raise capital or pursue strategic, financing or other transactions on acceptable terms, or at all. See also Part II – Item 1A “Risk Factors.”
On January 18, 2022, we filed a Form S-3 registration statement, or the 2022 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which we refer to collectively as the Shelf Securities, up to an aggregate amount of $75 million. The 2022 Shelf Registration Statement was declared effective on January 25, 2022. The proposed maximum offering price per unit and the proposed maximum aggregate offering price per class of security will be determined from time to time by us in connection with the issuance by us of the securities registered under the 2022 Shelf Registration Statement. Until such time as the aggregate market value of our securities held by non-affiliates equals or exceeds $75 million, the aggregate maximum offering price of all securities issued by the us in any given 12-calendar month period pursuant to this and any of our other registration statements may not exceed one-third of the aggregate market value of our securities held by non-affiliates.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decision making regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.
As required by Rule 13a-15(b) of the Exchange Act, an evaluation as of SeptemberJune 30, 20212022 was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of SeptemberJune 30,, 2021 2022 were effective for the purposes stated above.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act that occurred during the three months ended SeptemberJune 30, 20212022 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
On July 8, 2019The information set forth in Note 11. Commitments and August 1, 2019, purported stockholders of our company served putative class action lawsuits in the Superior Court of New Jersey for Somerset County, captioned Paul Kuehl vs. electroCore, Inc., et al.Contingencies – Stockholders Litigation, Docket No. SOM-L 000876-19 and Shirley Stone vs. electroCore, Inc., et al., Docket No. SOM-L 001007-19, respectively. In addition to our company, the defendants included present and past directors and officers, Evercore Group L.L.C., Cantor Fitzgerald & Co., JMP Securities LLC and BTIG, LLC, the underwriters for our IPO; and two of our stockholders. On August 15, 2019, the Superior Court entered an order consolidating the Kuehl and Stone actions, which proceeded under Docket No. SOM-L 000876-19. Each plaintiff was appointed a co-lead plaintiff. The plaintiffs filed a consolidated amended complaint, which sought certification of a class of stockholders who purchased our common stock in our IPO or whose purchases are traceable to that offering. The consolidated amended complaint alleged that the defendants violated Sections 11, 12(a)(2) and 15 of the Securities Actcondensed consolidated financial statements included with respectour quarterly report on Form 10-Q is incorporated here by reference to the registration statement and related prospectus for the IPO. The complaint sought unspecified compensatory damages, interest, costs and attorneys’ fees. On October 31, 2019, the Company and the other defendants filed a motion to dismiss the complaint or in the alternative to stay the action in favor of the pending federal action (discussed below). On February 21, 2020 the court granted the defendants’ motion to dismiss the consolidated amended complaint with prejudice. On March 2, 2020 the court entered an amended order dismissing the consolidated amended complaint with prejudice. On March 27, 2020, the plaintiffs filed a notice of appeal with the N.J. Superior Court - Appellate Division. The appeal was argued on September 27, 2021. On October 8, 2021, the Appellate Division issued an order reversing the decision of the Superior Court. The case has been remanded to the Superior Court for oral argument on the motion to dismiss or the alternative stay.this Part II Item 1.
You should carefully consider the following risk factorsincluded in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2021 (Annual Report), which was filed with the SEC on March 10, 2022, in addition to the following risk factor, and the other information in this report on Form 10-Q, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. If any of the events described in our Annual Report, the following risk factorsfactor and the risks described elsewhere in this report on Form 10-Q occurs,occur, our business, operating results and financial condition could be seriously harmed. This report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described in our Annual Report, below and elsewhere in this report. The risk factor set forth below contains changes
Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock, which could negatively impact the market price and liquidity of our common stock and our ability to access the capital markets.
On June 22, 2022, we received approval (the “Approval”) from the Nasdaq Listing Qualifications Department of the Nasdaq Stock Market (the “Nasdaq”) that our application to transfer the listing of our common stock from the Nasdaq Global Select Market to the similarly titled risk factor includedNasdaq Capital Market had been approved. The common stock was transferred to the Nasdaq Capital Market at the opening of business on June 23, 2022. The common stock will continue to trade under the symbol “ECOR.” The Nasdaq Capital Market operates in Item 1Asubstantially the same manner as the Nasdaq Global Select Market, and listed companies must meet certain financial requirements and comply with Nasdaq’s corporate governance requirements. On December 20, 2021, we received a letter from Nasdaq indicating that we were not in compliance with Nasdaq Listing Rule 5450(a)(1) because the closing bid price per share for our common stock had closed below $1.00 for the previous 30 consecutive business days (the “Bid Price Rule”). We were given until June 20, 2022, to regain compliance with the rule. In response, we filed an application to transfer the listing of our Annual Report on Form 10-K forcommon stock from the year ended December 31, 2021, which was filed withNasdaq Global Select Market to the SEC on March 11, 2021.
Risks Related to COVID-19
The coronavirus pandemic could have a significant negative impact on our business, revenues, financial condition and results of operations.
The persistence of the coronavirus pandemic has severely depressed the level of economic activity around the world. Many businesses and governments have taken preventative or protective actions, including mandatory COVID-19 vaccinations for employees, restrictions on travel and business operations, and advising or requiring individuals to limit or forego their time outside of their homes.Nasdaq Capital Market. As a result of those employees who choose not to receive a vaccination, there may be changes in the workforce. Temporary closures of many businessesApproval, we have been orderedgranted an additional 180-day grace period, or until December 19, 2022, to regain compliance with the Bid Price Rule. To regain compliance with the Bid Price Rule and numerous other businesses have temporarily closed voluntarily. Further, individuals' abilityqualify for continued listing on the Nasdaq Capital Market, the minimum bid price per share of our common stock must be at least $1.00 for at least 10 consecutive business days on or prior to travel has been curtailed through mandated travel restrictions, voluntary or mandated closuresDecember 19, 2022. As a condition of travel-related businesses, as well as quarantines, shelter-in-place/stay-at-home and social distancing orders. the Approval imposed by Nasdaq Listing Rule 5810(c)(3)(a)(i), we notified Nasdaq that we intend to affect a reverse stock split, if necessary, to regain compliance with the Bid Price Rule.
This coronavirus pandemic has also impacted, and may continueIf we fail to impact, our headquarters, manufacturing, and warehousing and distribution facilities, as well as thoseregain compliance during the additional compliance period, then Nasdaq will notify us of our third-party vendors, including through the effects of facility closures, employee furloughs, reductions in operating hours, staggered shifts and other social distancing efforts, labor shortages, decreased productivity and unavailability of materials or components. For example, we have limited accessits determination to our New Jersey office as a result of state-imposed restrictions. Furthermore, the recent Biden administration’s executive order requiring all on-site and remote federal employees, contractors and sub-contractors to be vaccinated against COVID-19 or receive an approved medical or religious exemption by December 8, 2021 may apply to us because of ourdelist Federal Supply Schedule Medical Equipment and Supply contract. Failureour common stock, at which point we would have an opportunity to comply withappeal the executive order could lead to loss of the contract, which could have a material adverse effect on our business, revenues, financial condition and results of operations. In light of the executive order, we have implemented a mandatory COVID-19 vaccination policy for all employees. All of our U.S. employees had to provide proof of vaccination by November 1, 2021, subject to medical and religious exemptions. To the extent an employee qualifies for a medical or religious exemption, we will collaborate with the exempt employee to explore reasonable accommodation options that may permit the employee to perform the essential functions of their job without being vaccinated. We will be unable to accommodate an employee’s exemption request if such accommodation would prevent an employee from performing the essential functions of their job, or would result in undue hardship, which includes, but in not limiteddelisting determination to a risk of harm to others. There can be no assurance that this policy will not have an adverse effect on our recruitment and retention of, and relations with our employees. The coronavirus pandemic may also impact our ability to sell our product, ship our product on a timely basis and may increase our costs.
The spread of coronavirus has also caused us to modify our business practices (including a mandatory COVID-19 vaccine policy, social distancing practices, requiring non-essential production related team members to work remotely where possible, restricting business travel, cancelling certain events, and limiting visitor access to our facilities)Nasdaq Listing Qualifications Panel (the “Panel”), and we may take further actions as may be required by government authorities or that we determine are necessary or advisable. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our business, which could have an adverse effect on our operations. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and illness and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions. In addition, work-from-home and related business practice modifications present significant challenges to maintaining our corporate culture, including employee engagement and productivity, both during the immediate pandemic crisis and as we make additional adjustments in the eventual transition from it. Implementing new business practices in order to protect employees, vendors and other parties with whom we interact may result in increased costs. Furthermore, even if we follow what we believe to be best practices,but there can be no assurance that the Panel would grant our measures will prevent the transmission of COVID-19 between employees. Any incidents of actual or perceived transmission may expose us to liability claims, adversely impact employee productivity and morale, and result in negative publicity and reputational harm.
request for continued listing.
Additionally,Such a delisting could have a negative effect on the price of our salescommon stock, impair the ability of investors to sell or purchase our common stock when they wish to do so, and marketing efforts are, and maymaterially adversely affect our ability to raise capital or pursue strategic, financing or other transactions on acceptable terms, or at all. Delisting from time to time be, adversely affected by protocols for screening and restricting outside visitors and vendors that have been adopted by the Department of Veterans Affairs, commercial prescribers and other third parties. Officially imposed quarantines and self-quarantinesNasdaq could also interfere with patients’ ability to see a health care provider and obtain our gammaCore therapy.have other negative results, including the potential loss of institutional investor interest.
The degree to which coronavirus impacts our results will continue to depend on future developments that are highly uncertain and cannot be predicted, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development, rollout and availability of effective treatments and vaccines, the imposition of protective public safety measures, and how quickly and to what extent normal economic and operating conditions can resume, if at all. These uncertainties may result in delays or modifications to our plans, initiatives and results.
For the reasons set forth above and other reasons that may come to light due to the coronavirus outbreak and any associated protective or preventative measures, we are unable to reasonably estimate coronavirus’ impact to our business, revenues, financial condition and results of operations.We are similarly unable to predict the degree to which the pandemic impacts our customers, suppliers, vendors, capital markets, and other partners, and their financial conditions, but a material effect on these parties could also adversely affect us.
The impact of coronavirus could also exacerbate other risks discussed below, which could in turn have a material adverse effect on us. Developments related to coronavirus have been rapidly changing, and additional impacts and risks may arise that we are not aware of or able to appropriately respond to currently.
Our ability to market gammaCore Sapphire CV under the EUA may be adversely affected to the extent that (i) the coronavirus pandemic subsides, regardless of whether or not the EUA is terminated, revoked or expires, and (ii) other treatments or vaccines for coronavirus are developed and made available. Furthermore, there are a number of preventative vaccines in development with two having received an Emergency Use Authorization approval and others potentially nearing regulatory approval. Additionally, the United States and other countries around the world have recently begun to approve and commence distributing COVID-19 vaccines in their jurisdictions. The broad distribution of COVID-19 vaccines may reduce demand for gammaCore Sapphire CV treatment as it may no longer be considered medically necessary.
More generally, in the future, our business, financial results, and financial condition may be negatively impacted by the effects of other disease outbreaks, epidemics, pandemics, or similar widespread public health concerns.
(b) Not applicable.
Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).
Exhibit Number |
| Description |
10.2† | ||
10.3* | Form of electroCore, Inc. Management Severance Plan as amended on June 10, 2022. | |
31.1* |
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31.2* |
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32.1** |
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32.2** |
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101.INS |
| Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith. |
** | Furnished herewith. |
† | Indicates management agreement or compensation plan. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Date: |
| By: | /s/ DANIEL S. GOLDBERGER |
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| Daniel S. Goldberger |
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| Chief Executive Officer (Principal Executive Officer) |
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Date: |
| By: | /s/ BRIAN M. POSNER |
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| Brian M. Posner |
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| Chief Financial Officer (Principal Financial and Accounting Officer) |