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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 June 30, 2023



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:

 

 

 

 

 

 

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 Capital Market

 

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      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

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

Emerging growth company 

 

 

 

 

 

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 August 3, 2023, the registrant had 5,985,043 shares of common stock outstanding.


1



PART I. FINANCIAL INFORMATION

Page Number


Cautionary Note Regarding Forward-Looking Statements 3
Item 1. Financial Statements 

Condensed Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022 4

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited) 5

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited) 6

Condensed Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited) 7

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (unaudited) 9

Notes to Condensed Consolidated Financial Statements (unaudited) 10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
Item 4. Controls and Procedures 26

PART II. OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 1A. Risk Factors 27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27
Item 3. Defaults Upon Senior Securities 27
Item 4. Mine Safety Disclosures 27
Item 5. Other Information 27
Item 6. Exhibits 28

Signatures 29


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.

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 risks and uncertainties included in our Form 10-Qs, our Annual Report on Form 10-K for the year ended December 31, 2022, 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, Truvaga, TAC-STIM, 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

(unaudited)

(in thousands, except share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,442

 

 

$

17,712

 

      Restricted cash

250




250

Accounts receivable, net

 

 

238

 

 

 

401

 

Inventories, net

 

 

2,368

 

 

 

1,982

 

Prepaid expenses and other current assets

 

 

106

 

 

 

828

 

Total current assets

 

 

11,404

 

 

 

21,173

 

Inventories, noncurrent

 

 

1,351

 

 

 

2,194

 

Property and equipment, net

 

 

114

 

 

 

50

 

Operating lease right of use assets, net

 

 

534

 

 

 

565

 

Other assets, net

 

 

819

 

 

 

774

 

Total assets

 

$

14,222

 

 

$

24,756

 

Liabilities and Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,284

 

 

$

2,129

 

Accrued expenses and other current liabilities

 

 

4,210

 

 

 

4,842

 

Current portion of operating lease liabilities

 

 

81

 

 

 

74

 

Total current liabilities 

 

 

6,575

 

 

 

7,045

 

Noncurrent liabilities:

 

 

 

 

 

 

 

 

Operating lease liabilities, noncurrent

 

 

583

 

 

 

625

 

Total liabilities

 

 

7,158

 

 

 

7,670

 

Commitments and contingencies (see Note 12)

 

 

 

 

 

 

Mezzanine Equity:









Preferred Stock, par value $0.001 per share; 10,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 0 shares issued and outstanding at June 30, 2023 and 71,173 issued and outstanding at December 31, 2022 ($0.001 per share liquidation value)







Stockholders' equity:

 

 

 

 

 

 

 

 

Common Stock, par value $0.001 per share; 500,000,000 shares authorized at June 30, 2023 and December 31, 2022; 4,752,475 shares issued and outstanding at June 30, 2023 and 4,744,886 shares issued and outstanding at December 31, 2022

 

 

5

 

 

 

5

 

Additional paid-in capital

 

 

164,275

 

 

 

163,520

 

Accumulated deficit

 

 

(157,140

)

 

 

(146,370

)

Accumulated other comprehensive loss

 

 

(76

)

 

 

(69

)

Total equity

 

 

7,064

 

 

17,086

 

Total liabilities and equity

 

$

14,222

 

$

24,756

 

 

See accompanying notes to unaudited condensed consolidated financial statements.


4


ELECTROCORE, INC. AND SUBSIDIARIES

(unaudited)

(in thousands, except per share data) 


 


Three months ended June 30,

Six months ended June 30,


 


2023


2022


2023

2022

Net sales


$ 3,551

$ 2,157

$ 6,331

$ 4,056

Cost of goods sold



585


358


1,043


718

Gross profit



2,966


1,799


5,288


3,338

Operating expenses

















Research and development



1,155


1,341


2,964


2,275

Selling, general and administrative



6,799


6,278


13,509


12,464

Total operating expenses



7,954


7,619


16,473


14,739

    Loss from operations



(4,988 )

(5,820 )

(11,185 )

(11,401 )

Other (income) expense

















Interest and other income



(85 )

(38 )

(204 )

(42 )

Other expense












5

Total other (income) expense



(85 )

(38 )

(204 )

(37 )
Loss before income taxes

(4,903 )

(5,782 )

(10,981 )

(11,364 )
Benefit from income taxes




445


211

445
Net loss
$ (4,903 )
$ (5,337 )
$ (10,770 )
$ (10,919 )

Net loss per share of common stock - Basic and Diluted


$ (1.03 )
$ (1.20 )
$ (2.27 )
$ (2.25 )

Weighted average common shares outstanding - Basic and Diluted



4,751


4,448


4,747


4,853

 

See accompanying notes to unaudited condensed consolidated financial statements.


5



ELECTROCORE, INC. AND SUBSIDIARIES

(unaudited)

(in thousands)


 


Three months ended June 30,

Six months ended June 30,


 



2023


2022

2023


2022

Net loss


$ (4,903 )
$ (5,337 )
$ (10,770 )
$ (10,919 )

   Other comprehensive loss:

















    Foreign currency translation adjustment 



(63 )

(58 )

(7 )

(85 )

    Other comprehensive loss



(63 )

(58 )

(7 )

(85 )

Comprehensive loss


$ (4,966 )
$ (5,395 )
$ (10,777 )
$ (11,004 )

 

See accompanying notes to unaudited condensed consolidated financial statements.


6


  

ELECTROCORE, INC. AND SUBSIDIARIES

(unaudited)

(in thousands)




Mezzanine Equity


Stockholders' Equity






Common

 


Additional

 

 

 


 


Accumulated other

 




 


Preferred Stock


Stock

 

 

paid-in

 

 

Accumulated

 

 

comprehensive

 

 

Total

 

 


Shares


Amount


Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

income (loss)

 

 

equity

 

Balances as of January 1, 2023

71

$


4,745

$ 5

$ 163,520

$ (146,370 )
$ (69 )
$ 17,086

Net loss


















(5,867 )




(5,867 )

Other comprehensive income 





















56


56

Issuance of stock related to employee compensation plans, net of forfeitures 









1















   Preferred stock redemption

(71 )






















Share based compensation















572








572
Balances as of March 31, 2023







4,746

5

164,092

(152,237 )
(13 )
11,847
   Net loss
















(4,903 )




(4,903 )
   Other comprehensive income



















(63 )

(63 )

Issuance of stock related to employee compensation plan, net of forfeitures









6














Share based compensation















183








183
Balances as of June 30, 2023



$


4,752

$ 5

$ 164,275

$ (157,140 )
$ (76 )
$ 7,064


See accompanying notes to unaudited condensed consolidated financial statements.


7



ELECTROCORE, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Equity

(unaudited)

(in thousands)




Mezzanine Equity

Stockholders' Equity

 





Common

 

 

Additional

 

 

 

 

 

 

Accumulated other

 


 

 

 

 


Preferred Stock


Stock

 

 

paid-in

 

 

Accumulated

 

 

comprehensive

 


Total

 

 


Shares


Amount

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

income (loss)

 


equity

 

Balance, January 1, 2022



$


4,714

$ 5

$
160,772


$ (124,208 )
$ 13

$ 36,582

Net loss


















(5,582 )




(5,582 )

Other comprehensive loss  





















(27 )

(27 )

Issuance of stock related to employee compensation plans, net of forfeitures









1















Share based compensation















777








777
Balance, March 31, 2022






4,715

5

161,549

(129,790 )
(14 )
31,750

Net loss








 

 

 

 

 

 

 

 

 

 

(5,337

)

 

 

 


 

(5,337

)
   Other comprehensive income  



















(58 )

(58 )

Issuance of stock related to employee compensation plans, net of forfeitures









27














Share based compensation















752










752


Balance, June 30, 2022



$


4,742



$

5



$

162,301



$

(135,127

)
$

(72

)
$

27,107



See accompanying notes to unaudited condensed consolidated financial statements.

8


ELECTROCORE, INC. AND SUBSIDIARIES

(unaudited)

(in thousands)

  

 

 

Six months ended June 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(10,770

)

 

$

(10,919

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

755

 

 

 

1,529

 

Depreciation and amortization

 

 

444

 

 

 

247

 

Net noncash lease expense

 

 

30

 

 

21

           Inventory reserve charge

65



           Increase in provision for bad debts



28



Changes in operating assets and liabilities:

 

 

  

 

 

 

 

 

Accounts receivable, net

 

 

135

 

 

(137

)

Inventories

 

 

(71

)

 

 

289

Prepaid expenses and other current assets

 

 

723

 

 

823

Accounts payable

 

 

155

 

 

1,115

Accrued expenses and other current liabilities

 

 

(631

)

 

 

(963

)

Operating lease liabilities



(35 )

(29 )

Net cash used in operating activities

 

 

(9,172

)

 

 

(8,024

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

                 Purchase of equipment

(91 )


Net cash used in investing activities

 

 

(91

)

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net cash provided by financing activities 

 

 

 

 

 

Effect of changes in exchange rates on cash and cash equivalents

 

 

(7

)

 

 

(85

)

Net decrease in cash and cash equivalents and restricted cash

 

 

(9,270

)

 

 

(8,109

)

Cash and cash equivalents and restricted cash – beginning of period

 

 

17,962

 

 

 

34,689

 

Cash and cash equivalents and restricted cash – end of period

 

$

8,692

 

$

26,580

 

Supplemental cash flows disclosures:

 

 

 

 

 

 

 

 

      Proceeds from sale of state net operating losses
$ 211

$ 445

Interest paid

  

$

4

 

 

$

4

 

 

See accompanying notes to unaudited condensed consolidated financial statements. 


9


ELECTROCORE, INC. AND SUBSIDIARIES

(unaudited) 

Note 1. The Company

electroCore, Inc. and its subsidiaries (“electroCore” or the “Company”) is a commercial stage bioelectronic medicine and wellness company dedicated to improving health through its non-invasive vagus nerve stimulation (“nVNS”) technology platform. The Company’s focus is the commercialization of medical devices for the management and treatment of certain medical conditions and consumer product offerings utilizing nVNS to promote general wellbeing and human performance in the United States and select overseas markets.

electroCore, headquartered in Rockaway, NJ, has two wholly owned subsidiaries: electroCore UK Ltd and electroCore Germany GmbH. The Company has paused operations in Germany, with sales into the country and the rest of Europe being managed by electroCore UK Ltd.

Note 2Summary of Significant Accounting Policies


(a)

Basis of Presentation

The accompanying condensed consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States (“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, 2022 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 8, 2023. The results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or period.

At a special stockholders meeting held on February 13, 2023, the Company's stockholders approved an amendment to the Company's certificate of incorporation to effect of a reverse stock split of the Company's common stock at a ratio between 1-for-5 to 1-for-50 in order to achieve a minimum bid price of $1.00 per share for a minimum of 10 consecutive trading days, as required for continued listing of the common stock on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). The board of directors authorized a 1-for-15 ratio for the reverse stock split, which became effective on February 15, 2023. The accompanying condensed consolidated financial statements and notes to condensed consolidated financial statements give retroactive effect to the reverse stock split for all prior periods presented.


(b)

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of electroCore and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. 


(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 the condensed 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, estimated useful life of licensed products and cloud computing arrangements, stock compensation, incremental borrowing rate and contingencies.   


(d)

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash to the balance reflected on the Condensed Consolidated Statement of Cash Flows for June 30, 2023 and 2022:

(in thousands)

June 30, 2023



June 30, 2022

Cash and cash equivalents


$

8,442



$ 26,330
Restricted cash

250




250

Total cash, cash equivalents and restricted cash


$ 8,692
$ 26,580


As of June 30, 2023 and December 31, 2022, cash equivalents represented funds held in a money market account.


(e)

Restricted Cash

The Company's restricted cash consists of cash that the Company is contractually obligated to maintain in accordance with the terms of its corporate credit card arrangement with Citibank, N.A and established in April 2022.   


10


 

(f)

Licensed Products

The Company licenses a portion of its devices through its cash pay channels. The cost of these licensed devices is capitalized and included in Other Assets in the accompanying Condensed Consolidated Balance Sheets at June 30, 2023 and December 31, 2022, and is being recognized as cost of goods sold on the straight-line method over the estimated 12-36 month useful life of the devices. If certain licensed devices are returned and no longer meet quality specifications or the carrying amount of certain licensed devices are no longer deemed to be recoverable, the Company records a charge to cost of goods sold to write down such licensed devices to zero. The net book value of these licensed devices at June 30, 2023 and December 31, 2022 was $724,000 and $538,000, respectively. Changes in the value of these licensed devices in Other Assets is captured on the Statement of Cash Flows with inventories.

 

(g) Prior Year Presentation

 Prior year presentation has been conformed to current year presentation.

Note 3. Going Concern, Significant Risks and Uncertainties

Going Concern

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 medical devices and wellness products. The Company has never been profitable and has incurred net losses and cash used in operations in each year since its inception.

Sales to the United States Department of Veteran Affairs comprised 59.8% of the Company's revenue during the six months ended June 30, 2023. The Company expects that a majority of its remaining 2023 sales will be made pursuant to its qualifying contract under the Federal Supply Schedule, or FSS, which was secured by the Company in December 2018, as well as open market sales to individual facilities within the government channels. The FSS is scheduled to expire on January 15, 2024. The Company has submitted a renewal application for extension of its qualifying contract under the FSS from the Department of Veterans Affairs Office of Procurement and Logistics, but there is no assurance the FSS will be renewed, if at all, or renewed at terms favorable to the Company.

The Company has historically funded its operations from the sale of its common stock. On July 31, 2023, the Company entered into a registered direct offering with a certain institutional and accredited investors, and concurrent private placements with certain of the Company’s officers and directors, resulting in net proceeds to the Company of approximately $7.5 million after deducting the placement agent fees and expenses, and other offering expenses payable by the Company. See Note 14. Subsequent Events, Securities Purchase Agreements.

The Company’s expected cash requirements for the next 12 months and beyond are largely based on the commercial success of its products. The Company believes its cash and cash equivalents and anticipated revenues will enable it to fund its operating expenses, working capital, and capital expenditure requirements, as currently planned, through 12 months from the date of the accompanying financial statements. There are significant risks and uncertainties as to its ability to achieve these operating results. Due to the risks and uncertainties, there can be no assurance that the Company will have sufficient cash flow and liquidity to fund its planned activities, which could force it to significantly reduce or curtail its activities and, ultimately, potentially cease operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date these accompanying financial statements are issued. The accompanying financial statements do not include any adjustment that might result from the outcome of this uncertainty. 

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 FSS 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 comprise those customers of the Company that each account for 10% or more of total net sales during the six months ended June 30, 2023 and 2022. The following table reflects the respective concentration as a percentage of the Company's net sales for the three and six months ended June 30, 2023 and 2022: 


 


Three months ended June 30,

Six months ended June 30,



 


2023

2022

2023

2022

Revenue channel:














Rx gammaCore - VA/DoD


58.6 %
55.1 %
59.8 %
60.4 %

National Health Service


9.8 %
16.4 %
9.9 %
15.3 %


11


No VA/DOD facility accounted for more than 10% of total VA/DoD net sales during the six months ended June 30, 2023. During the three and six months ended June 30, 2023 and 2022, one facility accounted for more than 10% of net sales from the National Health Service. 

Foreign Currency Exchange
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.

 

Note 4. Revenue 

Product Net Sales


(in thousands)


Three months ended June 30,

Six months ended June 30,


Channel

2023


2022

2023


2022
Rx gammaCore - Department of Veteran Affairs and Department of Defense
$ 2,081

$ 1,190
$ 3,786

$ 2,430
Rx gammaCore - U.S. Commercial

441


465

871


741
Outside the United States

424


467

834


772
Truvaga

290




437



TAC-STIM

311




399



Other

4


35

4

113


$ 3,551

$ 2,157
$ 6,331

$ 4,056

Geographical Net Sales

The following table presents net sales disaggregated by geographic market:  


 


Three months ended June 30,
Six months ended June 30,

(in thousands)



2023


2022

2023


2022

Product revenue
















United States


$ 3,127

$ 1,690
$ 5,497
$ 3,284
United Kingdom

384


355

705


621
Other

22


64

65


103
License revenue














Japan

18


48

64


48

Total Net Sales


$ 3,551

$ 2,157
$ 6,331

$ 4,056

The Company generally invoices the customer and recognizes revenue once its performance obligations are satisfied, at which point payment is unconditional. Agreed upon payment terms with customers are within 30 days of shipment. Accordingly, contracts with customers do not include a significant financing component. 

 

12


Note 5Inventories

As of June 30, 2023 and December 31, 2022, inventories consisted of the following:  


(in thousands)

 

June 30, 2023

 

 

December 31, 2022

 

Raw materials

 

$

1,334

 

 

$

944

 

Work in process

 

 

2,194

 

 

 

2,879

 

Finished goods

 

 

191

 

 

 

353

 

Total inventories, net

 

 

3,719

 

 

 

4,176

 

Less: noncurrent inventories 

 

 

1,351

 

 

2,194

Current inventories

 

$

2,368

 

 

$

1,982

 

The reserve for obsolete inventory was $0.3 million and $0.7 million as of June 30, 2023 and December 31, 2022, respectively. The Company records charges for obsolete inventory in cost of goods sold. As of June 30, 2023 and December 31, 2022, noncurrent inventory was comprised of approximately $0.6 million and $0.1 million in raw materials and $0.8 million and $2.1 million of work in process, respectively. Inventory classified under the category “Work in process” consists of prefabricated assembled product.

Note 6Leases

For each of the three and six months ended June 30, 2023 and 2022 the Company recognized lease expense of $38,000 and $76,000. 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: 


(in thousands)


June 30, 2023

 

 

December 31, 2022

 

Operating leases:

 

 

 

 

 

 

 

 

Operating lease right of use assets


$

534

 

 

$

565

 

Operating lease liabilities:


 

 

 

 

 

 

 

Current portion of operating lease liabilities 

 

 

81

 

 

 

74

 

Noncurrent operating lease liabilities


 

583

 

 

 

625

 

Total operating lease liabilities


$

664

 

 

$

699

 

Weighted average remaining lease term (in years)


 

5.6

 

 

 

6.1

 

Weighted average discount rate


 

13.8

%

 

 

13.8

%

 

 Future minimum lease payments under non-cancellable operating leases as of June 30, 2023:


(in thousands) 



Remainder of 2023

 

$

82

 

2024

 

 

168

 

2025

 

 

171

 

2026

 

 

161

 

2027

 

 

157

 

2028 and thereafter

216

Total future minimum lease payments

 

 

955

 

Less: Amounts representing interest

 

 

(291

)

Total

 

$

664

 


13



Note 7Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities as of June 30, 2023 and December 31, 2022 consisted of the following:


(in thousands)

 

June 30, 2023

 

 

December 31, 2022

 

Accrued professional fees 

 

$

483

 

 

$