UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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FOR THE QUARTERLY PERIOD ENDED
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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
(Exact name of Registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
(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 |
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Name of each exchange on which registered |
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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
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
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.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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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).
As of November 1, 2023, the registrant had
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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.
ELECTROCORE, INC. AND SUBSIDIARIES
(unaudited)
(in thousands, except share data)
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September 30, |
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December 31, |
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2023 |
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2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Inventories, noncurrent |
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Property and equipment, net |
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Operating lease right of use assets, net |
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Other assets, net |
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Total assets |
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$ |
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$ |
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Liabilities and Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Current portion of operating lease liabilities |
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Total current liabilities |
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Noncurrent liabilities: |
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Operating lease liabilities, noncurrent |
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Total liabilities |
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Commitments and contingencies (see Note 12) |
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Mezzanine Equity: |
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Preferred Stock, par value $ |
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Stockholders' equity: |
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Common Stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
ELECTROCORE, INC. AND SUBSIDIARIES
(unaudited)
(in thousands, except per share data)
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Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
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2023 |
2022 |
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Net sales |
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Cost of goods sold |
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Gross profit |
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Operating expenses |
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Research and development |
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Selling, general and administrative |
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Total operating expenses |
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Loss from operations |
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Other (income) expense |
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Interest and other income |
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Other expense |
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Total other (income) expense |
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| Loss before income taxes | ( |
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| Benefit from income taxes | ||||||||||||||||
| Net loss | $ | ( |
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Net loss per share of common stock - Basic and Diluted |
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Weighted average common shares outstanding - Basic and Diluted |
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See accompanying notes to unaudited condensed consolidated financial statements.
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ELECTROCORE, INC. AND SUBSIDIARIES
(unaudited)
(in thousands)
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Three months ended September 30, |
Nine months ended September 30, |
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2023 | 2022 | 2023 |
2022 | ||||||||||||
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Net loss |
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Other comprehensive loss: |
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Foreign currency translation adjustment |
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Other comprehensive loss |
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Comprehensive loss |
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See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
ELECTROCORE, INC. AND SUBSIDIARIES
(unaudited)
(in thousands)
| Mezzanine Equity |
Stockholders' Equity |
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Additional |
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Accumulated other |
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paid-in |
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Accumulated |
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comprehensive |
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Total |
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Shares |
Amount |
Shares |
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Amount |
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capital |
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deficit |
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income (loss) |
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equity |
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| Balances as of January 1, 2023 | $ | — | $ | $ | $ | ( |
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Net loss |
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Other comprehensive income |
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Issuance of stock related to employee compensation plans, net of forfeitures |
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| Preferred stock redemption | ( |
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Share based compensation |
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| Balances as of March 31, 2023 | ( |
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| Net loss | — | — | — | — | — | ( |
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| Other comprehensive income | — | — | — | — | — | — | ( |
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Issuance of stock related to employee compensation plan, net of forfeitures |
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Share based compensation |
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| Balances as of June 30, 2023 | ( |
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| Net loss | — | — | — | — | — | ( |
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| Other comprehensive income | — | — | — | — | — | — | ( |
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| Sale of common stock and warrants | — | — | — | — | ||||||||||||||||||||||||||||
| Financing fees | — | — | — | — | ( |
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| Issuance of stock related to employee compensation plan, net of forfeitures | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Share based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Balances as of September 30, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
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See accompanying notes to unaudited condensed consolidated financial statements.
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(unaudited)
(in thousands)
| Mezzanine Equity | Stockholders' Equity | |||||||||||||||||||||||||||||||
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Common |
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Additional |
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Accumulated other |
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Preferred Stock |
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paid-in |
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Accumulated |
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comprehensive |
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Total |
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Shares |
Amount |
Shares |
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Amount |
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capital |
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deficit |
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income (loss) |
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equity |
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| Balance, January 1, 2022 | $ | $ | $ |
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$ | ( |
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Net loss |
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Other comprehensive loss |
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Issuance of stock related to employee compensation plans, net of forfeitures |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
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Share based compensation |
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| Balance, March 31, 2022 | ( |
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Net loss |
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— |
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— |
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— |
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| Other comprehensive income | — | — | — | — | — | — | ( |
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Issuance of stock related to employee compensation plans, net of forfeitures |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
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Share based compensation |
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— |
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— |
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| Balance, June 30, 2022 |
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| Net loss |
— | — | — | — | — | ( |
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| Other comprehensive income |
— | — | — | — | — | — | ( |
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| Issuance of stock related to employee compensation plans, net of forfeitures |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| Share based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Balances as of September 30, 2022 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
ELECTROCORE, INC. AND SUBSIDIARIES
(unaudited)
(in thousands)
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Nine months ended September 30, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Depreciation and amortization |
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Net noncash lease expense |
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Increase in provision for bad debts |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other current assets |
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Accounts payable |
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Accrued expenses and other current liabilities |
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Operating lease liabilities |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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| Purchase of equipment | ( |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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| Proceeds from share issue | ||||||||
| Financing costs | ( |
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Net cash provided by financing activities |
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Effect of changes in exchange rates on cash and cash equivalents |
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( |
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( |
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Net decrease in cash and cash equivalents and restricted cash |
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( |
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( |
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Cash and cash equivalents and restricted cash – beginning of period |
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Cash and cash equivalents and restricted cash – end of period |
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$ |
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$ |
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Supplemental cash flows disclosures: |
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| Proceeds from sale of state net operating losses | $ | $ | ||||||
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Interest paid |
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$ |
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$ |
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| Supplemental schedule of noncash activity: | ||||||||
| Insurance premium financing | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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
Note 2. Summary of Significant Accounting Policies
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(a) |
Basis of Presentation |
The accompanying condensed consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“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 nine months ended September 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
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(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.
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(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.
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(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 September 30, 2023 and 2022:
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September 30, 2023 |
September 30, 2022 | ||||||
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Cash and cash equivalents |
$ |
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$ | |||||
| Restricted cash |
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Total cash, cash equivalents and restricted cash |
$ | $ | ||||||
As of September 30, 2023 and December 31, 2022, cash equivalents represented funds held in a money market account.
| 10 |
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(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.
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(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 September 30, 2023 and December 31, 2022, and is being recognized as cost of goods sold on the straight-line method over the estimated
| (g) | Warrant Accounting |
The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in ASC Topic 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity, or ASC Topic 815-40, as either derivative liabilities or equity instruments depending on the specific terms of the warrant.
| (h) | 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
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 certain institutional and accredited investors, and concurrent private placements with such investors and certain of the Company’s officers and directors, resulting in net proceeds to the Company of approximately $
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 revenue 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 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 of these accompanying financial statements are issued. The accompanying financial statements do not include any adjustment that might result from the outcome of this uncertainty.
| 11 |
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 accounted for
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Three months ended September 30, |
Nine months ended September 30, |
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2023 | 2022 | 2023 | 2022 | |||||||||
|
Revenue channel: |
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|
Rx gammaCore - VA/DoD |
% | ||||||||||||