Organization and Description of Business

6 Months Ended

Jun. 30, 2024

Organization and Description of Business

Organization and Description of Business

1. Organization and Description of Business

Nature of Operations

Agile Therapeutics, Inc. (“Agile” or the “Company”) was incorporated in Delaware on December 22, 1997. Agile is a women’s healthcare company dedicated to fulfilling the unmet health needs of today’s women. The Company’s activities since inception have consisted principally of raising capital, performing research and development, including development of the Company’s lead product, Twirla^®, and more recently commercializing Twirla. The Company is headquartered in Princeton, New Jersey.

On June 25, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Insud Pharma, S.L., a Spanish company (“Insud”), and Exeltis Project, Inc., a Delaware corporation and indirect, wholly owned subsidiary of Insud (“Merger Sub”) (see Note 10 for additional information). Pursuant to the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as an indirect wholly owned subsidiary of Insud.

The Company’s sole approved product, Twirla, is a once-weekly prescription contraceptive patch that received approval from the U.S. Food and Drug Administration, or FDA, in February 2020 and was commercially launched in early December 2020. Substantially all of the Company’s resources are currently dedicated to commercializing Twirla in the United States. The Company has generated minimal product revenue to date and is subject to a number of risks similar to those of other early stage commercial companies, including, but not limited to, dependence on key individuals, the difficulties and uncertainties inherent in the development of commercially usable products, market acceptance of products, protection of proprietary technology, the need to obtain additional capital necessary to fund the development of its products, reliance on a consistent supply chain both for Twirla and in general, macroeconomic factors such as inflation, competition from larger companies, and compliance with FDA and other government regulations. If the Company does not continue to successfully commercialize Twirla, it will be unable to generate recurring product revenue or achieve profitability. The Company has incurred operating losses and negative cash flows from operating activities each year since inception. As of June 30, 2024, the Company had an accumulated deficit of approximately $433.8 million. The Company expects to continue to incur significant operating expenses for the foreseeable future in connection with its ongoing activities, as the Company:

● maintains a sales and marketing infrastructure and contract manufacturing arrangement to support the continued commercialization of Twirla in the United States;

● continues to commercialize Twirla and seek increased uptake of Twirla in the United States;

● continues to evaluate additional line extensions for Twirla and initiates development of potential product candidates in addition to Twirla;

● maintains, leverages, and expands the Company’s intellectual property portfolio; and

● maintains operational, financial, and management information systems and personnel, including personnel to support the Company’s product development and future commercialization efforts.

The Company has financed its operations to date primarily through the issuance and sale of its common stock in both public and private offerings (see Note 8), private placements of its convertible preferred stock, venture loans, and non-dilutive grant funding.

Going Concern

As of June 30, 2024, the Company had cash and cash equivalents of $2.8 million and a $11.8 million working capital deficit. The Company’s current liquidity is sufficient to fund operations into September 2024. The Company closely monitors its cash and cash equivalents and, if the Merger is not consummated, will need to raise additional funds to meet its projected operating requirements, including the continued commercialization of Twirla. If the Merger is not consummated, the Company has serious concerns about its ability to continue as a going concern absent additional capital and its possible expansion through business development activities.

The Company has generated losses since inception, used substantial cash in operations, has a working capital deficit as of June 30, 2024, and anticipates it will continue to incur net losses for the foreseeable future. The Company’s future success depends on its ability to obtain additional capital and/or implement various strategic alternatives, and there can be no assurance that any financing can be realized by the Company, or if realized, what the terms of any such financing may be, or that any amount that the Company is able to raise will be adequate. Based upon the foregoing, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern through the 12 months following the date on which this Quarterly Report on Form 10-Q is filed.

One June 25, 2024, the Company has entered into the Merger Agreement, pursuant to which the Company will become an indirect wholly owned subsidiary of Insud. If the Merger is not consummated, the board of directors of the Company (the “Board”) will continue to evaluate and review the Company’s business, operations, assets, operating results, financial condition, prospects and business strategy, among other things, and make such changes as are deemed appropriate and continue to seek to enhance stockholder value. If the Merger Agreement is not adopted by the Company’s stockholders or if the Merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to Agile will be offered or that the Company’s business, prospects or results of operations will not be adversely impacted. The Company currently has a net working capital deficiency, and if the Merger is not consummated the Company may not be able to continue in the ordinary course and may need to seek bankruptcy protection. Additionally, concurrently with the execution of the Merger Agreement, the Company and Insud entered into a Revolving Promissory Note (the “Note”), pursuant to which Insud made available to the Company a line of credit in a maximum aggregate principal amount of up to $8.0 million (the “Bridge Loan”) issued by the Company, as borrower, in favor of Exeltis USA, Inc. (“Exeltis”), a New Jersey corporation and wholly owned subsidiary of Insud, which is secured by the Company’s intellectual property. No amounts were drawn on the Bridge Loan as of June 30, 2024. If the Merger is not consummated in certain instances, Exeltis shall have the right to declare an Event of Default (as defined in the Note) and immediately declare any amounts outstanding under the Note due and payable, and Agile shall be obligated to repay any amounts outstanding (including interest accrued) under the Note. Since the Bridge Loan is secured by Agile’s intellectual property, if Agile cannot repay the Bridge Loan, Exeltis would have the right to foreclose on such collateral as recourse for the failure to pay.

Absent the consummation of the Merger, the Company’s future success depends on its ability to raise additional capital as discussed above. The Company cannot be certain that these initiatives, or raising additional capital, whether through selling additional debt or equity securities or obtaining a line of credit or other loan, will be available to it or, if available, will be on terms acceptable to the Company. If the Company issues additional securities to raise funds, these securities may have rights, preferences, or privileges senior to those of its common stock, and the Company’s current stockholders will experience dilution. If the Company is unable to obtain funds when needed or on acceptable terms, the Company then may be unable to continue the commercialization of Twirla, and may also be required to cut operating costs, and forego future development and other opportunities or seek bankruptcy protection.

The unaudited financial statements as of June 30, 2024 have been prepared under the assumption that the Company will continue as a going concern for the next 12 months. Absent the consummation of the Merger, the Company’s ability to continue as a going concern is dependent upon its uncertain ability to obtain additional capital, reduce expenditures and/or execute on its business plan and successfully commercialize Twirla. The unaudited financial statements as of June 30, 2024 do not include any adjustments that might result from the outcome of this uncertainty. If the Company is unable to continue as a going concern, it may have to liquidate its assets and may receive less than the value at which those assets are carried on the financial statements.

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for Quarterly Reports on Form 10-Q. Accordingly, certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP has been condensed or omitted pursuant to such rules and regulations.

These interim financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on March 28, 2024.

In the opinion of management, the unaudited interim financial statements reflect all adjustments, which are normal recurring adjustments, necessary for the fair presentation of the financial information for the interim periods presented. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period.

The accompanying unaudited financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company has incurred recurring losses and negative cash flows from operations. If the Company encounters unforeseen factors that impact the Company’s current business plan or its ability to generate revenue from the commercialization of Twirla, the Company believes it has the ability to revise its commercial plans, including curtailing sales and marketing spending, to allow it to continue to fund its operations.