QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation) | (IRS Employer Identification No.) |
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
(Nasdaq Capital Market) | ||||||||
N/A | (Nasdaq Capital Market) |
Large accelerated filer ☐ | Accelerated filer ☐ | |||||||
Smaller reporting company | ||||||||
Emerging growth company |
Page | |||||||||||
PART I. | |||||||||||
Item 1. | |||||||||||
Item 2. | |||||||||||
Item 3. | |||||||||||
Item 4. | |||||||||||
PART II. | |||||||||||
Item 1. | |||||||||||
Item 1A. | |||||||||||
Item 2. | |||||||||||
Item 3. | |||||||||||
Item 4. | |||||||||||
Item 5. | |||||||||||
Item 6. | |||||||||||
EVOFEM BIOSCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except par value and share data) |
June 30, 2022 | December 31, 2021 | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Trade accounts receivable, net | |||||||||||
Inventories | |||||||||||
Prepaid and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Operating lease right-of-use assets | |||||||||||
Other noncurrent assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities, convertible and redeemable preferred stock and stockholders’ deficit | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Convertible notes payable recognized at fair value - Baker Bros. (Note 4) | |||||||||||
Convertible notes payable recognized at cost - Adjuvant (Note 4) | |||||||||||
Term notes payable - recognized at fair value | |||||||||||
Accrued expenses | |||||||||||
Accrued compensation | |||||||||||
Operating lease liabilities – current | |||||||||||
Derivative liabilities | |||||||||||
Other current liabilities | |||||||||||
Total current liabilities | |||||||||||
Operating lease liabilities – noncurrent | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 7) | |||||||||||
Convertible and redeemable preferred stock, $ | |||||||||||
Series B-1 convertible preferred stock, | |||||||||||
Series B-2 convertible preferred stock, | |||||||||||
Series C convertible preferred stock, | |||||||||||
Stockholders’ deficit: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated other comprehensive income | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Total stockholders’ equity deficit | ( | ( | |||||||||
Total liabilities, convertible and redeemable preferred stock and stockholders’ deficit | $ | $ |
EVOFEM BIOSCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except share and per share data) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
Selling and marketing | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Loss from operations | ( | ( | ( | ( | |||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||
Interest income | |||||||||||||||||||||||
Other expense | ( | ( | ( | ( | |||||||||||||||||||
Loss on issuance of financial instruments | ( | ( | |||||||||||||||||||||
Change in fair value of financial instruments | ( | ( | |||||||||||||||||||||
Total other (expense) income, net | ( | ( | |||||||||||||||||||||
Loss before income tax | ( | ( | ( | ( | |||||||||||||||||||
Income tax (expense) benefit | ( | ( | ( | ( | |||||||||||||||||||
Net loss | ( | ( | ( | ( | |||||||||||||||||||
Convertible preferred stock deemed dividends | |||||||||||||||||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Net loss per share attributable to common stockholders, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted |
EVOFEM BIOSCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS (Unaudited) (In thousands, except share and per share data) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Other comprehensive income: | |||||||||||||||||||||||
Change in fair value of financial instruments attributed to credit risk change | ( | ( | |||||||||||||||||||||
Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( |
EVOFEM BIOSCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE AND REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT (Unaudited) (In thousands, except share data) |
Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series B Convertible and Redeemable Preferred Stock | Series C Convertible and Redeemable Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock - Stock Purchase Agreement (see Note 8) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of series B-2 convertible preferred stock | ( | ( | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange of series B-2 convertible preferred stock (see Note 8) | ( | ( | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible preferred stock deemed dividends | — | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock awards issued | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in fair value of financial instruments attributed to credit risk change (see Note 4) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Modification of the Baker Warrants (see Note 8) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | $ | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock - Stock Purchase Agreement (see Note 8) | — | $ | — | — | $ | — | $ | $ | $ | — | $ | — | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock - May 2022 Public Offering (see Note 8) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon cash exercise of warrants | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock - ESPP | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock - a360 Media | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash repurchase of fractional common stock after the reverse stock split | — | — | — | — | ( | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of series B-2 convertible preferred stock | ( | ( | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible preferred stock deemed dividends | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
May 2022 exchange transaction | ( | ( | ( | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock awards cancelled | — | — | — | — | ( | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in fair value of financial instruments attributed to credit risk change (see Note 4) | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Modification of the Baker Warrants (see note 8) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | $ | $ | $ | $ | $ | ( | $ | ( |
Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
Issuance of common stock in connection with the 2021 Public Offering | — | — | ||||||||||||||||||||||||||||||||||||
Restricted stock awards issued | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Shares withheld to cover taxes related to vesting of restricted stock awards | ( | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
Balance at March 31, 2021 | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||||||
Issuance of common stock in connection with the March 2021 and May 2021 Public Offerings (see Note 8) | — | — | ||||||||||||||||||||||||||||||||||||
Issuance of common stock upon cash exercise of warrants | — | — | — | |||||||||||||||||||||||||||||||||||
Issuance of common stock - ESPP | — | — | — | |||||||||||||||||||||||||||||||||||
Restricted stock awards issued | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Restricted stock awards cancelled | ( | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Shares withheld to cover taxes related to vesting of restricted stock awards | ( | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | ||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | $ | $ | $ | $ | ( | $ |
EVOFEM BIOSCIENCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) |
Six Months Ended June 30, | |||||||||||
2022 | 2021 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash, cash equivalents and restricted cash used in operating activities: | |||||||||||
Loss on issuance of financial instruments | |||||||||||
Change in fair value of financial instruments | ( | ||||||||||
Financial instrument modification expense | |||||||||||
Stock-based compensation | |||||||||||
Depreciation | |||||||||||
Noncash lease expenses | |||||||||||
Noncash interest expenses | |||||||||||
Noncash instrument exchange expense | |||||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | ( | ( | |||||||||
Inventories | ( | ||||||||||
Prepaid and other assets | ( | ( | |||||||||
Accounts payable | ( | ||||||||||
Accrued expenses and other liabilities | ( | ||||||||||
Accrued compensation | ( | ||||||||||
Operating lease liabilities | ( | ( | |||||||||
Net cash, cash equivalents and restricted cash used in operating activities | ( | ( | |||||||||
Cash flows from investing activities: | |||||||||||
Proceeds from sale of Softcup line of business | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Net cash, cash equivalents and restricted cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from issuance of common stock - Stock Purchase Agreement | |||||||||||
Proceeds from issuance of common stock and warrants, net of discounts, fees and commissions - Public Offerings | |||||||||||
Proceeds from issuance of common stock - exercise of warrants | |||||||||||
Proceeds from issuance of common stock - ESPP and exercise of stock options | |||||||||||
Borrowings under term notes | |||||||||||
Payments under term notes | ( | ||||||||||
Cash paid for financing costs | ( | ( | |||||||||
Cash repurchase of fractional common stock after the reverse stock split | ( | ||||||||||
Payments of tax withholdings related to vesting of restricted stock awards | ( | ||||||||||
Net cash, cash equivalents and restricted cash provided by financing activities | |||||||||||
Net change in cash, cash equivalents and restricted cash | ( | ||||||||||
Cash, cash equivalents and restricted cash, beginning of period | |||||||||||
Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||||||
Supplemental disclosure of noncash investing and financing activities: | |||||||||||
Financing costs included in accounts payable and accrued expenses | $ | $ | |||||||||
Purchases of property and equipment included in accounts payable and accrued expenses | $ | $ | |||||||||
Conversion of series B-2 convertible preferred stock to common stock | $ | $ | |||||||||
Exchange of series B-2 convertible preferred stock to series C convertible preferred stock | $ | $ | |||||||||
Issuance of common stock for prepaid advertising | $ | $ |
EVOFEM BIOSCIENCES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
Six Months Ended June 30, | |||||||||||
2022 | 2021 | ||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Restricted cash included in other noncurrent assets | |||||||||||
Total cash, cash equivalents and restricted cash presented in the condensed consolidated statements of cash flows | $ | $ |
Six Months Ended June 30, | |||||||||||
2022 | 2021 | ||||||||||
Unvested restricted common stock subject to repurchase | |||||||||||
Common stock to be purchased under the 2019 ESPP | |||||||||||
Options to purchase common stock | |||||||||||
Warrants to purchase common stock | |||||||||||
Convertible debt | |||||||||||
Total |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Coupon interest | $ | $ | $ | $ | |||||||||||||||||||
Amortization of issuance costs | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
June 30, 2022 | December 31, 2021 | ||||||||||
Raw materials | $ | $ | |||||||||
Work in process(1) | |||||||||||
Finished goods(2)(3) | |||||||||||
Total | $ | $ |
June 30, 2022 | December 31, 2021 | ||||||||||
Clinical trial related costs | $ | $ | |||||||||
Selling and marketing related costs | |||||||||||
Legal and other professional fees | |||||||||||
Manufacturing related costs | |||||||||||
Other | |||||||||||
Total | $ | $ |
June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||||||||||||||||||||||||||||||
Money market funds (1) | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | $ | $ | $ | $ |
Fair Value | ||||||||||||||||||||||||||||||||||||||
June 30, 2022 | Principal Amount | Unamortized Issuance Costs | Accrued Interest | Net Carrying Amount | Amount | Leveling | ||||||||||||||||||||||||||||||||
Baker Notes(1)(2) | $ | $ | $ | $ | $ | Level 3 | ||||||||||||||||||||||||||||||||
Adjuvant Notes(3) | ( | N/A | N/A | |||||||||||||||||||||||||||||||||||
May 2022 Notes(1) | Level 3 | |||||||||||||||||||||||||||||||||||||
January 2022 Warrants | — | — | — | — | Level 3 | |||||||||||||||||||||||||||||||||
March 2022 Warrants | — | — | — | — | Level 3 | |||||||||||||||||||||||||||||||||
May 2022 Warrants | — | — | — | — | Level 3 | |||||||||||||||||||||||||||||||||
May 2022 Public Offering Warrants | — | — | — | — | Level 3 | |||||||||||||||||||||||||||||||||
June 2022 Baker Warrants | — | — | — | — | Level 3 |
Fair Value | ||||||||||||||||||||||||||||||||||||||
December 31, 2021 | Principal Amount | Unamortized Issuance Costs | Accrued Interest | Net Carrying Amount | Amount | Leveling | ||||||||||||||||||||||||||||||||
Baker Notes(1)(2) | $ | $ | $ | $ | $ | Level 3 | ||||||||||||||||||||||||||||||||
Adjuvant Notes(3) | ( | Level 3 | ||||||||||||||||||||||||||||||||||||
Derivative Liability - Convertible Preferred Stock | — | — | — | — | Level 3 |
Derivative Liability - Convertible Preferred Stock Conversion Feature | Derivative Liability - January 2022 Warrants | Derivative Liability - March 2022 Warrants | Derivative Liability - May 2022 Warrants | May 2022 Public Offering Common Warrants | May 2022 Public Offering Pre-Funded Warrants | June 2022 Baker Warrants | Derivative Liabilities Total | ||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Balance at issuance | |||||||||||||||||||||||||||||||||||||||||||||||
Warrant exercises | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Change in fair value presented in the Condensed Consolidated Statements of Operations | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Conversion of series B-2 convertible preferred stock | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
May 2022 exchange transaction | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | $ | $ | $ | $ | $ | $ | $ |
Derivative Liability - Convertible Preferred Stock Conversion Feature | Derivative Liability - January 2022 Warrants | Derivative Liability - March 2022 Warrants | Derivative Liability - May 2022 Warrants | May 2022 Public Offering Common Warrants | May 2022 Public Offering Pre-Funded Warrants | June 2022 Baker Warrants | Derivative Liabilities Total | ||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Balance at issuance | |||||||||||||||||||||||||||||||||||||||||||||||
Warrant exercises | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Change in fair value presented in the Condensed Consolidated Statements of Operations | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Conversion of series B-2 convertible preferred stock | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
May 2022 exchange transaction | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | $ | $ | $ | $ | $ | $ | $ |
Term Notes - January 2022 Notes | Term Notes - March 2022 Notes | Term Notes - May 2022 Notes | Term Notes Total | Baker First Closing Notes | Baker Second Closing Notes | Baker Notes Total | ||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
Balance at issuance | ||||||||||||||||||||||||||||||||||||||||||||
Debt repayment | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Change in fair value presented in the Condensed Consolidated Statements of Operations | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
Change in fair value presented in the Condensed Consolidated Statements of Comprehensive Operations | ||||||||||||||||||||||||||||||||||||||||||||
May 2022 exchange transaction | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | $ | $ | $ | $ | $ | $ |
Term Notes - January 2022 Notes | Term Notes - March 2022 Notes | Term Notes - May 2022 Notes | Term Notes Total | Baker First Closing Notes | Baker Second Closing Notes | Baker Notes Total | ||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
Balance at issuance | ||||||||||||||||||||||||||||||||||||||||||||
Debt repayment | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Change in fair value presented in the Condensed Consolidated Statements of Operations | ||||||||||||||||||||||||||||||||||||||||||||
Change in fair value presented in the Condensed Consolidated Statements of Comprehensive Operations | ||||||||||||||||||||||||||||||||||||||||||||
May 2022 exchange transaction | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | $ | $ | $ | $ | $ | $ |
Baker First Closing Notes | Baker Second Closing Notes | Total | |||||||||||||||
Balance at March 31, 2021 | $ | $ | $ | ||||||||||||||
Change in fair value | ( | ( | ( | ||||||||||||||
Balance at June 30, 2021 | $ | $ | $ |
Baker First Closing Notes | Baker Second Closing Notes | Total | |||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | ||||||||||||||
Change in fair value | ( | ( | ( | ||||||||||||||
Balance at June 30, 2021 | $ | $ | $ |
Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | |||||||
Expected volatility | % | % | ||||||
Risk-free interest rate | % | % | ||||||
Expected dividend yield | % | % | ||||||
Expected term (years) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
Lease Cost (in thousands) | Classification | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||
Operating lease expense | Research and development | $ | $ | $ | $ | |||||||||||||||||||||||||||
Operating lease expense | Selling and marketing | |||||||||||||||||||||||||||||||
Operating lease expense | General and administrative | |||||||||||||||||||||||||||||||
Total | $ | $ | $ | $ |
Lease Term and Discount Rate | June 30, 2022 | December 31, 2021 | ||||||||||||
Weighted Average Remaining Lease Term (in years) | ||||||||||||||
Weighted Average Discount Rate | % | % |
Maturity of Operating Lease Liabilities (in thousands) | June 30, 2022 | |||||||
Remainder of 2022 (6 months) | $ | |||||||
Year ending December 31, 2023 | ||||||||
Year ending December 31, 2024 | ||||||||
Year ending December 31, 2025 | ||||||||
Total lease payments | ||||||||
Less: imputed interest | ( | |||||||
Total | $ |
Six Months Ended June 30, | ||||||||||||||
Other information (in thousands) | 2022 | 2021 | ||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||
Operating cash outflows in operating leases | $ | $ |
Type of Warrants | Underlying Common Stock to be Purchased | Exercise Price | Issue Date | Exercise Period | ||||||||||||||||||||||
Common Warrants | $ | August 17, 2012 | August 17, 2012 to July 17, 2022 | |||||||||||||||||||||||
Common Warrants | $ | June 11, 2014 | June 11, 2014 to June 11, 2024 | |||||||||||||||||||||||
Common Warrants | $ | May 24, 2018 | May 24, 2018 to May 24 2025 | |||||||||||||||||||||||
Common Warrants | $ | June 26, 2018 | June 26, 2018 to June 26, 2025 | |||||||||||||||||||||||
Common Warrants | $ | April 11, 2019 | October 11, 2019 to April 11, 2026 | |||||||||||||||||||||||
Common Warrants | $ | June 10, 2019 | December 10, 2019 to June 10, 2026 | |||||||||||||||||||||||
Common Warrants | $ | April 24, 2020 | April 24, 2020 to April 24, 2025 | |||||||||||||||||||||||
Common Warrants | $ | June 9, 2020 | June 9, 2020 to June 9, 2025 | |||||||||||||||||||||||
Common Warrants | $ | May 20, 2021 | May 20, 2021 to May 22, 2023 | |||||||||||||||||||||||
Common Warrants | $ | January 13, 2022 | March 1, 2022 to March 1, 2027 | |||||||||||||||||||||||
Common Warrants | $ | March 1, 2022 | March 1, 2022 to March 1, 2027 | |||||||||||||||||||||||
Common Warrants | $ | May 4, 2022 | May 4, 2022 to May 4, 2027 | |||||||||||||||||||||||
Common Warrants | $ | May 24, 2022 | May 24, 2022 to May 24, 2027 | |||||||||||||||||||||||
Common Warrants | $ | June 28, 2022 | June 28, 2022 to June 28, 2027 | |||||||||||||||||||||||
Total |
Common stock issuable upon the exercise of stock options outstanding | |||||
Common stock issuable upon the exercise of common stock warrants | |||||
Common stock available for future issuance under the 2019 ESPP | |||||
Common stock available for future issuance under the Amended and Restated 2014 Plan | |||||
Common stock available for future issuance under the Amended Inducement Plan | |||||
Common stock reserved for the conversion of convertible notes | |||||
Total common stock reserved for future issuance |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Research and development | $ | $ | $ | $ | |||||||||||||||||||
Selling and marketing | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
Three and Six Months Ended June 30, | |||||||||||
2022 | 2021 | ||||||||||
Expected volatility | % | % | |||||||||
Risk-free interest rate | % | % | |||||||||
Expected dividend yield | % | % | |||||||||
Expected term (years) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Allocated third-party development expenses: | |||||||||||||||||||||||
EVO100 for prevention of chlamydia/gonorrhea- Phase 3 (EVOGUARD) | $ | 5,455 | $ | 5,926 | $ | 13,742 | $ | 10,188 | |||||||||||||||
Total allocated third-party development expenses | 5,455 | 5,926 | 13,742 | 10,188 | |||||||||||||||||||
Unallocated internal research and development expenses: | |||||||||||||||||||||||
Noncash stock-based compensation expenses | 166 | 419 | 341 | 962 | |||||||||||||||||||
Payroll related expenses | 1,296 | 1,306 | 2,662 | 2,940 | |||||||||||||||||||
Outside services costs | 546 | 492 | 791 | 1,016 | |||||||||||||||||||
Other | 281 | 364 | 599 | 663 | |||||||||||||||||||
Total unallocated internal research and development expenses | 2,289 | 2,581 | 4,393 | 5,581 | |||||||||||||||||||
Total research and development expenses | $ | 7,744 | $ | 8,507 | $ | 18,135 | $ | 15,769 |
Three Months Ended June 30, | 2022 vs. 2021 | |||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||
Product sales, net | $ | 6,034 | $ | 1,857 | $ | 4,177 | 225 | % |
Three Months Ended June 30, | 2022 vs. 2021 | |||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||
Cost of goods sold | $ | 1,285 | $ | 839 | $ | 446 | 53 | % |
Three Months Ended June 30, | 2022 vs. 2021 | |||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||
Research and development | $ | 7,744 | $ | 8,507 | $ | (763) | (9) | % |
Three Months Ended June 30, | 2022 vs. 2021 | |||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||
Selling and marketing | $ | 12,298 | $ | 27,237 | $ | (14,939) | (55) | % |
Three Months Ended June 30, | 2022 vs. 2021 | |||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||
General and administrative | $ | 9,126 | $ | 6,416 | $ | 2,710 | 42 | % |
Three Months Ended June 30, | 2022 vs. 2021 | |||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||
Total other expense, net | $ | (101,541) | $ | 7,728 | $ | (109,269) | (1,414) | % |
Six Months Ended June 30, | 2022 vs. 2021 | |||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||
Product sales, net | $ | 10,285 | $ | 2,962 | $ | 7,323 | 247 | % |
Six Months Ended June 30, | 2022 vs. 2021 | |||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||
Cost of goods sold | $ | 2,351 | $ | 1,345 | $ | 1,006 | 75 | % |
Six Months Ended June 30, | 2022 vs. 2021 | |||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||
Research and development | $ | 18,135 | $ | 15,769 | $ | 2,366 | 15 | % |
Six Months Ended June 30, | 2022 vs. 2021 | |||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||
Selling and marketing | $ | 25,003 | $ | 57,762 | $ | (32,759) | (57) | % |
Six Months Ended June 30, | 2022 vs. 2021 | |||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||
General and administrative | $ | 18,144 | $ | 14,100 | $ | 4,044 | 29 | % |
Six Months Ended June 30, | 2022 vs. 2021 | |||||||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||||||
Total other expense, net | $ | (104,497) | $ | 6,448 | $ | (110,945) | (1,721) | % |
Six Months Ended June 30, | 2022 vs. 2021 | ||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | ||||||||||||||||||||
Net cash, cash equivalents and restricted cash used in operating activities | $ | (47,579) | $ | (88,035) | $ | 40,456 | (46) | % | |||||||||||||||
Net cash, cash equivalents and restricted cash used in investing activities | (236) | (2,039) | 1,803 | (88) | % | ||||||||||||||||||
Net cash, cash equivalents and restricted cash provided by financing activities | 56,493 | 80,811 | (24,318) | (30) | % | ||||||||||||||||||
Net decrease in cash, cash equivalents and restricted cash | $ | 8,678 | $ | (9,263) | $ | 17,941 | (194) | % |
Exhibit No. | Exhibit Title | Filed Herewith | Incorporated by Reference | ||||||||||||||||||||||||||
Form | File No. | Date Filed | |||||||||||||||||||||||||||
3.1 | 10-Q | 001-36754 | 5/10/2022 | ||||||||||||||||||||||||||
3.2 | 8-K | 001-36754 | 5/5/2022 | ||||||||||||||||||||||||||
3.3 | 8-K | 001-36754 | 1/17/2018 | ||||||||||||||||||||||||||
4.1^^ | 8-K | 001-36754 | 5/5/2022 | ||||||||||||||||||||||||||
4.2^^ | 8-K | 001-36754 | 5/5/2022 | ||||||||||||||||||||||||||
4.3 | 8-K | 001-36754 | 5/5/2022 | ||||||||||||||||||||||||||
4.4 | 8-K | 001-36754 | 5/23/2022 | ||||||||||||||||||||||||||
4.5 | 8-K | 001-36754 | 5/23/2022 | ||||||||||||||||||||||||||
10.1 | 8-K | 001-36754 | 4/7/2022 | ||||||||||||||||||||||||||
10.2 | 8-K | 001-36754 | 5/5/2022 | ||||||||||||||||||||||||||
10.3 | 8-K | 001-36754 | 5/5/2022 | ||||||||||||||||||||||||||
10.4 | 8-K | 001-36754 | 5/5/2022 | ||||||||||||||||||||||||||
10.5^^ | X | ||||||||||||||||||||||||||||
31.1 | X | ||||||||||||||||||||||||||||
31.2 | X | ||||||||||||||||||||||||||||
32.1* | X | ||||||||||||||||||||||||||||
101.INS† | XBRL Instance Document | X | |||||||||||||||||||||||||||
101.SCH† | XBRL Taxonomy Extension Schema Document | X | |||||||||||||||||||||||||||
101.CAL† | XBRL Taxonomy Extension Calculation Linkbase Document | X | |||||||||||||||||||||||||||
101.DEF† | XBRL Definition Linkbase Document | X | |||||||||||||||||||||||||||
101.LAB† | XBRL Taxonomy Extension Labels Linkbase Document | X | |||||||||||||||||||||||||||
101.PRE† | XBRL Taxonomy Extension Presentation Linkbase Document | X |
* | Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation by reference language in such filing. | ||||
† | The financial information of Evofem Biosciences, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 filed on August 12, 2022 formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) Parenthetical Data to the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Operations, (iv) the Condensed Consolidated Statements of Stockholders’ Deficit, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Unaudited Condensed Consolidated Financial Statements, is furnished electronically herewith. | ||||
^^ | Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule upon request by the SEC. |
EVOFEM BIOSCIENCES, INC. | ||||||||
Date: August 12, 2022 | By: | /s/ Justin J. File | ||||||
Justin J. File | ||||||||
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
If to Sublessor: Evofem Biosciences, Inc. 12400 High Bluff Drive, Suite 600 San Diego, CA 92130 ________________________________ ________________________________ ________________________________ | If to Sublessee: AMN Healthcare, Inc. 12400 High Bluff Drive, Suite 500 San Diego, CA 92130 ________________________________ ________________________________ |
SUBLESSOR: | SUBLESSEE: | |||||||
Evofem Biosciences, Inc. | AMN Healthcare, Inc. | |||||||
By:________________________________ | By:________________________________ | |||||||
Name:_____________________________ | Name:_____________________________ | |||||||
Title:______________________________ | Title:______________________________ | |||||||
Date: 5/27/2022 . | Date: 5/27/2022 . |
1 | I have reviewed this quarterly report on Form 10-Q of Evofem Biosciences, Inc.; |
2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4 | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5 | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 12, 2022 | By: | /s/ Saundra Pelletier | ||||||
Saundra Pelletier | ||||||||
President, Chief Executive Officer, and Interim Chairperson of the Board | ||||||||
(Principal Executive Officer) |
1 | I have reviewed this quarterly report on Form 10-Q of Evofem Biosciences, Inc.; |
2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4 | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5 | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 12, 2022 | By: | /s/ Justin J. File | ||||||
Justin J. File | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer and Principal Accounting Officer) |
(1) | The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 12, 2022 | By: | /s/ Saundra Pelletier | ||||||
Saundra Pelletier | ||||||||
President, Chief Executive Officer, and Interim Chairperson of the Board | ||||||||
(Principal Executive Officer) |
Date: August 12, 2022 | By: | /s/ Justin J. File | ||||||
Justin J. File | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer and Principal Accounting Officer) |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (125,980) | $ (33,426) | $ (157,868) | $ (79,577) |
Other comprehensive income: | ||||
Change in fair value of financial instruments attributed to credit risk change | (3,675) | 0 | (3,494) | 0 |
Comprehensive loss | $ (129,655) | $ (33,426) | $ (161,362) | $ (79,577) |
Description of Business and Basis of Presentation |
6 Months Ended |
---|---|
Jun. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business and Basis of Presentation | Description of Business and Basis of Presentation Description of Business Evofem is a San Diego-based, commercial-stage biopharmaceutical company committed to developing and commercializing innovative products to address unmet needs in women’s sexual and reproductive health, including hormone-free, woman-controlled contraception and protection from certain sexually transmitted infections (STIs). The Company’s first commercial product, Phexxi® (lactic acid, citric acid, and potassium bitartrate) vaginal gel (Phexxi), was approved by the Food and Drug Administration (FDA) on May 22, 2020 and is the first and only FDA-approved, hormone-free, woman-controlled, on-demand prescription contraceptive gel for women. The Company commercially launched Phexxi in September 2020. Phexxi is currently being evaluated for two potential new indications, the prevention of urogenital chlamydia and gonorrhea in women – two of the most pervasive STIs in the United States. Currently, there are no FDA-approved prescription products for the prevention of either of these dangerous infections. The Company initiated its registrational Phase 3 clinical trial of Phexxi for these potential indications (EVOGUARD) in 2020, completed enrollment in March 2022, and expects to report top-line data in October 2022. Basis of Presentation and Principles of Consolidation The Company prepared the unaudited interim condensed consolidated financial statements included in this Quarterly Report in accordance with accounting principles generally accepted (GAAP) in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission (SEC) related to quarterly reports on Form 10-Q. The Company’s financial statements are presented on a consolidated basis, which include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The unaudited interim condensed consolidated financial statements do not include all information and disclosures required by GAAP for annual audited financial statements and should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2021 included in its Annual Report on Form 10-K as filed with the SEC on March 10, 2022 (the 2021 Audited Financial Statements). The unaudited interim condensed consolidated financial statements included in this report have been prepared on the same basis as the Company’s audited consolidated financial statements and include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the financial position, results of operations, cash flows, and statements of convertible and redeemable preferred stock and stockholders’ deficit for the periods presented. The results for the three and six months ended June 30, 2022 are not necessarily indicative of the results expected for the full year. The condensed consolidated balance sheet as of December 31, 2021 was derived from the 2021 Audited Financial Statements. Risks, Uncertainties and Going Concern The Company is susceptible to risks and uncertainties associated with the COVID-19 pandemic, which is affecting its employees, customers, communities, and business operations, as well as the U.S. and global economies and financial markets. Any disruptions in the commercialization of Phexxi and/or the completion of the Company's clinical trials, data analysis or readouts and/or any disruption in its supply chain could have a material adverse effect on its business, results of operations and financial condition. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and/or financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the success of ongoing COVID-19 vaccination efforts, the emergence, prevalence and strength of variant strains, actions taken to contain or treat the disease, as well as the economic impact on local, regional, national and international markets. The COVID-19 pandemic slowed the Company’s ability to generate product sales of Phexxi due to reduced access to medical offices and HCPs. The condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities, in the normal course of business, and does not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty. The Company’s principal operations have been related to research and development, including the development of Phexxi, and to its commercially related sales and marketing efforts. Additional activities have included raising capital, recruiting personnel, and establishing and maintaining a corporate infrastructure to support a commercial product. The Company has incurred operating losses and negative cash flows from operating activities since inception. In the first half of 2022, as described in Note 4- Debt and Note 8- Stockholders' Deficit, the Company received gross proceeds of approximately $10.0 million from the sale of notes and warrants in two registered direct offerings, gross proceeds of approximately $7.4 million from the sale and issuance of common stock pursuant to the Stock Purchase Agreement (as defined below), net proceeds of approximately $18.1 million (net of $5.9 million debt repayment and $2.6 million underwriting discounts and offering expenses) upon the sale and issuance of common stock, pre-funded warrants and common warrants from the underwritten public offering in May 2022, and net proceeds of $21.1 million (including $0.2 million that was included in prepaid and other current assets in the condensed consolidated balance sheet at June 30, 2022), from the exercise of common warrants. As of June 30, 2022, the Company had $19.9 million in cash and cash equivalents, $1.2 million in restricted cash from the Adjuvant Notes (as defined in Note 4- Debt) that was available for use, a working capital deficit of $223.6 million and an accumulated deficit of approximately $1.0 billion. The Company is subject to risks common to other life science companies in the development and early commercial stage including, but not limited to, uncertainty regarding the commercial success of Phexxi and the outcome of its EVOGUARD trial; potential disruption of its research and development and commercialization activities as a result of the COVID-19 pandemic; lack of marketing and sales history; potential development by its competitors of new and competitive technological innovations; dependence on key personnel; market acceptance of Phexxi or any other future approved products, if any; product liability; protection of proprietary technology; ability to raise additional funds through financings; ability to comply with debt covenants in its debt arrangements and to manage the existing defaults pursuant to its debt arrangements and compliance with FDA and other government regulations, including post marketing regulations. Management’s plans to meet its cash flow needs in the next 12 months include generating recurring product revenue and obtaining additional funding such as through the issuance of its capital stock, non-dilutive financings, or through collaborations or partnerships with other companies and negotiating possible amendments to our current agreements. Until August 10, 2022, the Company’s common stock was listed on The Nasdaq Capital Market, for which the Nasdaq Stock Market LLC (Nasdaq) imposes, among other requirements, a minimum $1.00 per share bid price requirement (the Bid Price Requirement) for continued inclusion on The Nasdaq Capital Market. The closing bid price for the Company’s common stock must remain at or above $1.00 per share to comply with the Bid Price Requirement for continued listing. From July 12, 2021 until May 5, 2022, the closing bid price for the Company’s common stock was below $1.00 per share. On August 23, 2021, the Company received a deficiency letter from the Staff of Nasdaq (the Staff) notifying it that, for the preceding 30 consecutive trading days, the closing bid price for shares of its common stock was below the minimum $1.00 per share requirement and that the Company had failed to comply with the Bid Price Requirement. In accordance with Nasdaq rules, the Company was provided until February 21, 2022 to regain compliance with the Bid Price Requirement. The Company did not evidence compliance with the Bid Price Requirement by February 22, 2022 and, as a result, the Staff notified the Company on February 22, 2022 that shares of its common stock were subject to delisting unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the Panel). The Company timely requested a hearing, and the hearing was held on March 31, 2022. On April 6, 2022, the Company received a notice indicating that the Panel determined to grant the Company an extension through May 20, 2022, to evidence compliance with the Bid Price Requirement, subject to a requirement that the Company obtain stockholder approval for a reverse stock split at its annual meeting on May 4, 2022. The Company obtained stockholder approval for the reverse stock split at its annual meeting on May 4, 2022, and effected the reverse stock split on May 5, 2022. According to this notice, if at any time before May 20, 2022, the closing bid price of the Company’s common stock was at least $1.00 per share for a minimum of 10 consecutive trading sessions, the Staff would provide written notification that the Company has achieved compliance with the Bid Price Requirement and the common stock would continue to be eligible for listing on the Nasdaq Capital Market. The Company did achieve compliance for the 10 consecutive trading sessions specified in the notice, however, the Panel subsequently elected to continue monitoring the price of the Company’s common stock. From May 20, 2022 through June 24, 2022, the closing price of the Company’s common stock was below $1.00. On June 8, 2022, the Company received a notice from the Panel that the Company would be permitted to continue its listing on the Nasdaq Capital Market through August 22, 2022 (the Extended Date) to afford the Company the opportunity to regain compliance with the Bid Price Requirement. The Company continued to discuss with and submit additional information to the Panel, and the Panel modified the June 8, 2022 notice. As modified, the Panel permitted the continued listing of the Company’s common stock on The Nasdaq Capital Market, provided that (i) on or before August 22, 2022, the Company demonstrate compliance with the Bid Price Requirement, by evidencing a closing bid price of $1.00 or more for a minimum of 10 consecutive trading sessions or (ii) if the Company did not demonstrate compliance before August 8, 2022, the Company evidenced a closing bid price of $1.00 or more on August 8, 2022 and each trading session thereafter through August 22, 2022. The Company did not achieve these conditions. On August 9, 2022, the Company received a written notice from the Panel that it had determined to delist the Company’s securities from The Nasdaq Capital Market as a result of the Company’s failure to regain compliance with the Bid Price Requirement. Trading of the shares on The Nasdaq Capital Market was suspended effective at the open of business on August 11, 2022. This suspension and any delisting of the Company’s shares from The Nasdaq Capital Market will likely result in events of default under the Company’s existing debt arrangements, make shares of the Company’s common stock less liquid and make it more difficult for the Company to raise funds when and as needed to fund its operations. Shares of the Company’s common stock began trading on the OTC Markets Group platform effective as of market open on August 11, 2022. The Company is applying for trading of its shares of common stock on the OTCQB marketplace. The Company has recognized limited revenues since the launch of Phexxi in September 2020, and anticipates it will continue to incur net losses for the foreseeable future. According to management estimates, liquidity resources as of June 30, 2022 are not sufficient to maintain the Company’s cash flow needs for the twelve months from the date of issuance of these condensed consolidated financial statements. These circumstances and the uncertainties associated with the Company’s ability to obtain additional equity or debt financing on terms that are favorable to the Company, or at all, and otherwise succeed in its future operations raise substantial doubt about the Company’s ability to continue as a going concern. If the Company is not able to obtain the required funding in the near term, through a significant increase in revenue, equity or debt financings, license agreements for Phexxi in foreign markets, or other means, or is unable to obtain funding on terms favorable to the Company, or an event of default affecting the notes payable, there will be a material adverse effect on commercialization and development operations and the Company's strategic development plan for future growth. If the Company cannot successfully raise additional funding and implement its strategic development plan, the Company may be forced to make reductions in spending, including spending in connection with its commercialization activities, extend payment terms with suppliers, liquidate assets where possible at a potentially lower amount than as recorded in the condensed consolidated financial statements, suspend or curtail planned operations or cease operations entirely. Any of these could materially and adversely affect the Company's liquidity, financial condition and business prospects, and the Company would not be able to continue as a going concern.
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Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the notes thereto. Significant estimates affecting amounts reported or disclosed in the condensed consolidated financial statements include, but are not limited to: the assumptions used in measuring the revenue gross-to-net variable consideration items, the trade accounts receivable credit loss reserve estimate, the discount rate used in estimating the fair value of the lease right-of-use (ROU) assets and lease liabilities, the assumptions used in estimating the fair value of notes, derivative liabilities, convertible preferred stock, warrants and purchase rights issued, the useful lives of property and equipment, the recoverability of long-lived assets, inventory reserves, clinical trial accruals, the assumptions used in estimating the fair value of stock-based compensation expense and in assessing the probability of achieving certain milestones associated with the performance-based restricted stock awards (performance-based RSAs). These assumptions are more fully described in Note 3- Revenue, Note 4- Debt, Note 6- Fair Value of Financial Instruments, Note 7- Commitments and Contingencies, and Note 9- Stock-based Compensation. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances and adjusts when facts and circumstances dictate. The estimates are the basis for making judgments about the carrying values of assets, liabilities and recorded expenses that are not readily apparent from other sources. As future events and their effects cannot be determined with precision, actual results may materially differ from those estimates or assumptions. Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, the Chief Executive Officer of the Company, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment. Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. Deposits in the Company’s checking, time deposit and investment accounts are maintained in federally insured financial institutions and are subject to federally insured limits or limits set by Securities Investor Protection Corporation. The Company invests in funds through a major U.S. bank and is exposed to credit risk in the event of default to the extent of amounts recorded on the condensed consolidated balance sheets. The Company has not experienced any losses in such accounts and believes it is not exposed to significant concentrations of credit risk on its cash, cash equivalents and restricted cash balances on amounts in excess of federally insured limits due to the financial position of the depository institutions in which these deposits are held. The Company is also subject to credit risk related to its trade accounts receivable from product sales. Its customers are located in the United States and consist of wholesale distributors, retail pharmacies, and a mail-order specialty pharmacy. The Company extends credit to its customers in the normal course of business after evaluating their overall financial condition and evaluates the collectability of its accounts receivable by periodically reviewing the age of the receivables, the financial condition of its customers, and its past collection experience. Historically, the Company has not experienced any credit losses. As of June 30, 2022, based on the evaluation of these factors, the Company did not record an allowance for doubtful accounts. Phexxi is distributed primarily through three major distributors and a mail-order pharmacy, who receive service fees calculated as a percentage of the gross sales, and fee per units shipped, respectively. These entities are not obligated to purchase any set number of units and distribute Phexxi on demand as orders are received. For the three and six months ended June 30, 2022, the Company’s three largest customers combined made up approximately 72% and 71% of its gross product sales, respectively. For the three and six months ended June 30, 2021, the Company’s three largest customers combined made up approximately 83% and 85% of its gross product sales, respectively. As of June 30, 2022 and December 31, 2021, the Company's three largest customers combined made up 78% and 75%, respectively, of its trade accounts receivable balance. Significant Accounting Policies There have been no changes to the significant accounting policies that were described in Note 2- Summary of Significant Accounting Policies of the 2021 Audited Financial Statements in the Company's Annual Report. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents consist of readily available cash in checking accounts and money market funds. Restricted cash consists of cash held in monthly time deposit accounts and letters of credit, which are collateral for the Company’s facility leases and fleet leases, as described in Note 7- Commitments and Contingencies. As of June 30, 2022, the Company maintained letters of credit of $0.8 million and $0.3 million for its office lease and fleet leases, respectively. Additionally, the remaining $1.2 million of the $25.0 million received from the issuance of Adjuvant Notes (as defined in Note 4- Debt) in the fourth quarter of 2020, is classified as restricted cash as the Company is contractually obligated to use the funds for specific purposes. The following table provides a reconciliation of cash, cash equivalents and restricted cash, reported within the condensed consolidated statements of cash flows (in thousands):
Net Loss Per Share Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share calculation, potentially dilutive securities are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and, therefore, basic and diluted net loss per share were the same for all periods presented. Potentially dilutive securities excluded from the calculation of diluted net loss per share are summarized in the table below. Common shares were calculated for the convertible debt using the if-converted method.
Recently Adopted Accounting Pronouncements In August 2020, the Financial Accounting Standards Board (FASB) issued ASU No. 2020-06, Debt (ASU No. 2020-06), removing, modifying, and adding certain disclosure requirements of ASC 470, Debt with Conversion and Other Options, (ASC 470) and ASC 815, Derivatives and Hedging - Contracts in Entity’s Own Equity (ASC 815). The Company early adopted ASU No. 2020-06 on January 1, 2022 using the modified retrospective method. The adoption of this new standard resulted in additional required disclosures related to the notes as described in Note 8- Stockholders' Deficit. In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) to clarify and reduce diversity in the accounting for modifications or exchanges of freestanding equity-classified written call options. ASU No. 2021-04 was effective for the Company on January 1, 2022. The adoption of this new standard did not have a material impact on the Company's condensed consolidated financial statements.
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Revenue from Contract with Customer [Abstract] | |
Revenue | Revenue The Company recognizes revenue from the sale of Phexxi in accordance with ASC 606, Revenue from Contracts with Customers (ASC 606). The provisions of ASC 606 require the following steps to determine revenue recognition: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. In accordance with ASC 606, the Company recognizes revenue when its performance obligation is satisfied by transferring control of the product to a customer. In accordance with the Company’s contracts with customers, control of the product is transferred upon the conveyance of title, which occurs when the product is sold to and received by a customer. The Company’s customers are located in the United States and consist of wholesale distributors, retail pharmacies, and a mail-order specialty pharmacy. Payment terms typically range from 31 to 66 days, include prompt pay discounts, and vary by customer. Trade accounts receivable due to the Company from contracts with its customers are stated separately in the balance sheet, net of various allowances as described in the Trade Accounts Receivable policy in Note 2- Summary of Significant Accounting Policies to the 2021 Audited Financial Statements. The amount of revenue recognized by the Company is equal to the amount of consideration that is expected to be received from the sale of product to its customers. Revenue is only recognized when the performance obligation is satisfied. To determine whether a significant reversal will occur in future periods, the Company assesses both the likelihood and magnitude of any such potential reversal of revenue. Phexxi is sold to customers at the wholesale acquisition cost (WAC), or in some cases at a discount to WAC. However, the Company records product revenue, net of reserves for applicable variable consideration. These types of variable consideration reduce revenue and include the following: •Distribution services fees •Prompt pay and other discounts •Product returns •Chargebacks •Rebates •Patient support programs, including our co-pay programs An estimate for variable consideration is made with each sale and is recorded in conjunction with the revenue being recognized. To calculate the variable consideration, the Company uses the expected value method. If the estimated amount is payable to a customer, it is recorded as a reduction to accounts receivable. If the estimated amount is payable to an entity other than a customer, it is recorded as a current liability. An estimated amount of variable consideration may differ from the actual amount. At each balance sheet date, these provisions are analyzed and adjustments are made if necessary. Any adjustments made to these provisions would also affect net product revenue and earnings. In accordance with ASC 606, the Company must make significant judgments to determine the estimate for certain variable consideration. For example, the Company must estimate the percentage of end-users that will obtain the product through public insurance such as Medicaid or through private commercial insurance. To determine these estimates, the Company relies on historical sales data showing the amount of various end-user consumer types, inventory reports from the wholesale distributors and mail-order specialty pharmacy, and other relevant data reports. Because Phexxi was launched in September 2020, this historical data is limited. Due to limits on historical data, the Company has also used trend analysis and professional judgment in developing these estimates. The specific considerations that the Company uses in estimating these amounts related to variable consideration are as follows: Distribution services fees – The Company pays distribution service fees to its wholesale distributors and mail-order specialty pharmacy. These fees are a contractually fixed percentage of WAC and are calculated at the time of sale based on the purchase amount. The Company considers these fees to be separate from the customer’s purchase of the product, therefore, they are recorded in other current liabilities on the condensed consolidated balance sheet. Prompt pay and other discounts – The Company incentivizes its customers to pay their invoices on time through prompt pay discounts. These discounts are an industry standard practice, and the Company offers a prompt pay discount to each wholesale distributor and retail pharmacy customer. The specific prompt pay terms vary by customer and are contractually fixed. Prompt pay discounts are typically taken by the Company’s customers, so an estimate of the discount is recorded at the time of sale based on the purchase amount. Prompt pay discount estimates are recorded as contra trade accounts receivable on the condensed consolidated balance sheet. The Company may also give other discounts to its customers to incentivize purchases and promote customer loyalty. The terms of such discounts may vary by customer. These discounts reduce gross product revenue at the time the revenue is recognized. Chargebacks – Certain government entities and covered entities (e.g. Veterans Administration, 340B covered entities) are able to purchase the product at a price discounted below WAC. The difference between the government or covered entity purchase price and the wholesale distributor purchase price of WAC will be charged back to the Company. The Company estimates the amount of each chargeback channel based on the expected number of claims in each channel and related chargeback that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Estimated chargebacks are recorded as contra trade accounts receivable on the condensed consolidated balance sheet. Rebates – The Company is subject to mandatory discount obligations under the Medicaid and Tricare programs. The rebate amounts for these programs are determined by statutory requirements or contractual arrangements. Rebates are owed after the product has been dispensed to an end user and the Company has been invoiced. Rebates for Medicaid and Tricare are typically invoiced in arrears. The Company estimates the amount in rebates based on the expected number of claims and related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Rebate estimates are recorded as other current liabilities on the condensed consolidated balance sheet. Patient support programs – One type of patient support program the Company offers is a co-pay program to commercially insured patients whose insurance requires a co-pay to be made when filling their prescription. This is a voluntary program that is intended to provide financial assistance to patients meeting certain eligibility requirements. The benefit amount is capped at a maximum per patient level each calendar year. The Company estimates the amount of financial assistance for these programs based on the expected number of claims and related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Patient support programs estimates are recorded as other current liabilities on the condensed consolidated balance sheet. Product returns – Customers have the right to return product that is within six months or less of the labeled expiration date or that is past the expiration date by no more than six months. Phexxi was commercially launched in September 2020 and there have been minimal returns as of June 30, 2022. The Company uses historical sales and return data to estimate future product returns. Product return estimates are recorded as other current liabilities on the condensed consolidated balance sheet. As of June 30, 2022 and December 31, 2021, the variable considerations discussed above were recorded in the condensed consolidated balance sheet and consisted of $0.3 million and $0.1 million, respectively, in contra trade accounts receivable and $2.4 million and $2.2 million, respectively, in other current liabilities.
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Debt | Debt Convertible Notes Baker Bros. Notes On April 23, 2020, the Company entered into a Securities Purchase and Security Agreement (the Baker Bros. Purchase Agreement) with certain affiliates of Baker Bros. Advisors LP, as purchasers (the Baker Purchasers), and Baker Bros. Advisors LP, as designated agent, pursuant to which the Company agreed to issue and sell to the Baker Purchasers (i) convertible senior secured promissory notes (the Baker Notes) in an aggregate principal amount of up to $25.0 million and (ii) warrants to purchase shares of common stock (the Baker Warrants) in a private placement. At the initial closing date of April 24, 2020 (the Baker Initial Closing), the Company issued and sold Baker Notes with an aggregate principal amount of $15.0 million (the Baker First Closing Notes) and Baker Warrants exercisable for 204,918 shares of common stock. Following the Baker Initial Closing, the Baker Purchasers had an option to purchase from the Company up to $10.0 million of Baker Notes (the Baker Purchase Rights) at the Baker Purchasers’ discretion at any time prior to the Company receiving at least $100.0 million in aggregate gross proceeds from one or more sales of equity securities. On June 5, 2020 (the Exercise Date), the Baker Purchasers exercised the Baker Purchase Rights. At the second closing date of June 9, 2020 (the Baker Second Closing), the Baker Purchasers acquired the remaining Baker Notes with an aggregate principal amount of $10.0 million and Baker Warrants exercisable for 136,612 shares of common stock. Upon the completion of the underwritten public offering in June 2020, the exercise price of the Baker Warrants was $36.60 per share. The Baker Warrants have a five-year term with a cashless exercise provision and are immediately exercisable at any time from their respective issuance date. The Baker Notes have a five-year term, with no pre-payment ability during the first three years. Interest on the unpaid principal balance of the Baker Notes (the Baker Outstanding Balance) accrues at 10.0% per annum with interest accrued during the first year from the two respective closing dates recognized as payment-in-kind. The effective interest rate for the period was 10.0%. Accrued interest beyond the first year of the respective closing dates is to be paid in arrears on a quarterly basis in cash or recognized as payment-in-kind, at the direction of the Baker Purchasers. The Baker Purchasers elected to have the accrued interest for the first quarter of 2021 paid-in-kind, and the accrued interest going forward to be paid in cash. Interest pertaining to the Baker Notes for the three and six months ended June 30, 2022 and 2021 was approximately $0.7 million and $1.4 million, respectively. The Company accounts for the Baker Notes under the fair value method. Therefore, the interest associated with the Baker Notes was included in the fair value determination. The Baker Notes are callable by the Company on 10 days’ written notice beginning on the third anniversary of the initial closing date of April 24, 2020. The call price will equal 100% of the Baker Outstanding Balance plus accrued and unpaid interest if the Company’s common stock as measured using a 30-day volume weighted average price (VWAP) is greater than the benchmark price of $74.85 as stated in the Baker Bros. Purchase Agreement, or 110% of the Baker Outstanding Balance plus accrued and unpaid interest if the VWAP is less than such benchmark price. The Baker Purchasers also have the option to require the Company to repurchase all or any portion of the Baker Notes in cash upon the occurrence of certain events. In a repurchase event, as defined in the Baker Bros. Purchase Agreement, the repurchase price will equal 110% of the Baker Outstanding Balance plus accrued and unpaid interest. In an event of default or the Company’s change of control, the repurchase price will equal to the sum of (x) three times of the Baker Outstanding Balance plus (y) the aggregate value of future interest that would have accrued. The Baker Notes were convertible at any time at the option of the Baker Purchasers at the conversion price of $36.60 per share prior to the First and Second Baker Amendments (as defined below). The Company evaluated whether any of the Embedded Features required bifurcation as a separate component of equity. The Company elected the fair value option (FVO) under ASC 825, Financial Instruments (ASC 825), as the Baker Notes are qualified financial instruments and are, in whole, classified as liabilities. Under the FVO, the Company recognized the hybrid debt instrument at fair value, inclusive of the Embedded Features. On November 20, 2021, the Company entered into the first amendment to the Baker Bros. Purchase Agreement (the First Baker Amendment), in which each Baker Purchaser had the right to convert all or any portion of the Baker Notes into common stock at a conversion price equal to the lesser of (a) $36.60 and (b) 115% of the lowest price per share of common stock (or, as applicable with respect to any equity securities convertible into common stock, 115% of the applicable conversion price) sold in one or more equity financings until the Company had met a qualified financing threshold defined as one or more equity financings resulting in aggregate gross proceeds to the Company of at least $50 million (the Financing Threshold). The First Baker Amendment also extended, effective upon the Company’s achievement of the Financing Threshold, the affirmative covenant to achieve $100.0 million in cumulative net sales of Phexxi by June 30, 2022 to June 30, 2023. Additionally per the First Baker Amendment, if in any equity financing closing on or prior to the date the Company has met the Financing Threshold, the Company was required to issue warrants to purchase capital stock of the Company (or other similar consideration), the Company was also required to issue to the Baker Purchasers an equivalent coverage of warrants (or other similar consideration) on the same terms as if the Baker Purchasers participated in the financing in an amount equal to the then outstanding principal of the Baker Notes held by the Baker Purchasers. In satisfaction of this requirement in connection with the closing of the May 2022 Public Offering, the Company issued warrants to purchase 72,860,769 shares of the Company's common stock at an exercise price of $0.75 per share (the June 2022 Baker Warrants). As required by the terms of the First Baker Amendment, the June 2022 Baker Warrants have substantially the same terms as the warrants issued in the May 2022 Public Offering. Refer to Note 8- Stockholders' Deficit for further information. On March 21, 2022, the Company entered into the second amendment to the Baker Bros. Purchase Agreement (the Second Baker Amendment), pursuant to which each Baker Purchaser now has the right to convert all or any portion of the Baker Notes into Common Stock at a conversion price equal to the lesser of (a) $5.8065 or (b) 100% of the lowest price per share of common stock (or as applicable with respect to any equity securities convertible into common stock, 100% of the applicable conversion price) sold in any equity financing until the Company has (i) met the qualified financing threshold by June 30, 2022, defined as a single underwritten financing resulting in aggregate gross proceeds to the Company of at least $20 million (Qualified Financing Threshold) and (ii) the disclosure of its top-line results from its EVOGUARD clinical trial (the Clinical Trial Milestone) by October 31, 2022. The Second Baker Amendment also provides that the exercise price of the Baker Warrants will equal the conversion price of the Baker Notes. The Company met the Qualified Financing Threshold upon the closing of the May 2022 Public Offering, and as of June 30, 2022, the conversion price and exercise price of the Baker Warrants was reset to $0.75. As a result of this modification to the Baker Warrants exercise price, the Company recorded $0.2 million in incremental expense in general and administrative operating expenses in the condensed consolidated statements of operations. The Second Baker Amendment also extended, effective upon the Company’s achievement of the Qualified Financing Threshold, the affirmative covenant to achieve $100.0 million in cumulative net sales of Phexxi by June 30, 2022 to October 31, 2022. The Second Baker Amendment further extends, effective upon the Company’s achievement of the Qualified Financing Threshold by June 30, 2022 and the Clinical Trial Milestone by October 31, 2022, the affirmative covenant to achieve $100.0 million in cumulative net sales of Phexxi to June 30, 2023. The Company achieved the Qualified Financing Threshold in May 2022. Using the valuation methods discussed in Note 6- Fair Value Financial Instruments, the Company recorded a $1.1 million net loss in fair value of financial instruments as a result of mark-to-market adjustments recognized on the Baker Notes for the quarter ended June 30, 2022 in the condensed consolidated financial statements. For the three and six months ended June 30, 2022, the Company recognized a loss of $3.7 million and $3.5 million, respectively, due to changes in the underlying instrument-specific credit risk for the Baker Notes. These losses are presented separately as a component of other comprehensive income. The change in fair value attributed to the change in the underlying instrument-specific credit risk was determined by taking the difference between the fair value of the Baker Notes with and without the credit risk change. The Baker Notes contain various customary affirmative and negative covenants agreed to by the Company. The Company was in compliance with all applicable covenants at June 30, 2022, except the required payments of accrued interest for the first and second quarters of 2022 in the aggregate amount of $1.4 million and related cross default covenants. As a result of the cross default provisions applicable to the Adjuvant Notes and the May 2022 Notes, the Company is in default of the Baker Notes, the Adjuvant Notes, and the May 2022 Notes. The Baker Notes also include other customary events of default and cross-default as set forth in the Baker Bros. Purchase Agreement, which include a failure of the Company to maintain the listing of its shares of common stock on the Nasdaq Capital Market. As a result of the current default, the Baker Purchasers have the right to accelerate repayment of all amounts owed pursuant to the Baker Notes or to request redemption of the Baker Notes in an amount equal to three times the outstanding balance plus accrued interest and a make-whole amount further described in the Baker Purchase Agreement. As of June 30, 2022, the Baker Notes are recorded at fair value in the condensed consolidated balance sheet as short-term convertible notes payable with a total balance of $87.2 million; the total outstanding balance including principal and accrued interest was $28.7 million. As of June 30, 2022 and assuming the current conversion price of $0.75 per share, the Baker Notes could be converted into 38,262,024 shares of common stock and the Baker Warrants and June 2022 Baker Warrants are exercisable for 73,202,299, shares of common stock at an exercise price of $0.75 per share. Adjuvant Notes On October 14, 2020, the Company entered into a Securities Purchase Agreement (the Adjuvant Purchase Agreement) with Adjuvant Global Health Technology Fund, L.P., and Adjuvant Global Health Technology Fund DE, L.P. (together, the Adjuvant Purchasers), pursuant to which the Company sold unsecured convertible promissory notes (the Adjuvant Notes) in aggregate principal amount of $25.0 million. The Adjuvant Notes have a five-year term with interest accruing at 7.5% per annum on a quarterly basis in arrears to the outstanding balance of the Adjuvant Notes and are recognized as payment-in-kind. The effective interest rate for the period was 7.7%. Interest expense is included in Adjuvant convertible notes payable on the condensed consolidated balance sheet. Interest expense for the Adjuvant Notes for the three and six months ended June 30, 2022 and 2021 consisted of the following (in thousands):
The Adjuvant Notes were originally convertible, subject to customary 4.99% and 19.99% beneficial ownership limitations, into shares of the Company’s common stock, par value $0.0001 per share, at any time at the option of the Adjuvant Purchasers at a conversion price of $54.75 per share. In connection with certain Company change of control transactions, the Adjuvant Notes may be prepaid at the option of the Company or will become payable at the option of the Adjuvant Purchasers. To the extent not previously prepaid or converted, the Adjuvant Notes were originally automatically convertible into shares of the Company’s common stock at a conversion price of $54.75 per share immediately following the earliest of the time at which the (i) 30-day value-weighted average price of the Company’s common stock was $150.00 per share, or (ii) Company achieved cumulative net sales from the sales of Phexxi of $100.0 million, provided such net sales are achieved prior to July 1, 2022. On April 4, 2022, the Company entered into the first amendment to the Adjuvant Purchase Agreement (the Adjuvant Amendment). The Adjuvant Amendment extended, effective as of the date the Company achieved the Qualified Financing Threshold upon the closing of the May 2022 Public Offering, the affirmative covenant to achieve $100.0 million in cumulative net sales of Phexxi by June 30, 2022 to June 30, 2023. The Adjuvant Amendment also provided for an adjustment to the conversion price of the Adjuvant Notes such that the conversion price (the Conversion Price) for these Notes, effective as of the reverse stock split the conversion price will now be the lesser of (i) $5.4279 and (ii) 100% of the lowest price per share of common stock (or with respect to securities convertible into common stock, 100% of the applicable conversion price) sold in any equity financing until the Company has met the Qualified Financing Threshold. As of June 30, 2022 and upon the closing of the May 2022 Public Offering, the conversion price was reset to $0.75. Effective as of the Company’s achievement of the Qualified Financing Threshold, the automatic conversion provisions in the Agreement were further amended to provide that the Adjuvant Notes will automatically convert into shares of the Company’s common stock at the Conversion Price immediately following the earliest of the time at which the (i) 30-day value-weighted average price of the Company’s common stock is $150.00 per share, or (ii) the Company achieves cumulative net sales from the sales of Phexxi of $100.0 million, provided such net sales are achieved prior to July 1, 2023. The Adjuvant Notes contain various customary affirmative and negative covenants agreed to by the Company. The Company was in compliance with all applicable covenants at June 30, 2022, except for the cross default provisions related to the required payments of accrued interest pursuant to the Baker Notes described above. As a result of this default, the holders of the Adjuvant Notes have the right to accelerate payments of all amounts due under the Adjuvant Notes. The Adjuvant Notes also include other customary events of default and cross-default as set forth in the Adjuvant Purchase Agreement. The Adjuvant Notes are classified as current liabilities in the condensed consolidated balance sheet due as a result of these circumstances. The Adjuvant Notes are accounted for in accordance with authoritative guidance for convertible debt instruments. The $25.0 million in proceeds is considered to be restricted cash for financial reporting purposes due to contractual stipulations that specify the types of expenses the money can be spent on and how it must be allocated. As of June 30, 2022, $1.2 million in proceeds remain that are included in restricted cash on the accompanying condensed consolidated balance sheet. As of June 30, 2022, the Adjuvant Notes are recorded in the condensed consolidated balance sheet as short-term convertible notes payable with a total balance of $28.3 million. The balance is comprised of $24.9 million in principal, net of unamortized debt issuance costs, and $3.4 million in accrued interest. As of June 30, 2022 and assuming the current conversion price of $0.75 per share, the Adjuvant Notes could be converted into 37,853,578 shares of common stock. Term Notes January and March 2022 Notes On January 13, 2022, the Company entered into a Securities Purchase Agreement (the January 2022 Purchase Agreement) with institutional investors (the January 2022 Purchasers) pursuant to which the Company agreed to sell in a registered direct offering (i) unsecured 5.0% Senior Subordinated Notes due 2025 with an aggregate issue price of $5.9 million (the January 2022 Notes), which included an original issue discount of $0.9 million, and (ii) warrants (the January 2022 Warrants) to purchase up to 1,000,400 shares of the Company’s common stock, $0.0001 par value per share. The January 2022 Warrants have an exercise price of $5.88 per share and were initially exercisable beginning on July 15, 2022 with a five-year term. Pursuant to the terms of the March 2022 Purchase Agreement (as defined below), the January 2022 Warrants became exercisable on March 1, 2022, as described in more detail below. On March 1, 2022, the Company entered into a Securities Purchase Agreement (the March 2022 Purchase Agreement) with institutional investors (the March 2022 Purchasers) pursuant to which the Company agreed to sell in a registered direct offering (i) unsecured 5.0% Senior Subordinated Notes due 2025 with an aggregate issue price of $7.45 million (the March 2022 Notes), which included an original issue discount of $2.45 million, and (ii) warrants (the March 2022 Warrants) to purchase up to 1,037,885 shares of the Company’s common stock, $0.0001 par value per share. The March 2022 Warrants have an exercise price of $7.1805 per share and are immediately exercisable with a five-year term. The January and March 2022 Notes carried an interest rate of 5% per annum, which was subject to increase to 18% upon an event of default. The January and March 2022 Notes were able to be prepaid, in whole or in part, at the Company’s option together with all accrued and unpaid interest and fees as of the date of the repayment. The holders of the January and March 2022 Notes were able to require the Company to redeem their respective notes upon the occurrence of an event of default with a redemption premium of 25%. The holders of the January and March 2022 Notes were also able to require the Company to redeem their respective notes upon the occurrence of certain subsequent transactions. Pursuant to the terms of the January and March 2022 Purchase Agreements, the Company agreed to certain restrictions on effecting variable rate transactions so long as the January and March 2022 Notes were outstanding. Also, pursuant to the terms of the January and March 2022 Purchase Agreements, the January and March 2022 Purchasers had certain rights to participate in subsequent issuances of the Company’s securities, subject to certain exceptions. The Company evaluated the January and March 2022 Notes to determine if any embedded components qualified as a derivative requiring bifurcation in accordance with ASC 815. The Company determined that the embedded put option and interest rate increase feature would both require bifurcation and separate accounting. Therefore, the Company elected to use the fair value option under ASC 825, Financial Instruments (ASC 825) for the January and March 2022 Notes inclusive of the embedded features. The Company evaluated the January and March 2022 Warrants and determined that in accordance with ASC 815 the warrants should be recorded at fair value and classified as a derivative liability in the condensed consolidated balance sheet. Both the January and March 2022 Notes and Warrants are marked-to-market at each reporting date. Under the valuation methods as described in Note 6- Fair Value Financial Instruments, the Company recorded the following in the condensed consolidated financial statements related to the January 2022 Notes and Warrants during the six months ended June 30, 2022: (i) $0.1 million in notes at issuance; (ii) $4.6 million in warrants at issuance as a derivative liability; (iii) a $0.3 million gain on issuance; and (iv) a $3.9 million gain in fair value of financial instruments as a result of the mark-to-market adjustment on the January 2022 Warrants. Under the valuation methods as described in Note 6- Fair Value Financial Instruments, the Company recorded the following in the condensed consolidated financial statements related to the March 2022 Notes and Warrants during the six months ended June 30, 2022: (i) $0.1 million in notes at issuance; (ii) $6.0 million in warrants at issuance as a derivative liability; (iii) a $1.2 million loss on issuance; and (iv) a $5.3 million gain in fair value of financial instruments as a result of the mark-to-market adjustment on the March 2022 Warrants. Interest pertaining to both the January and March 2022 Notes for the three and six months ended June 30, 2022 was approximately $0.1 million. Since the Company accounts for the January and March 2022 Notes under the fair value method, the interest was included in the determination of the fair value, and the debt issuance costs were expensed. May 2022 Notes On May 4, 2022, the Company entered into amendment and exchange agreements (the May 2022 Exchange) with the holder of issued and outstanding Series B-2 and C Preferred Stock, Seven Knots, and the January and March 2022 Purchasers, pursuant to which they agreed to exchange all of the January and March 2022 Notes, 2,100 shares of Series B-2 Convertible Preferred Stock, 1,700 shares of Series C Convertible Preferred Stock, and 533,333 shares of the Company’s Common Stock for (i) new 5.0% Senior Subordinated Notes with an aggregate principal amount of $22.3 million (the May 2022 Notes), (ii) 208,333 new shares of Common Stock and (iii) new warrants to purchase up to 833,333 shares of Common Stock (the May 2022 Warrants). The May 2022 Warrants have an exercise price of $2.4765 per share and were exercisable immediately with a five-year term. The 2,100 shares of Series B-2 Convertible Preferred Stock, 1,700 shares of Series C Convertible Preferred Stock, and 533,333 shares of the Company’s Common Stock that were exchanged in the May 2022 Exchange were retired by the Company. All exchange transactions aforementioned were cashless. The May 2022 Notes are substantially similar to the January and March 2022 Notes, except that (i) the maturity date of the May 2022 Notes was August 1, 2022 and (ii) the holders of the May 2022 Notes may require the Company to redeem or exchange up to 100% of the May 2022 Notes upon the occurrence of certain subsequent transactions (each, a Subsequent Transaction Optional Redemption). Pursuant to the terms of the May 2022 Notes and subject to certain conditions described in the May 2022 Notes, if the Company completed an underwritten public offering of at least $20 million complying with certain conditions (a Qualified Underwritten Offering) and the holder of the May 2022 Notes did not participate in the Qualified Underwritten Offering, then the holder would have forfeited their right to Subsequent Transaction Optional Redemption solely with respect to that Qualified Underwritten Offering and amounts that may have been due pursuant to the May 2022 Notes would not have been due and payable until the three-month anniversary of the Qualified Underwritten Offering. The May 2022 Public Offering qualified as the Qualified Underwritten Offering and, in connection with the May 2022 Public Offering, the holders of the May 2022 Notes waived certain of their preemptive and redemption rights and the Company redeemed $5.9 million of the May 2022 Notes. The holders of the May 2022 Notes also waived the maturity date of the May 2022 Notes until October 31, 2022. The Company evaluated the May 2022 Notes and determined that in accordance with ASC 470 the notes should be accounted for as a modification of the January and March 2022 Notes. The Company further evaluated the May 2022 Notes to determine if any embedded components qualified as a derivative requiring bifurcation in accordance with ASC 815. The Company determined that the embedded put options and interest rate increase feature would all require bifurcation and separate accounting. Therefore, the Company elected to use the fair value option under ASC 825, Financial Instruments (ASC 825) for the May 2022 Notes inclusive of the embedded features. The May 2022 Notes contain various customary affirmative and negative covenants agreed to by the Company. The Company was in compliance with all applicable covenants at June 30, 2022, except for the cross default provisions related to the required payments of accrued interest pursuant to the Baker Notes described above. The May 2022 Notes also include other customary events of default, which include the suspension of trading of shares of the Company’s common stock on the Nasdaq Capital Market for a period of more than trading days. As such, the recent suspension of trading of the Company’s common stock will likely result in an additional event of default under the May 2022 Notes, which as discussed above, will likely result in additional events of default and cross defaults under the Adjuvant Notes and Baker Notes. As a result of the default relating to the Baker Notes, the interest rate has been increased to 18% for the duration of the default and the holders of the May 2022 Notes have the right to request redemption for 125% of the amounts then owed pursuant to the May 2022 Notes. The Company evaluated the May 2022 Warrants and determined that, in accordance with ASC 815, the warrants should be recorded at fair value and classified as a derivative liability in the condensed consolidated balance sheet. Both the May 2022 Notes and Warrants are marked-to-market at each reporting date. Under the valuation methods as described in Note 6- Fair Value Financial Instruments, the Company recorded the following in the condensed consolidated financial statements related to the May 2022 Notes and Warrants during the quarter ended June 30, 2022: (i) $22.3 million in notes at issuance; (ii) $1.6 million in warrants at issuance as a derivative liability; (iii) a $9.5 million loss in fair value of financial instruments as a result of the mark-to-market adjustment on the May 2022 Notes, and (iv) a $0.9 million gain in fair value of financial instruments as a result of the mark-to-market adjustment on the May 2022 Warrants.
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Balance Sheet Details |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Details | Balance Sheet Details Inventories Inventories consist of the following (in thousands):
(1) The work in process balance represents all production costs incurred for partially completed goods. (2) As of June 30, 2022 and December 31, 2021, the finished goods balance includes a $0.3 million inventory reserve for estimated obsolescence and excess inventory based upon assumptions about the future demand for Phexxi. (3) As of June 30, 2022 and December 31, 2021, $0.2 million in finished goods is included on the condensed consolidated balance sheet in other noncurrent assets. Accrued Expenses Accrued expenses consist of the following (in thousands):
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair Value of Financial Assets The fair values of the Company’s assets, including the money market funds, investments in marketable fixed income debt securities classified as cash and cash equivalents, and restricted cash measured on a recurring basis as of June 30, 2022 and December 31, 2021, respectively, are summarized in the following tables (in thousands):
_____________________ (1) Included as a component of cash and cash equivalents and restricted cash on the accompanying condensed consolidated balance sheet. Fair Value of Financial Liabilities The fair values of the Company’s debt instruments and derivative liabilities embedded in the convertible preferred stock host contract as discussed in Note 8- Stockholders' Deficit measured on a recurring basis as of June 30, 2022 and December 31, 2021, respectively, are summarized in the following tables (in thousands):
(1) These liabilities are recorded on the condensed consolidated balance sheet at fair value. Therefore, the principal and accrued interest was included in the fair value determination and debt issuance costs were expensed. (2) The Baker Notes principal amount includes $2.3 million in interest that was paid-in-kind. (3) The Adjuvant notes are recorded on the condensed consolidated balance sheet at the net carrying amount which includes the principal, unamortized issuances costs, and accrued interest. Change in Fair Value of Level 3 Financial Liabilities The following tables summarize the changes in Level 3 financial liabilities related to derivative liabilities measured at fair value on a recurring basis for the three and six months ended June 30, 2022 (in thousands):
Change in Fair Value of Level 3 Financial Liabilities The following tables summarize the changes in Level 3 financial liabilities related to the January 2022 Notes, the March 2022 Notes, the May 2022 Notes, and the Baker Notes measured at fair value on a recurring basis for the three and six months ended June 30, 2022 (in thousands):
The following table summarizes the changes in Level 3 financial liabilities related to the Baker Notes measured at fair value on a recurring basis for the three and six months ended June 30, 2021 (in thousands):
Valuation Methodology Baker Notes The fair value of the Baker Notes issued as described in Note 4- Debt, and subsequent changes in fair value recorded at each reporting date, were determined using a Monte Carlo simulation-based model. Monte Carlo simulation was used to take into account several factors, including the future value of the Company's common stock, a potential change of control event, the probability of meeting certain debt covenants, the maturity term of the Baker Notes, the probability of an event of voluntary conversion of the Baker Notes, exercise of the put right, and exercise of the Company's call right. January and March 2022 Notes The fair value of the January and March 2022 Notes issued as described in Note 4- Debt, and subsequent changes in fair value recorded at each reporting date, were determined using a probability weighted expected return method (PWERM) model. PWERM was used to take into account several factors, including the future value of the Company's common stock, a potential change of control event, the probability of meeting certain debt covenants, the maturity term of the January and March 2022 Notes, exercise of the put right, and exercise of the Company's call right. May 2022 Notes The fair value of the May 2022 Notes issued as described in Note 4- Debt, and subsequent changes in fair value recorded at each reporting date, were determined using a PWERM model. PWERM was used to take into account several factors, including the future value of the Company's common stock, a potential change of control event, the probability of meeting certain debt covenants, the maturity term of the January and March 2022 Notes, exercise of the put right, and exercise of the Company's call right. Warrants Issued in 2022 The fair values of all warrants issued in the first half of 2022 as described in Note 4- Debt was determined using the Black-Scholes option pricing model based on the following weighted-average assumptions for the period indicated.
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Operating Leases Fleet Lease In December 2019, the Company and Enterprise FM Trust (the Lessor) entered into a Master Equity Lease Agreement whereby the Company leases vehicles to be delivered by the Lessor from time to time with various monthly costs depending on whether the vehicles are delivered for a term of 24 or 36 months, commencing on each corresponding delivery date. The leased vehicles are for use by eligible employees of the Company's commercial operations personnel. As of June 30, 2022, there was a total of 75 leased vehicles. The Company maintains a letter of credit as collateral in favor of the Lessor, which was included in restricted cash in the condensed consolidated balance sheet. As of June 30, 2022 and December 31, 2021, this letter of credit was $0.3 million. The Company determined that the leased vehicles are accounted for as operating leases under ASC 842, Leases (ASC 842). 2020 Lease and the First Amendment On October 3, 2019, the Company entered into an office lease for approximately 24,474 square feet (the Existing Premises) pursuant to a non-cancelable lease agreement (the 2020 Lease). The 2020 Lease commenced on April 1, 2020 and will expire on September 30, 2025, unless terminated earlier in accordance with its terms. The Company has a right to extend the term of the lease for an additional five years, although at this time the Company does not anticipate exercising such extension. The Company provided the landlord with a $750,000 security deposit in the form of a letter of credit for the Existing Premises. On April 14, 2020, the Company entered into the first amendment to the 2020 Lease for an additional 8,816 rentable square feet of the same office location (the Expansion Premises), which commenced on September 1, 2020 and will expire on September 30, 2025. The Company provided an additional $50,000 in a letter of credit for the Expansion Premises. As of June 30, 2022 and December 31, 2021, restricted cash maintained as collateral for the Company’s security deposit was $0.8 million. 2022 Sublease On May 27, 2022, the Company entered into a sublease agreement with AMN Healthcare, Inc. (AMN), pursuant to which the Company agreed to sublease approximately 16,637 rentable square feet of the Existing Premises to AMN for a term commencing on June 15, 2022 and ending coterminous with the 2020 Lease on September 30, 2025, in exchange for the sum of approximately $87,000 per month, subject to an annual 3.5% increase each year. The sublease gross income was immaterial for the three and six months ended June 30, 2022. Supplemental Financial Statement Information
Other Contractual Commitments In November 2019, the Company entered into a supply and manufacturing agreement with a third party to manufacture Phexxi, with potential to manufacture other product candidates in accordance with all applicable current good manufacturing practice regulations, pursuant to which the Company has certain minimum purchase commitments based on the forecasted product sales. There were no purchases made under the supply and manufacturing agreement for the three and six months ended June 30, 2022, and $1.9 million and $3.0 million in purchases for the three and six months ended June 30, 2021, respectively. Contingencies From time to time, the Company has become and may become involved in certain lawsuits and legal proceedings which arise in the ordinary course of business. On December 14, 2020, a trademark dispute captioned TherapeuticsMD, Inc. v. Evofem Biosciences, Inc., was filed in the United States District Court for the Southern District of Florida against the Company, alleging infringement of certain trademarks owned by TherapeuticsMD under federal and state law (Case No. 9:20-cv-82296). On July 17, 2022, the Company settled the lawsuit with TherapeuticsMD pursuant to which the Company agreed to rebrand its product by July 2024 to coincide with its marketing objectives which may include the potential new indications for the prevention of urogenital chlamydia and gonorrhea in women. As of June 30, 2022, there were no other claims or actions pending against the Company, which management believes has a probable, or reasonably possible, probability of an unfavorable outcome. Intellectual Property Rights In 2014, the Company entered into an amended and restated license agreement (the Rush License Agreement) with Rush University Medical Center (Rush University) pursuant to which Rush University granted the Company an exclusive, worldwide license of certain patents and know-how related to its multipurpose vaginal pH modulator technology. Pursuant to the Rush License Agreement, the Company is obligated to pay to Rush University an earned royalty based upon a percentage of net sales in the range of mid-single digits. In September 2020, the Company entered into the first amendment to the Rush License Agreement, pursuant to which the Company is also obligated to pay a minimum annual royalty amount of $100,000 to the extent the earned royalties do not equal or exceed $100,000 commencing January 1, 2021. Such royalty costs were $0.2 million and $0.5 million for the three and six months ended June 30, 2022, respectively, and $0.1 million for the three and six months ended June 30, 2021.
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Stockholders' Deficit |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Deficit | Stockholders' Deficit Warrants In April and June 2020, pursuant to the Baker Bros. Purchase Agreement, as discussed in Note 4- Debt, the Company issued warrants to purchase up to 341,530 shares of the Company's common stock in a private placement at an exercise price of $36.60 per share. As discussed in Note 4- Debt, the Second Baker Amendment provides that the exercise price of the Baker Warrants will equal the conversion price of the Baker Notes. As of June 30, 2022, the exercise price of the Baker warrants was reset to $0.75 per share. In January 2022, pursuant to the January 2022 Securities Purchase Agreement as discussed in Note 4- Debt, the Company issued warrants to purchase up to 1,000,400 shares of the Company's common stock in a registered direct offering at an exercise price of $5.88 per share. In March 2022, pursuant to the March 2022 Securities Purchase Agreement as discussed in Note 4- Debt, the Company issued warrants to purchase up to 1,037,885 shares of common stock in a registered direct offering at an exercise price of $7.18 per share. In May 2022, pursuant to the exchange agreement as described in Note 4- Debt, the Company issued common warrants to purchase up to 833,333 shares of common stock at an exercise price of $2.4765 per share. The warrants have a five-year term and were exercisable beginning on May 4, 2022. In May 2022, pursuant to the May 2022 Public Offering as described below, the Company issued common warrants to purchase up to 71,000,000 shares of common stock at an exercise price of $0.75 per share, and pre-funded warrants to purchase up to 12,835,000 shares of common stock at an exercise price of $0.001 per share. The warrants have a five-year term and were exercisable beginning May 24, 2022. The common warrants contain (and the pre-funded warrants contained) customary 4.99% and 19.99% limitations on exercise provisions. The exercise price and number of shares issuable upon exercise of the common warrants is subject to adjustment for certain dilutive issuances, stock splits and similar recapitalization transactions. During the second quarter of 2022, all pre-funded warrants were exercised for an immaterial amount of cash and 28,129,848 shares of common warrants were exercised for total proceeds of $21.1 million (including $0.2 million that was included in prepaid and other current assets in the condensed consolidated balance sheet at June 30, 2022). Subsequent to June 30, 2022, 4,791,666 shares of common warrants were exercised for total proceeds of $3.6 million. In June 2022, as required by the Second Baker Amendment, the Company issued the June 2022 Baker Warrants to purchase up to 72,860,769 shares of the Company’s common stock, $0.0001 par value per share. The June 2022 Baker Warrants have an exercise price of $0.75 per share and a five-year term and were exercisable beginning June 28, 2022. The June 2022 Baker Warrants also contain customary 4.99% and 19.99% limitations on exercise provisions. The exercise price and number of shares issuable upon exercise of the June 2022 Baker Warrants is subject to adjustment for certain dilutive issuances, stock splits and similar recapitalization transactions. As of June 30, 2022, warrants to purchase up to 123,120,348 shares of the Company’s common stock remain outstanding at a weighted average exercise price of $1.58 per share. These warrants are summarized below:
Convertible Preferred Stock On October 12, 2021, the Company completed the initial closing of a registered direct offering with Keystone Capital Partners (Keystone Capital) (the Initial October 2021 Registered Direct Offering), whereby the Company issued 5,000 shares of Series B-1 Convertible Preferred Stock, par value $0.0001 per share, at a price of $1,000.00 per share. The Company received proceeds from the Initial October 2021 Registered Direct Offering of approximately $4.6 million, net of offering expenses. On October 26, 2021, the Company completed the additional closing of the October 2021 Registered Direct Offering (the Additional October 2021 Registered Direct Offering), whereby the Company issued 5,000 shares of Series B-2 Convertible Preferred Stock, par value $0.0001 per share, at a price of $1,000.00 per share. The Company received proceeds from the Additional October 2021 Registered Direct Offering of approximately $5.0 million, net of offering expenses. The Series B-1 and B-2 Convertible Preferred Stock were convertible into shares of common stock at any time at a conversion price per share of the greater of $9.00 (Fixed Conversion Price), or the price computed as the product of 0.85 multiplied by the arithmetic average of the closing sale prices of a share of the Company's common stock during the consecutive trading-day period immediately preceding the conversion date (Variable Conversion Price). On October 12, 2021, Keystone Capital converted their 5,000 shares of B-1 Convertible Preferred Stock at a conversion price of $9.45 per share into 529,100 shares of the Company's common stock. Pursuant to the terms of the Series B-2 Convertible Preferred Stock, the Fixed Conversion Price was adjusted during the first quarter of 2022 for certain dilutive issuances. The adjustment period ended on April 25, 2022 and the Fixed Conversion Price was fixed at $2.66 from the sale of common stock pursuant to the Seven Knots Purchase Agreement. On March 24, 2022, the Company, entered into an exchange agreement with the holder of its Series B-2 Convertible Preferred Stock, pursuant to which the holder agreed to exchange 1,700 shares of the Series B-2 Convertible Preferred Stock in consideration for 1,700 shares of the Company’s Series C Convertible Preferred Stock, par value $0.0001 per share, $1,000.00 per share stated value. Except with respect to voting provisions, the Series C and Series B-2 Preferred Stock had substantially similar terms. On May 4, 2022, pursuant to the May 2022 Exchange, as defined in Note 4- Debt, the remaining 2,100 shares of Series B-2 Convertible Preferred Stock and 1,700 shares of Series C Convertible Preferred Stock were exchanged for Senior Subordinated Notes with an aggregate principal amount of $4.8 million and warrants to purchase up to 833,333 shares of common stock. Common Stock Public Offerings On March 29, 2021, the Company completed an underwritten public offering (the March 2021 Public Offering), whereby the Company issued 1,142,857 shares of common stock at a price to the public of $26.25 per share (the March 2021 Public Offering Price). The Company received proceeds from the March 2021 Public Offering of approximately $28.0 million, net of underwriting discounts. In addition, the Company granted the underwriters a 30 days overallotment option to purchase up to an additional 171,428 shares of its common stock at the March 2021 Public Offering Price, less applicable underwriting discounts. On April 6, 2021, the underwriters exercised their overallotment option in full and the Company received proceeds of approximately $4.2 million, net of underwriting discounts. The common stock issued in the March 2021 Public Offering was registered pursuant to a shelf registration statement on Form S-3 (File No. 333-253881) filed with the SEC on March 4, 2021 and declared effective on March 11, 2021. On May 20, 2021, the Company completed an underwritten public offering (the May 2021 Public Offering), whereby the Company issued 3,333,333 shares of common stock at a price to the public of $15.00 per share and accompanying common warrants to purchase 3,333,333 shares of common stock. The common warrants have an exercise price of $15.00 per share and can be exercised any time through May 22, 2023. The Company received proceeds from the May 2021 Public Offering of approximately $46.8 million, net of underwriting discounts and fees. In addition, the Company granted the underwriters a 30-day overallotment option to purchase up to an additional 500,000 shares of its common stock at $14.85 per share, less applicable underwriting discounts, and/or common warrants to purchase 500,000 shares of common stock, at $0.15 per warrant, less applicable underwriting discounts. On May 20, 2021, the underwriters exercised their overallotment option to purchase warrants in full and the Company received proceeds of approximately $0.1 million, net of underwriting discounts. On May 24, 2021, the underwriters exercised their overallotment option to purchase common stock and the Company issued an additional 169,852 shares of common stock and received proceeds of approximately $2.4 million, net of underwriting discounts. The common stock issued in the May 2021 Public Offering were registered pursuant to a shelf registration statement on Form S-3 (File No. 333-253881) filed with the SEC on March 4, 2021 and declared effective on March 11, 2021. In May 2022, the Company completed an underwritten public offering (the May 2022 Public Offering), whereby the Company issued 22,665,000 shares of common stock and accompanying common warrants to purchase 45,330,000 shares of common stock at a price to the public of $0.75. The common warrants have an exercise price of $0.75 per share, a five-year term, and were exercisable beginning on May 24, 2022. In the May 2022 Public Offering the Company also issued pre-funded warrants to purchase 12,835,000 shares of common stock and accompanying common warrants to purchase 25,670,000 shares of common stock at a price to the public of $0.749. The pre-funded warrants had an exercise price of $0.001 per share, were exercisable beginning on May 24, 2022, and expired when they were exercised in full. The Company received proceeds from the May 2022 Public Offering of approximately $18.1 million, net of $5.9 million debt repayment, underwriting discounts and offering expenses. Common Stock Purchase Agreement On February 15, 2022, the Company entered into a common stock purchase agreement (the Stock Purchase Agreement) with Seven Knots, LLC (Seven Knots), pursuant to which Seven Knots agreed to purchase from the Company up to $50.0 million in shares of the Company's common stock. Sales made to Seven Knots were at the Company's sole discretion, and the Company controlled the timing and amount of any and all sales. The price per share was based on the market price of the Company's common stock at the time of sale as computed under the Stock Purchase Agreement. As consideration for Seven Knots’ commitment to purchase shares of common stock, the Company issued 128,172 shares of common stock to Seven Knots as commitment fee shares. Sales of common stock to Seven Knots were subject to customary 4.99% and 19.99% beneficial ownership limitations. The Stock Purchase Agreement had a termination date of the earliest of March 1, 2024, or when Seven Knots has purchased from the Company $50.0 million in shares of the Company's common stock, or as otherwise determined by the Stock Purchase Agreement at the Company’s option. Effective as of May 18, 2022, the Company and Seven Knots elected to terminate the Stock Purchase Agreement without any penalty or additional cost to the Company. Prior to termination, the Company issued a total of 1,964,272 shares of common stock under the Stock Purchase Agreement for aggregate gross proceeds of $7.4 million. Unregistered shares On June 8, 2022, the Company entered into an agreement for services with a360 Media, LLC (a360 Media), pursuant to which a360 Media will provide professional media support and advertising services in exchange for, at a360 Media's option, either (a) $860,119 in cash, or (b) 2,318,380 shares of the Company's common stock at a value of $0.371 per share. On July 18, 2022, the Company and a360 Media entered into a similar agreement for professional media support and advertising services in exchange for, at a360 Media's option, either (a) $1,409,858 in cash, or (b) 1,600,293 shares of the Company's common stock at a value of $0.881 per share. Pursuant to these two agreements, the company issued an aggregate 3,918,673 unregistered shares of the Company's common stock to a360 Media. These shares were issued in reliance upon an exemption from registration afforded by Section 4(a)(2) promulgated under the Securities Act of 1933, as amended. The Company evaluated the a360 Media agreement and determined that in accordance with ASC 480 Distinguishing Liabilities from Equity (ASC 480) and ASC 718 Compensation-Stock Compensation (ASC 718), the common stock issued to a360 should be equity classified and recorded as a prepaid asset in the condensed consolidated balance sheet. When the requisite service condition has been met, the Company will recognize noncash stock-based compensation expense. Common Stock Reserved for Future Issuance Common stock reserved for future issuance is as follows in common equivalent shares as of June 30, 2022:
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Stock-based Compensation |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation | Stock-based Compensation Equity Incentive Plans The following table summarizes stock-based compensation expense related to stock options, restricted stock awards (RSAs) granted to employees, non-employee directors and consultants, and the 2019 Employee Stock Purchase Plan (the 2019 ESPP) included in the condensed consolidated statements of operations as follows (in thousands):
Stock Options There were 40,000 and 257,718 shares of stock options granted during the three and six months ended June 30, 2022, respectively. As of June 30, 2022, unrecognized stock-based compensation expense for employee stock options was approximately $5.7 million, which the Company expects to recognize over a weighted-average remaining period of 2.7 years, assuming all unvested options become fully vested. Restricted Stock Awards There were no shares and 157,333 shares of performance-based RSAs granted during the three and six months ended June 30, 2022, respectively, to the Company's executive management team. The vesting conditions for the performance-based RSAs are connected to the Company’s achievement of certain performance milestones during the current fiscal year. For the performance-based RSAs, (i) the fair value of the award is determined on the grant date; (ii) the Company assesses the probability of achieving each individual milestone associated with the award using reasonable assumptions based on the Company's operation performance towards each milestone; (iii) the fair value of the shares subject to the milestone is expensed over the implicit service period commencing once management believes the performance criteria is probable of being met; and (iv) the Company reassesses the probability of achieving each individual milestone at each reporting date, and any change in estimate is accounted for through a cumulative adjustment in the period when the change in estimate occurs. The non-performance based RSAs are valued at the fair value on the grant date and the associated expenses will be recognized over the vesting period. As of June 30, 2022, unrecognized noncash stock-based compensation expense related to the unvested RSAs was approximately $0.3 million, all of which is related to the performance-based RSAs. The expense recognition for unvested performance-based RSAs is dependent upon the probability of milestone achievement in 2022. Employee Stock Purchase Plan The purchase price under the 2019 ESPP is 85% of the lesser of the fair market value of the common stock on the first or the last business day of an offering period. The maximum number of shares of common stock that may be purchased by any participant during an offering period is equal to $25,000 divided by the fair market value of the common stock on the first business day of an offering period. The fair market value of shares to be issued to employees under the 2019 ESPP is estimated using a Black-Scholes option-pricing model at the grant date, which requires the use of subjective and complex assumptions, including (i) the expected stock price volatility, (ii) the calculation of the expected term of the award, (iii) the risk-free interest rate and (iv) the expected dividend yield. During the three and six months ended June 30, 2022 and 2021, there were 75,169 and 11,578 shares of common stock purchased under the 2019 ESPP, respectively. The fair market value of shares to be issued to employees under the 2019 ESPP is estimated using a Black-Scholes option-pricing model at the grant date, which requires the use of subjective and complex assumptions, including (i) the expected stock price volatility, (ii) the calculation of the expected term of the award, (iii) the risk-free interest rate and (iv) the expected dividend yield. The following weighted average assumptions were used in the calculation of fair value of shares under the 2019 ESPP at the grant dates for the period indicated.
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsSubsequent events were evaluated through the filing date of this Quarterly Report, August 12, 2022. See Note 1 Description of Business and Basis of Presentation, Note 7- Commitments and Contingencies and Note 8- Stockholders' Deficit for discussion of subsequent events, which occurred in July and August 2022. |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The Company prepared the unaudited interim condensed consolidated financial statements included in this Quarterly Report in accordance with accounting principles generally accepted (GAAP) in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission (SEC) related to quarterly reports on Form 10-Q. |
Principles of Consolidation | The Company’s financial statements are presented on a consolidated basis, which include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. The unaudited interim condensed consolidated financial statements do not include all information and disclosures required by GAAP for annual audited financial statements and should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2021 included in its Annual Report on Form 10-K as filed with the SEC on March 10, 2022 (the 2021 Audited Financial Statements). The unaudited interim condensed consolidated financial statements included in this report have been prepared on the same basis as the Company’s audited consolidated financial statements and include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the financial position, results of operations, cash flows, and statements of convertible and redeemable preferred stock and stockholders’ deficit for the periods presented. The results for the three and six months ended June 30, 2022 are not necessarily indicative of the results expected for the full year. The condensed consolidated balance sheet as of December 31, 2021 was derived from the 2021 Audited Financial Statements.
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Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the notes thereto. Significant estimates affecting amounts reported or disclosed in the condensed consolidated financial statements include, but are not limited to: the assumptions used in measuring the revenue gross-to-net variable consideration items, the trade accounts receivable credit loss reserve estimate, the discount rate used in estimating the fair value of the lease right-of-use (ROU) assets and lease liabilities, the assumptions used in estimating the fair value of notes, derivative liabilities, convertible preferred stock, warrants and purchase rights issued, the useful lives of property and equipment, the recoverability of long-lived assets, inventory reserves, clinical trial accruals, the assumptions used in estimating the fair value of stock-based compensation expense and in assessing the probability of achieving certain milestones associated with the performance-based restricted stock awards (performance-based RSAs). These assumptions are more fully described in Note 3- Revenue, Note 4- Debt, Note 6- Fair Value of Financial Instruments, Note 7- Commitments and Contingencies, and Note 9- Stock-based Compensation. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances and adjusts when facts and circumstances dictate. The estimates are the basis for making judgments about the carrying values of assets, liabilities and recorded expenses that are not readily apparent from other sources. As future events and their effects cannot be determined with precision, actual results may materially differ from those estimates or assumptions.
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Segment Reporting | Segment Reporting Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker, the Chief Executive Officer of the Company, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment.
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Concentrations of Credit Risk | Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. Deposits in the Company’s checking, time deposit and investment accounts are maintained in federally insured financial institutions and are subject to federally insured limits or limits set by Securities Investor Protection Corporation. The Company invests in funds through a major U.S. bank and is exposed to credit risk in the event of default to the extent of amounts recorded on the condensed consolidated balance sheets. The Company has not experienced any losses in such accounts and believes it is not exposed to significant concentrations of credit risk on its cash, cash equivalents and restricted cash balances on amounts in excess of federally insured limits due to the financial position of the depository institutions in which these deposits are held. The Company is also subject to credit risk related to its trade accounts receivable from product sales. Its customers are located in the United States and consist of wholesale distributors, retail pharmacies, and a mail-order specialty pharmacy. The Company extends credit to its customers in the normal course of business after evaluating their overall financial condition and evaluates the collectability of its accounts receivable by periodically reviewing the age of the receivables, the financial condition of its customers, and its past collection experience. Historically, the Company has not experienced any credit losses. As of June 30, 2022, based on the evaluation of these factors, the Company did not record an allowance for doubtful accounts. Phexxi is distributed primarily through three major distributors and a mail-order pharmacy, who receive service fees calculated as a percentage of the gross sales, and fee per units shipped, respectively. These entities are not obligated to purchase any set number of units and distribute Phexxi on demand as orders are received. For the three and six months ended June 30, 2022, the Company’s three largest customers combined made up approximately 72% and 71% of its gross product sales, respectively. For the three and six months ended June 30, 2021, the Company’s three largest customers combined made up approximately 83% and 85% of its gross product sales, respectively. As of June 30, 2022 and December 31, 2021, the Company's three largest customers combined made up 78% and 75%, respectively, of its trade accounts receivable balance.
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Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents consist of readily available cash in checking accounts and money market funds. Restricted cash consists of cash held in monthly time deposit accounts and letters of credit, which are collateral for the Company’s facility leases and fleet leases, as described in Note 7- Commitments and Contingencies. As of June 30, 2022, the Company maintained letters of credit of $0.8 million and $0.3 million for its office lease and fleet leases, respectively. Additionally, the remaining $1.2 million of the $25.0 million received from the issuance of Adjuvant Notes (as defined in Note 4- Debt) in the fourth quarter of 2020, is classified as restricted cash as the Company is contractually obligated to use the funds for specific purposes. |
Net Loss Per Share | Net Loss Per ShareBasic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share calculation, potentially dilutive securities are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and, therefore, basic and diluted net loss per share were the same for all periods presented. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In August 2020, the Financial Accounting Standards Board (FASB) issued ASU No. 2020-06, Debt (ASU No. 2020-06), removing, modifying, and adding certain disclosure requirements of ASC 470, Debt with Conversion and Other Options, (ASC 470) and ASC 815, Derivatives and Hedging - Contracts in Entity’s Own Equity (ASC 815). The Company early adopted ASU No. 2020-06 on January 1, 2022 using the modified retrospective method. The adoption of this new standard resulted in additional required disclosures related to the notes as described in Note 8- Stockholders' Deficit. In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) to clarify and reduce diversity in the accounting for modifications or exchanges of freestanding equity-classified written call options. ASU No. 2021-04 was effective for the Company on January 1, 2022. The adoption of this new standard did not have a material impact on the Company's condensed consolidated financial statements.
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Revenue | The Company recognizes revenue from the sale of Phexxi in accordance with ASC 606, Revenue from Contracts with Customers (ASC 606). The provisions of ASC 606 require the following steps to determine revenue recognition: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. In accordance with ASC 606, the Company recognizes revenue when its performance obligation is satisfied by transferring control of the product to a customer. In accordance with the Company’s contracts with customers, control of the product is transferred upon the conveyance of title, which occurs when the product is sold to and received by a customer. The Company’s customers are located in the United States and consist of wholesale distributors, retail pharmacies, and a mail-order specialty pharmacy. Payment terms typically range from 31 to 66 days, include prompt pay discounts, and vary by customer. Trade accounts receivable due to the Company from contracts with its customers are stated separately in the balance sheet, net of various allowances as described in the Trade Accounts Receivable policy in Note 2- Summary of Significant Accounting Policies to the 2021 Audited Financial Statements. The amount of revenue recognized by the Company is equal to the amount of consideration that is expected to be received from the sale of product to its customers. Revenue is only recognized when the performance obligation is satisfied. To determine whether a significant reversal will occur in future periods, the Company assesses both the likelihood and magnitude of any such potential reversal of revenue. Phexxi is sold to customers at the wholesale acquisition cost (WAC), or in some cases at a discount to WAC. However, the Company records product revenue, net of reserves for applicable variable consideration. These types of variable consideration reduce revenue and include the following: •Distribution services fees •Prompt pay and other discounts •Product returns •Chargebacks •Rebates •Patient support programs, including our co-pay programs An estimate for variable consideration is made with each sale and is recorded in conjunction with the revenue being recognized. To calculate the variable consideration, the Company uses the expected value method. If the estimated amount is payable to a customer, it is recorded as a reduction to accounts receivable. If the estimated amount is payable to an entity other than a customer, it is recorded as a current liability. An estimated amount of variable consideration may differ from the actual amount. At each balance sheet date, these provisions are analyzed and adjustments are made if necessary. Any adjustments made to these provisions would also affect net product revenue and earnings. In accordance with ASC 606, the Company must make significant judgments to determine the estimate for certain variable consideration. For example, the Company must estimate the percentage of end-users that will obtain the product through public insurance such as Medicaid or through private commercial insurance. To determine these estimates, the Company relies on historical sales data showing the amount of various end-user consumer types, inventory reports from the wholesale distributors and mail-order specialty pharmacy, and other relevant data reports. Because Phexxi was launched in September 2020, this historical data is limited. Due to limits on historical data, the Company has also used trend analysis and professional judgment in developing these estimates. The specific considerations that the Company uses in estimating these amounts related to variable consideration are as follows: Distribution services fees – The Company pays distribution service fees to its wholesale distributors and mail-order specialty pharmacy. These fees are a contractually fixed percentage of WAC and are calculated at the time of sale based on the purchase amount. The Company considers these fees to be separate from the customer’s purchase of the product, therefore, they are recorded in other current liabilities on the condensed consolidated balance sheet. Prompt pay and other discounts – The Company incentivizes its customers to pay their invoices on time through prompt pay discounts. These discounts are an industry standard practice, and the Company offers a prompt pay discount to each wholesale distributor and retail pharmacy customer. The specific prompt pay terms vary by customer and are contractually fixed. Prompt pay discounts are typically taken by the Company’s customers, so an estimate of the discount is recorded at the time of sale based on the purchase amount. Prompt pay discount estimates are recorded as contra trade accounts receivable on the condensed consolidated balance sheet. The Company may also give other discounts to its customers to incentivize purchases and promote customer loyalty. The terms of such discounts may vary by customer. These discounts reduce gross product revenue at the time the revenue is recognized. Chargebacks – Certain government entities and covered entities (e.g. Veterans Administration, 340B covered entities) are able to purchase the product at a price discounted below WAC. The difference between the government or covered entity purchase price and the wholesale distributor purchase price of WAC will be charged back to the Company. The Company estimates the amount of each chargeback channel based on the expected number of claims in each channel and related chargeback that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Estimated chargebacks are recorded as contra trade accounts receivable on the condensed consolidated balance sheet. Rebates – The Company is subject to mandatory discount obligations under the Medicaid and Tricare programs. The rebate amounts for these programs are determined by statutory requirements or contractual arrangements. Rebates are owed after the product has been dispensed to an end user and the Company has been invoiced. Rebates for Medicaid and Tricare are typically invoiced in arrears. The Company estimates the amount in rebates based on the expected number of claims and related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Rebate estimates are recorded as other current liabilities on the condensed consolidated balance sheet. Patient support programs – One type of patient support program the Company offers is a co-pay program to commercially insured patients whose insurance requires a co-pay to be made when filling their prescription. This is a voluntary program that is intended to provide financial assistance to patients meeting certain eligibility requirements. The benefit amount is capped at a maximum per patient level each calendar year. The Company estimates the amount of financial assistance for these programs based on the expected number of claims and related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Patient support programs estimates are recorded as other current liabilities on the condensed consolidated balance sheet. Product returns – Customers have the right to return product that is within six months or less of the labeled expiration date or that is past the expiration date by no more than six months. Phexxi was commercially launched in September 2020 and there have been minimal returns as of June 30, 2022. The Company uses historical sales and return data to estimate future product returns. Product return estimates are recorded as other current liabilities on the condensed consolidated balance sheet.
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Summary of Significant Accounting Policies (Tables) |
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Reconciliation of Cash, Cash Equivalents and Restricted Cash | The following table provides a reconciliation of cash, cash equivalents and restricted cash, reported within the condensed consolidated statements of cash flows (in thousands):
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Summary of Potentially Dilutive Securities Excluded from Calculation of Diluted Net Loss Per Share | Potentially dilutive securities excluded from the calculation of diluted net loss per share are summarized in the table below. Common shares were calculated for the convertible debt using the if-converted method.
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Debt (Tables) |
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Interest Income and Interest Expense Disclosure | Interest expense for the Adjuvant Notes for the three and six months ended June 30, 2022 and 2021 consisted of the following (in thousands):
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Balance Sheet Details (Tables) |
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Schedule of Inventories | Inventories consist of the following (in thousands):
(1) The work in process balance represents all production costs incurred for partially completed goods. (2) As of June 30, 2022 and December 31, 2021, the finished goods balance includes a $0.3 million inventory reserve for estimated obsolescence and excess inventory based upon assumptions about the future demand for Phexxi. (3) As of June 30, 2022 and December 31, 2021, $0.2 million in finished goods is included on the condensed consolidated balance sheet in other noncurrent assets.
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Accrued Expenses | Accrued expenses consist of the following (in thousands):
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Values of Assets and Liabilities Measured on a Recurring Basis |
_____________________ (1) Included as a component of cash and cash equivalents and restricted cash on the accompanying condensed consolidated balance sheet. The fair values of the Company’s debt instruments and derivative liabilities embedded in the convertible preferred stock host contract as discussed in Note 8- Stockholders' Deficit measured on a recurring basis as of June 30, 2022 and December 31, 2021, respectively, are summarized in the following tables (in thousands):
(1) These liabilities are recorded on the condensed consolidated balance sheet at fair value. Therefore, the principal and accrued interest was included in the fair value determination and debt issuance costs were expensed. (2) The Baker Notes principal amount includes $2.3 million in interest that was paid-in-kind. |
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Summary of Changes in Level 3 Financial Liabilities Measured at Fair Value on a Recurring Basis | The following tables summarize the changes in Level 3 financial liabilities related to derivative liabilities measured at fair value on a recurring basis for the three and six months ended June 30, 2022 (in thousands):
The following tables summarize the changes in Level 3 financial liabilities related to the January 2022 Notes, the March 2022 Notes, the May 2022 Notes, and the Baker Notes measured at fair value on a recurring basis for the three and six months ended June 30, 2022 (in thousands):
The following table summarizes the changes in Level 3 financial liabilities related to the Baker Notes measured at fair value on a recurring basis for the three and six months ended June 30, 2021 (in thousands):
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Fair Value Measurement Inputs and Valuation Techniques | The fair values of all warrants issued in the first half of 2022 as described in Note 4- Debt was determined using the Black-Scholes option pricing model based on the following weighted-average assumptions for the period indicated.
|
Commitments and Contingencies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Financial Information, Lease Cost and Other information |
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Supplemental Financial Information, Lease Assets and Liabilities and Lease Term and Discount Rate |
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Maturities of Lease Liabilities |
|
Stockholders' Deficit (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Warrants | As of June 30, 2022, warrants to purchase up to 123,120,348 shares of the Company’s common stock remain outstanding at a weighted average exercise price of $1.58 per share. These warrants are summarized below:
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Summary of Common Stock Reserved for Future Issuance | Common stock reserved for future issuance is as follows in common equivalent shares as of June 30, 2022:
|
Stock-based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock-based Compensation Expense | The following table summarizes stock-based compensation expense related to stock options, restricted stock awards (RSAs) granted to employees, non-employee directors and consultants, and the 2019 Employee Stock Purchase Plan (the 2019 ESPP) included in the condensed consolidated statements of operations as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted Average Assumptions Used in Calculation of Fair Value | The following weighted average assumptions were used in the calculation of fair value of shares under the 2019 ESPP at the grant dates for the period indicated.
|
Summary of Significant Accounting Policies - Schedule of Reconciliation of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
Jun. 30, 2021 |
Dec. 31, 2020 |
---|---|---|---|---|
Cash and Cash Equivalents [Line Items] | ||||
Cash and cash equivalents | $ 19,885 | $ 7,732 | $ 46,982 | |
Restricted cash | 1,581 | 5,056 | 15,206 | |
Total cash, cash equivalents and restricted cash presented in the condensed consolidated statements of cash flows | 22,266 | $ 13,588 | 62,988 | $ 72,251 |
Other Noncurrent Assets | ||||
Cash and Cash Equivalents [Line Items] | ||||
Restricted cash included in other noncurrent assets | $ 800 | $ 800 |
Revenue (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2022 |
Dec. 31, 2021 |
|
Trade Accounts Receivable | ||
Disaggregation of Revenue [Line Items] | ||
Accrued balance of variable considerations | $ 0.3 | $ 0.1 |
Other Current Liabilities | ||
Disaggregation of Revenue [Line Items] | ||
Accrued balance of variable considerations | $ 2.4 | $ 2.2 |
Minimum | ||
Disaggregation of Revenue [Line Items] | ||
Payment term | 31 days | |
Maximum | ||
Disaggregation of Revenue [Line Items] | ||
Payment term | 66 days |
Debt - Schedule of Interest Expense (Details) - Adjuvant Notes - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Debt Instrument [Line Items] | ||||
Coupon interest | $ 523 | $ 485 | $ 1,035 | $ 961 |
Amortization of issuance costs | 10 | 10 | 19 | 19 |
Total | $ 533 | $ 495 | $ 1,054 | $ 980 |
Balance Sheet Details - Schedule of Inventories (Details) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Raw materials | $ 574 | $ 574 |
Work in process | 1,783 | 1,712 |
Finished goods | 3,776 | 5,629 |
Total | 6,133 | 7,915 |
Inventory reserve | 300 | 300 |
Other noncurrent assets | $ 200 | $ 200 |
Balance Sheet Details - Accrued Expenses (Details) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Clinical trial related costs | $ 4,569 | $ 5,294 |
Selling and marketing related costs | 1,140 | 1,997 |
Legal and other professional fees | 831 | 550 |
Manufacturing related costs | 0 | 201 |
Other | 378 | 328 |
Total | $ 6,918 | $ 8,370 |
Commitments and Contingencies - Supplemental Financial Statement Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Dec. 31, 2021 |
|
Lessee, Lease, Description [Line Items] | |||||
Operating lease expense | $ 603 | $ 584 | $ 1,179 | $ 1,177 | |
Weighted Average Remaining Lease Term (in years) | 3 years 2 months 8 days | 3 years 2 months 8 days | 3 years 6 months 29 days | ||
Weighted Average Discount Rate (percent) | 12.00% | 12.00% | 12.00% | ||
Research and development | |||||
Lessee, Lease, Description [Line Items] | |||||
Operating lease expense | $ 85 | 128 | $ 171 | 272 | |
Selling and marketing | |||||
Lessee, Lease, Description [Line Items] | |||||
Operating lease expense | 268 | 251 | 499 | 497 | |
General and administrative | |||||
Lessee, Lease, Description [Line Items] | |||||
Operating lease expense | $ 250 | $ 205 | $ 509 | $ 408 |
Commitments and Contingencies - Future Operating Lease Maturities (Details) $ in Thousands |
Jun. 30, 2022
USD ($)
|
---|---|
Maturity of Operating Lease Liabilities | |
Remainder of 2022 (6 months) | $ 1,301 |
Year ending December 31, 2023 | 2,440 |
Year ending December 31, 2024 | 2,311 |
Year ending December 31, 2025 | 1,506 |
Total lease payments | 7,558 |
Less: imputed interest | (1,328) |
Total | $ 6,230 |
Commitments and Contingencies - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Operating cash outflows in operating leases | $ 1,289 | $ 1,139 |
Stockholders' Deficit - Summary of Warrants (Details) - $ / shares |
Jun. 30, 2022 |
Jun. 28, 2022 |
May 24, 2022 |
May 04, 2022 |
Mar. 01, 2022 |
Jan. 13, 2022 |
May 20, 2021 |
Jun. 09, 2020 |
Apr. 24, 2020 |
Jun. 10, 2019 |
Apr. 11, 2019 |
Jun. 26, 2018 |
May 24, 2018 |
Jun. 11, 2014 |
Aug. 17, 2012 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Class of Warrant or Right [Line Items] | |||||||||||||||
Underlying Common Stock to be Purchased (in shares) | 123,120,348 | 72,860,769 | 42,870,152 | 833,333 | |||||||||||
Exercise Price (in dollars per share) | $ 1.58 | $ 0.75 | $ 0.75 | $ 2.4765 | $ 7.1805 | $ 5.88 | |||||||||
Common Warrants | |||||||||||||||
Class of Warrant or Right [Line Items] | |||||||||||||||
Underlying Common Stock to be Purchased (in shares) | 1,037,886 | 1,000,401 | 3,822,793 | 136,612 | 204,918 | 185,185 | 111,111 | 12 | 56,578 | 520 | 78 | ||||
Exercise Price (in dollars per share) | $ 7.18 | $ 5.88 | $ 15.00 | $ 0.75 | $ 0.75 | $ 95.70 | $ 95.70 | $ 112.50 | $ 112.50 | $ 55.35 | $ 768.60 |
Stock-based Compensation - Summary of Stock-based Compensation Expense Related to Stock Options, Restricted Stock Awards (RSAs) and RSUs Granted to Employees and Non-employee Directors (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total | $ 1,081 | $ 2,993 | $ 2,148 | $ 6,457 |
Research and development | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total | 166 | 419 | 341 | 962 |
Selling and marketing | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total | 152 | 609 | 315 | 1,349 |
General and administrative | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total | $ 763 | $ 1,965 | $ 1,492 | $ 4,146 |
Stock-based Compensation - Summary of Assumptions (Details) - ESPP - Employee Stock Purchase Plan 2019 |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expected volatility | 177.20% | 106.90% | 177.20% | 106.90% |
Risk-free interest rate | 2.30% | 0.10% | 2.30% | 0.10% |
Expected dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
Expected term (years) | 6 months | 6 months | 6 months | 6 months |
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