electroCore, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Annual Report, including those set forth under Item 1 A. “Risk Factors” and under “Forward-Looking Statements” in this Annual Report. Overview We are a commercial stage medical device company with a proprietary non-invasive vagus nerve stimulation, or nVNS, therapy, called gammaCore. nVNS is a platform bioelectronic medical therapy that modulates neurotransmitters and immune function through its effects on both the peripheral and central nervous systems. We are initially focused on utilizing gammaCore in the management and treatment of primary headache conditions. Our gammaCore nVNS therapy is the first non-invasive, hand-held medical therapy applied at the neck as an adjunctive therapy to treat migraine and cluster headache through the utilization of a mild electrical stimulation to the vagus nerve that passes through the skin. Designed as a portable, easy-to-use technology, gammaCore can be self-administered by patients, prophylactically or as needed, without the potential side effects associated with commonly prescribed drugs. When placed on a patient ’s neck over the vagus nerve, gammaCore stimulates the nerve’s afferent fibers, which may lead to a reduction of pain in patients. gammaCore (nVNS) is FDA cleared in the United States for adjunctive use for the preventive treatment of cluster headache in adult patients, the acute treatment of pain associated with episodic cluster headache in adult patients, the acute and preventive treatment of migraine in adults and adolescent (ages 12 and older) patients, and paroxysmal hemicrania and hemicrania continua in adult patients. gammaCore is CE-marked in the United Kingdom and European Union for the acute and/or prophylactic treatment of primary headache (Migraine, Cluster Headache, Trigeminal Autonomic Cephalalgias and Hemicrania Continua) and Medication Overuse Headache in adults. Since May 2019, we have primarily focused our sales efforts in two channels, the U.S. Department of Veterans Affairs and U.S. Department of Defense, and the United Kingdom. More recently, we began making targeted investments to increase the adoption of our gammaCore therapy in both the United States and abroad. We continue to evaluate strategies to expand commercial adoption of gammaCore, including traditional reimbursement models as well as the potential use of e-commerce and cash pay models through direct-to-physician and direct-to-consumer approaches. We expect to make continued targeted investments in the evaluation and possible execution of these strategies in future quarters. We are unable to predict the impact these strategies will have on our financial condition, results of operations and cash flows due to numerous uncertainties. In addition, we have announced agreements with new distributors to make gammaCore Sapphire available in several countries beyond the U.S. and United Kingdom. 82 Capital Activities On January 18, 2022, we filed a Form S- 3 registration statement, or the 2022 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, up to an aggregate amount of $ 75 million. The 2022 Shelf Registration Statement was declared effective on January 25, 2022. The proposed maximum offering price per unit and the proposed maximum aggregate offering price per class of security will be determined from time to time by us in connection with the issuance by us of the securities registered under the 2022 Shelf Registration Statement. Until such time as the aggregate market value of our securities held by non-affiliates equals or exceeds $ 75 million , the aggregate maximum offering price of all securities issued by the us in any given 12 -calendar month period pursuant to this and any of our other registration statements may not exceed one -third of the aggregate market value of our securities held by non-affiliates. On July 2, 2021, we completed a public offering of 20,700,000 shares of our common stock at a purchase price of $1.00 per share. The net proceeds of the offering to us were approximately $18.8 million, after deducting the underwriting discounts and commissions and other estimated offering expenses. We intend to use the net proceeds of the offering for sales and marketing, working capital, and general corporate purposes. In addition, we believe that opportunities may exist from time to time to expand our current business through acquisitions or in-licenses of, or investments in, complementary companies, medicines, intellectual property, or technologies. While we have no current agreements or commitments for any specific acquisitions, in-licenses or investments at this time, we may use a portion of the net proceeds for these purposes. On August 30, 2021, we entered into a Securities Purchase Agreement with our legal counsel pursuant to which we issued 952,380 shares of common stock, at a purchase price of $1.05 per share. Upon issuance of the shares, certain of our outstanding financial obligations to our legal counsel were deemed paid and satisfied in full. On October 4, 2021, we issued 200,000 shares of our common stock in connection with the lease termination related to our former headquarters located in Basking Ridge, NJ. On March 27, 2020, we and Lincoln Park Capital Fund, LLC ("Lincoln Park") entered into an equity facility purchase agreement ("Purchase Agreement") pursuant to which we had the right to sell to Lincoln Park shares of our common stock, subject to certain limitations and conditions set forth in the Purchase Agreement. In January 2021, we sold 2,750,000 shares of our common stock under the Purchase Agreement, resulting in aggregate proceeds of approximately $6.9 million. On March 11, 2021, we terminated the Purchase Agreement and, accordingly, we will not sell any further shares of our common stock to Lincoln Park under the Purchase Agreement. 83 Research and Development Regulatory Clearances In February 2021, gammaCore received clearance by the FDA for the acute and preventive treatment of migraine in adolescents between 12 and 17 years of age. In September 2021, we announced the company received Section 510(k) clearance from the United States Food and Drug Administration (FDA) of the company’s submission to expand the label of gammaCore nVNS to include the treatment of Paroxysmal Hemicrania (PH) and Hemicrania Continua (HC) in adults. Outside the US In August 2011, we received a CE Certificate of Conformity for gammaCore for the treatment of primary headache from the British Standards Institution, a European Union notified body. This CE Certificate of Conformity allowed us to affix the CE Mark on gammaCore and to commercialize it in the European Economic Area and other countries that recognize the European CE Mark. In addition to the CE Certificate of Conformity for primary headache, between September 2011 and October 2013 we received CE Certificates of Conformity on gammaCore covering four other indications for use, including reactive airway disease and gastric motility disorders. In 2019, the National Institute for Health and Care Excellence, or NICE published a Medical Technology Guidance document recommending the use of gammaCore for Cluster Headache or CH within the National Health Service, or NHS, of England and Wales. On January 2021, NHS Scotland adopted the NICE recommendation and recommended gammaCore for use in the treatment of CH in Scotland. NHS England awarded gammaCore a place on the Innovation Technology Payment, or ITP, program for treatment of patients with reflectory cluster headache, a reimbursement pathway that opened in April 2019. In October 2020, we announced that the ITP program was extended through March 2021. Effective April 1, 2021, gammaCore Sapphire was included in a new long-term, reimbursement policy, titled the MedTech Funding Mandate Policy 2021/22, or MTFM. In August 2021, we announced the release of an article entitled “gammaCore for Cluster Headaches: A NICE Medical Technologies Guidance” in the journal PharmacoEconomics highlighting the cost impact of gammaCore’s non-invasive vagus nerve stimulation therapy platform for patients with cluster headaches. The paper is part of a series that provides insight into the development of NICE medical technologies guidance for new or innovative medical devices or diagnostics. The aim of the guidance is to support the adoption of clinically effective and cost-saving technologies in the UK National Health Service. The paper validated that gammaCore both reduces the frequency and severity of cluster headaches when used with standard of care and provides a £450 per patient savings in the first year of therapy versus standard of care alone. In October 2021, we announced the publication of a peer-reviewed paper entitled “Non-invasive vagus nerve stimulation for treatment of cluster headache: a retrospective review of prescribing in England,” in the British Journal of Healthcare Management. The paper reviews the prescribing trends of gammaCore in England from April 2019 through the end of 2020 and is one of the largest clinical audits of patients with cluster headache. The paper highlights that of the 655 patients who started on gammaCore, 46.3% of patients were prescribed at least one refill and 30.9% were prescribed two or more refills. These real-world results suggest a durable benefit for patients utilizing gammaCore’s non-invasive vagus nerve stimulation (nVNS) for cluster headache in England. In April 2021, we announced that Health Canada has granted regulatory approval for the promotion and sale of the gammaCore Sapphire family of products in Canada for prevention and therapeutic treatment of migraine and cluster headache, as outlined in the registration application with Health Canada. Later in the year, the company received an amended Medical Device License from Health Canada to expand the label of gammaCore nVNS to include the acute and preventive treatment of migraine in adolescents between 12 and 17 years of age. gammaCore is now cleared for most forms of primary headache including the acute and preventive treatment of migraine in adolescents and adults, as well as the acute and preventive treatment of cluster headache in adults. 84 In December 2021, we announced the launch of an e-commerce shop for patients residing in the United Kingdom. The site, which can be found at www.gammacore.co.uk, requires patients to complete a healthcare questionnaire in order to purchase a gammaCore Sapphire™, non-invasive vagus nerve stimulator (nVNS) device online. The first product launched on the platform is designed to treat menstrual migraine, supporting the 60% of women who report migraine symptoms associated with their menstrual cycle. This platform will allow patients to experience a fully virtual experience by completing an online clinical assessment, having product delivered to their door, and being trained via video calls with a member of the UK customer service team. Throughout 2021 we continued executing on the plan to expand international distribution by onboarding exclusive distribution partners outside the United States and United Kingdom (Table 1). Table 1: International Distributor List Territory Distributor Country North America RSK Medical Canada Eastern Europe Pro Medical Baltic Lithuania, Latvia, Belarus, Kazakhstan, and Ukraine Western Europe Silvert Medical Nv-Sa. Belgium, Luxembourg, the Netherlands, and France Australia Medistar2 PTY Ltd Australia Asia Kromax International Corp. Kromax South Asia Pte Ltd. Taiwan and China Malaysia, Singapore, and Indonesia Middle East East Agency Melidonia Cyrus Medexsol Qatar Cypress United Arab Emirates and Oman Saudi Arabia and Bahrain Impact of COVID- 19 We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it will impact business partners, customers and the global supply chain. In particular, the pandemic has resulted in a significant reduction in non-essential contact between patients and healthcare providers, shifting of focus by healthcare providers to the acute treatment of COVID-19 related illness regardless of specialty. We believe these restrictions have limited our sales force’s ability to generate additional interest in the Company’s products. While we began to experience disruptions from the COVID-19 pandemic during the three months ended March 31, 2020, we are unable to predict the impact that the COVID-19 pandemic may have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the development, rollout and availability of effective treatments and vaccines, the imposition of various protective public safety measures including vaccine mandates, as well as the transmissibility and effects of new coronavirus variants such as those experienced with respect to the Omicron variant beginning in early December 2021, and the direct and indirect economic effects of the pandemic and containment measures, among others. The outbreak of COVID-19 in many countries, including the United States, has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries have reacted by instituting quarantines, mandating business and school closures and restricting travel. Certain states and cities, including those where our principal place of business is located and sales force seeks to operate, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, and restrictions on types of business that may continue to operate. We cannot predict if additional states and cities will implement similar restrictions or when restrictions currently in place will expire. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including industries in which we operate. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown of effective treatments and vaccines. 85 Because the COVID-19 pandemic affected, among other things, our access to prescribing physicians and their access to headache patients, on March 23, 2020 we suspended our earlier full-year revenue guidance until we could better understand the trajectory of our business, as well as announced a reduction in our activities, and adjusted our cash runway expectations in response to the potential adverse impact caused by the COVID-19 pandemic. Compared to our earlier expectations, we believe that our results for the year ended December 31, 2021 reflect a negative impact from, among other things, the global pandemic. Moreover, our expectations for at least the beginning of 2022 have also been adversely affected by both the uncertainty and potential negative impact of the global pandemic. Depending upon the duration and severity of the pandemic, the continuing effect on our results and outlook over the long term remains uncertain. In July 2020, the Company received an EUA for use of its gammaCore Sapphire CV nVNS therapy for the acute treatment of asthma exacerbations in known or suspected COVID-19 patients. This EUA is expected to remain in effect for the duration of the COVID-19 pandemic justifying emergency use of these devices unless terminated or revoked by the FDA (after which products may no longer be used). We did not recognize material revenue from the sales of gammaCore Sapphire CV during the year ended December 31, 2021 , and we do not expect to recognize material revenue from the sales of gammaCore Sapphire CV in general. Critical Accounting Policies and Estimates The significant accounting policies and basis of presentation of our consolidated financial statements are described in Note 2 “Summary of Significant Accounting Policies” of the consolidated financial statements included with the annual report on Form 10-K. The preparation of our financial statements is in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, and we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and other related disclosures. While we believe our estimates, assumptions and judgments are reasonable, they are based on information presently available. Actual results may differ significantly from these estimates due to changes in judgments, assumptions and conditions as a result of unforeseen events or otherwise, which could have a material impact on our financial position and results of operations. We believe the judgements estimates and assumptions associated with the following critical accounting policies have the greatest potential impact on the consolidated financial statements: 86 Revenue Recognition Our principal source of revenue is product sales. Our contracts with customers generally contain a single performance obligation and we recognize revenue from product sales when we have satisfied our performance obligation by transferring control of the product to our customers. Control of the product generally transfers to the customer upon delivery. Revenue is recognized at the amount to which we expect to be entitled in exchange for the sale of our products. Variability in the transaction price for our products pursuant to our contract with customers primarily arises from discounts and rebates. We offer discounts and rebates to certain distributors and customers under our arrangements. In many cases, these amounts are fixed at the time of sale and the transaction price is reduced accordingly. We have a standardized approach to estimate the amount of consideration that we expect to be entitled to, including the impact of discounts and rebates. Our historical collection is an integral part of the estimation process related to revenues and receivables. Further adjustments to the allowances, based on actual receipts, may be recorded upon settlement. Revenue from the Veterans Administration and the Department of Defense Revenue from sales of our products is recognized under terms of the Federal Supply Schedule, or FSS, and purchase orders from individual VA sites and a distributor who purchases our products on behalf of the DoD. Revenue from the VA includes sales of therapy for up to 36 months. Sales to the VA and DoD are at a fixed price and are usually paid at the time of delivery. A cash refund is allowed under specific circumstances for undamaged and non-defective products. Damaged or defective products are replaced at no charge. United Kingdom Revenue In the United Kingdom, an award from the Innovation Technology Payment program of the NHS and evidence-based recommendations published in December 2021 by NICE offer the potential for us to generate revenue from the treatment of CH. This is the primary commercial channel from which our United Kingdom revenue is derived. The first 93 days of therapy is free under this program. The cost to produce the free therapy in the 93-day period is recorded as promotional expense within selling, general and administrative expenses. Effective April 1, 2021, gammaCore Sapphire will be included in the new MTFM long-term reimbursement policy which supports commissioners and providers in the use of selected NICE approved, clinically effective and cost-saving medical devices, diagnostics and digital technologies that will improve patient outcomes. Sales in the United Kingdom are primarily in increments of 93 -day therapy at a fixed price and are paid within 30 days. Recently, product offering in the United Kingdom has expanded to 10-day therapy at a fixed price for menstrual migraine patients purchasing product through our UK e-commerce store. All revenue associated with the menstrual migraine product are paid prior to product being shipped. United States Commercial Revenue Outside of Federal Supply Schedule Channel Revenue from our e-commerce and cash pay models through direct-to-physician and direct-to-consumer channel are usually recognized at the time of product shipment or delivery dependent on specific contractual terms, less any discounts or rebates. Managed care rebates represent our estimated obligations to pharmacy benefit managers. Rebate accruals are recognized in the same period the related revenue is recognized. Co-payment assistance represents financial assistance to qualified patients, to assist them with co-payments for gammaCore therapy. The calculation of the accrual is based on an estimate of claims and the cost per claim that we expect to incur associated with inventory that exists in the distribution channel at period end. The amount of monthly co-payment assistance is up to a maximum of $100 per prescription. We expense the cost, as incurred, of product damaged as a result of shipping. This expense, historically, has been immaterial. We expect to receive payment on all of our customer receivables within one year and therefore classify all receivables as current assets. In accordance with our policy, damaged or defective products are replaced at no charge under our standard warranty. A cash refund is allowed in our discretion under specific circumstances for undamaged and non-defective returned product. Accounts receivable are net of an allowance for doubtful accounts, which are accounts from which payment is not expected to be received although product was provided, and revenue was earned. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received. 87 Inventories We value inventory at the lower of cost or net realizable value. Cost is determined on a first in first out basis. This policy requires us to make estimates regarding the net realizable value of our inventory, including an assessment of excess or obsolete inventory. We evaluate inventory for excess quantities and obsolescence based on an estimate of the future demand for our product within a specified timeframe and record an allowance to reduce the carrying value of inventory as determined necessary. The estimates we use for demand are also used for near-term capacity planning and inventory purchasing and are consistent with our revenue forecasts. We evaluate inventory with respect to our operating cycle and classify inventory as either current or long-term on our balance sheet. We further consider inventory shelf life in our estimates regarding the net realizable value of our inventory. If our actual demand is less than our forecast demand, we may be required to take additional excess inventory charges, which would decrease gross margin and adversely impact net operating results in the future. Income taxes We routinely assess whether a valuation allowance should be established against our deferred tax assets based on consideration of all available evidence, both positive and negative, using a more likely than not standard. The assessment of the realizability of deferred tax assets requires management to make numerous estimates and assumptions. Factors that are considered in this assessment include the nature, frequency, and severity of recent losses; a forecast of future profitability; the duration of statutory carryback and carryforward periods; our experience with tax attributes expiring unused; and tax planning alternatives. Stock-based compensation We recognize compensation expense associated with the issuance of equity instruments to employees and non-employees for their services. Compensation expense is determined based on the grant date fair value and is expensed over the vesting period. The grant date fair value of stock options is measured using the Black-Scholes option valuation model. The input assumptions used in determining the fair value of options are expected life, expected volatility, risk-free interest rate and expected dividend yield. These input assumptions are based on management’s estimates, and these estimates are evaluated periodically for reasonability. The expected life of the option represents the period the stock-based awards are expected to be outstanding. We use the simplified method for estimating the expected life of the options since we have limited historical experience to estimate expected term behavior. Since our common stock was not publicly traded until June 2018 there has been insufficient volatility data available. Accordingly, we calculate expected volatility using comparable peer companies with publicly traded shares over a term similar to the expected term of the options issued. Since we currently do not intend to pay dividends on our common stock, we estimate the dividend yield percentage to be zero. We base the risk-free interest rate on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of the stock options being valued. Loss contingencies We are subject to claims and lawsuits in the ordinary course of business, including claims by employees or former employees, with respect to our products and involving commercial disputes, or shareholder actions. We accrue for loss contingencies when it is deemed probable that a loss has been incurred and the loss is estimable. The amounts accrued are based on the full amount of the estimated loss considering insurance proceeds, if applicable, and do not include legal fees expected to be incurred in connection with the loss contingency. The process of analyzing, assessing, and establishing reserve estimates relative to legal proceedings involves a high degree of judgment. Our consolidated financial statements do not reflect any material amounts related to unfavorable outcomes of claims and lawsuits to which we are currently a party because we currently believe that such claims and lawsuits are not expected to result in a material adverse effect on our financial condition. Management estimates that its current insurance coverage is sufficient to meet the potential liabilities of pending legal proceedings. Changes in facts and circumstances related to such proceedings could lead to significant adjustments to reserve estimates for such matters and could have a material impact on our results of operations, cash flows and financial condition in the period that reserve estimates are adjusted or paid. Emerging Growth Company Status In April 2012, the JOBS Act was enacted by the federal government. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by public companies that are not emerging growth companies. In addition, as an emerging growth company, we are not required to provide an auditor’s attestation report on our internal control over financial reporting in future annual reports on Form 10-K. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO (December 31, 2023), (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. 88 Results of Operations Comparison of the years ended December 31, 2021 and 2020 The following table summarizes our results of operations for the years ended December 31, 2021 and 2020 with the changes in those items in dollars. Years ended December 31, 2021 2020 Change (in thousands) Net sales $ 5,451.2 $ 3,495.8 $ 1,955.4 Cost of goods sold 1,385.0 1,737.5 (352.5 ) Gross profit 4,066.2 1,758.3 2,307.9 Operating expenses: Research and development 2,535.9 4,201.3 (1,665.4 ) Selling, general and administrative 21,573.4 21,840.9 (267.5 ) Restructuring and other severance related charges — 464.6 (464.6 ) Total operating expenses 24,109.3 26,506.8 (2,397.5 ) Loss from operations (20,043.1 ) (24,748.5 ) 4,705.4 Other (income) expense: Gain on extinguishment of debt (1,422.2 ) — (1,422.2 ) Gain on termination of joint venture (549.3 ) — (549.3 ) Interest and other income (10.7 ) (84.3 ) 73.6 Other expense 8.3 17.8 (9.5 ) Total other (income) expense (1,973.9 ) (66.5 ) (1,907.4 ) Loss before income taxes (18,069.2 ) (24,682.0 ) 6,612.8 Benefit from income taxes 851.2 1,170.9 (319.7 ) Net loss (17,218.0 ) (23,511.1 ) 6,293.1 Net Sales Net sales for the year ended December 31, 2021 increased 56% as compared to the year ended December 31, 2020. The increase of $ 2.0 million is due to increased sales from the U.S. Department of Veteran Affairs, as well as increased sales from outside the United States, and our U.S. commercial channel. We expect that the majority of our 2022 fiscal year revenue will continue to come from the U.S. Department of Veterans Affairs and United Kingdom, however, we expect to increase revenue from our commercial channel through cash pay models via direct-to-consumer approaches through our online stores in the United States and United Kingdom. Further, we expanded our cash pay proposition to include direct to physician models within our traditional neurology headache specialists, as well as the wide range of medical providers who manage patients' headache conditions including primary care physicians, women's health, pain management, functional and integrative medicine professionals, as well as chiropractors, and PharmDs (Doctors of Pharmacy). Gross Profit Gross profit increased $2.3 million for the year ended December 31, 2021 compared to the year ended December 31, 2020. This increase was due to the increase in net sales, as well as an inventory charge of $0.4 million in 2020 for which there was a corresponding charge of $70,000 in 2021. Gross margin was 75% and 50% for the years ended December 31 , 2021 and 2020 , respectively. Excluding the 2021 and 2020 inventory charges, gross margin for the years ended December 31, 2021 and December 31, 2020 was 76% and 63%, respectively. The increase in gross margin, excluding the 2020 inventory charge, was largely due to the more favorable absorption of labor and overhead costs, and product mix. The selling of our products with longer periods of therapy, have had a favorable impact on our gross profit and gross margin. Gross profit and gross margin in 2022 will be largely dependent on revenue levels, product mix, and the pricing levels of our therapy. 89 Research and Development Research and development expense of $ 2.5 m illion for the year ended December 31, 2021 decreased by $1.7 million, or 40%, as compared to 2020. This reduction was primarily due to significant reductions in company sponsored clinical trial costs offset by targeted investments to support certain investigator-initiated trials, scientific publications and product development. We expect research and development expenses to increase in 2022 largely due to planned expenditures in connection with the next generation of our therapy delivery platform. Selling, General and Administrative Selling, general and administrative expense of $ 21.6 million for the year ended December 31, 2021 was consistent with the prior year. Excluding the $0.6 million write-off of an operating lease right of use asset in 2020, selling general and administrative expense was $21.2 million for the year ended December 31, 2020. We expect an increase in our 2022 selling, general, and administrative expense as we may make targeted investments to support our commercial efforts. Restructuring and Other Severance Related Expenses There were no restructuring and other severance related costs recorded during the year ended December 31, 2021. Restructuring and other severance related charges for the year ended December 31, 2020 of $ 464,606 consisted of severance related expenses in connection with personnel changes. Other (Income) Expense Other (income) expense for the year ended December 31, 2021 of 1.9 million primarily represents the gain of $1.4 million recorded in association with the forgiveness of the PPP Loan and the gain of $0.5 million recorded related to the termination of the joint venture in Australia. Interest and other income of $10,678 and $ 84,327 for the years ended December 31, 2021 and 2020, respectively, primarily consisted of interest earned on cash, cash equivalents and marketable securities. Liquidity and Capital Resources At December 31, 2021 our cash, cash equivalents, and marketable securities was $34.7 million compared to $22.6 million at December 31, 2020. December 31, 2021 2020 (in millions) Net cash (used in) provided by Operating activities $ (13.6 ) $ (20.1 ) Investing activities $ 18.2 $ (8.0 ) Financing activities $ 25.7 $ 18.9 Operating Activities Net cash used in operating activities was $13.6 million and $ 20.1 million for the years ended December 31, 2021 and 2020, respectively. The reduction in 2021 is primarily due to a decrease in our net loss from operations, and less cash being used for working capital components such as inventory and accounts payable. Investing Activities Net cash provided by investing activities was $18.2 m illion for the year ended December 31, 2021. For the year ended December 31, 2020, net cash used in investing activities was $8.0 million. This increase reflects the increase in funds received from the maturity of marketable securities partially offset by a decrease in our purchases of marketable securities during the current period. Financing Activities Net cash provided by financing activities was $25.7 million for the year ended December 31, 2021, representing net proceeds from the sale of common stock. For the year ended December 31, 2020, net cash provided by financing activities was $18.9 representing net cash proceeds of $17.5 million from the issuance of common stock and $1.4 million from our loan under the PPP . 90 Liquidity Outlook As of December 31, 2021, our cash, cash equivalents and marketable securities totaled $34.7 million. We have experienced recurring losses since our inception. We incurred net cash used in operating activities of $13.6 million and $20.1 million for the years ended December 31, 2021 and 2020, respectively. We expect to continue to incur substantial negative cash flows from operations for at least the next several years as we work to increase market acceptance of our gammaCore therapy for the acute treatment of primary headache and its other indications. Our expected cash requirements for the next 12 months and beyond are largely based on the commercial success of our products and the level of targeted investment in our commercial strategies. There are significant risks and uncertainties as to our ability to achieve these operating results, including as a result of the adverse impact on its headache business from the ongoing COVID-19 pandemic. These conditions raise substantial doubt about our ability to continue as a going concern. We have historically funded our operations from the sale of our common stock. During the year ended December 31, 2021, we received net proceeds of approximately $25.7 million from such sales and as of December 31, 2021, our cash, cash equivalents and marketable securities totaled $34.7 million. We believe that the substantial doubt of our ability to continue as going concern is alleviated based on proceeds received from recent offerings of our common stock. We believe our cash and marketable securities will enable us to fund our operating expenses and capital expenditure requirements, as currently planned, for at least the next 12 months from the date the financial statements included in this Annual Report are made available. Beyond the next 12 months, we believe that our growth will depend, in part, on our ability to fund our commercial efforts for our gammaCore therapy, and to opportunistically pursue research and development activities for additional indications for our gammaCore therapy. Our existing resources are unlikely to allow us to conduct all the activities that we believe could be beneficial for our future growth. As a result, we will need to seek additional funds in the future or curtail or forgo some or all such activities. If we seek to and are unable to raise funds on favorable terms, or at all, we may not be able to support our commercialization efforts or increase our research and development activities and the growth of our business may be negatively impacted. As a result, we may be unable to compete effectively. Changes, including those relating to the payer and competitive landscape, our commercialization strategy, our development activities and regulatory matters, may occur beyond our control that would cause us to consume our available capital more quickly. On January 18, 2022, we filed a Form S-3 registration statement, or the 2022 Shelf Registration Statement, with the SEC, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which we refer to collectively as the Shelf Securities, up to an aggregate amount of $75 million. The 2022 Shelf Registration Statement was declared effective on January 25, 2022.The proposed maximum offering price per unit and the proposed maximum aggregate offering price per class of security will be determined from time to time by us in connection with the issuance by us of the securities registered under the 2022 Shelf Registration Statement. Until such time as the aggregate market value of our securities held by non-affiliates equals or exceeds $75 million, the aggregate maximum offering price of all securities issued by the us in any given 12-calendar month period pursuant to this and any of our other registration statements may not exceed one-third of the aggregate market value of our securities held by non-affiliates. Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. Impact of Recently Issued Accounting Standards In the normal course of business, we evaluate all new accounting pronouncements issued by the FASB, SEC, or other authoritative accounting bodies to determine the potential impact they may have on our Consolidated Financial Statements. See Note 2 “Basis of Presentation” of the notes to our consolidated financial statements in this Annual Report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations. 91