What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-10 compared with 2020-11-05 · 277 added, 389 removed, 371 unchanged (64% of the section changed)

3 unchanged sentences

(in thousands)

September 30, 2020* December 31, 2019

March 31, 2021 December 31, 2020

Assets (Unaudited)

8 unchanged sentences

Property and equipment, net 14,869 14,609

Long-term marketable securities 1,294 —

Operating lease right-of-use assets 41,284 42,558

Restricted cash 3,354 3,354

Other assets 24,790 18,004

Intangible assets, net 8,393 8,569

Goodwill 40,233 40,233

Other assets 27,471 26,455

Total assets $ 1,017,795 $ 1,040,022

4 unchanged sentences

Accrued marketing expenses 11,076 17,788

Earnout liability – current — 37,273

Lease liabilities – current 5,316 5,192

2 unchanged sentences

Total current liabilities 57,113 84,408

Commitments and contingencies

Deferred income taxes – non-current 71,748 72,317

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Total liabilities and stockholders’ equity $ 1,017,795 $ 1,040,022

_____________

* Reflects the impact from the adoption of ASC 326 on January 1, 2020.

See Note 1 – Summary of Business and Significant Accounting Policies for details.

The accompanying notes are an integral part of these condensed consolidated financial statements.

EHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts, unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Commission $ 127,052 $ 99,669

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Amortization of intangible assets 176 547

Change in fair value of earnout liability — ( 5,400 ) — 15,106

Restructuring charges 2,431 —

Total operating costs and expenses 134,856 105,377

Loss from operations ( 20,847 ) ( 20,241 ) ( 26,070 ) ( 41,735 )

Other income (expense), net ( 101 ) 568 724 1,824

Loss before benefit from income taxes ( 20,948 ) ( 19,673 ) ( 25,346 ) ( 39,911 )

Benefit from income taxes ( 6,443 ) ( 8,649 ) ( 10,923 ) ( 17,974 )

Net loss $ ( 14,505 ) $ ( 11,024 ) $ ( 14,423 ) $ ( 21,937 )

Net loss per share:

Basic and diluted $ ( 0.55 ) $ ( 0.47 ) $ ( 0.56 ) $ ( 0.96 )

Income (loss) from operations ( 642 ) 1,031

Other income, net 150 373

Income (loss) before provision for (benefit from) income taxes ( 492 ) 1,404

Provision for (benefit from) income taxes 308 ( 2,048 )

Net income (loss) $ ( 800 ) $ 3,452

Net income (loss) per share:

Basic $ ( 0.03 ) $ 0.14

Diluted $ ( 0.03 ) $ 0.13

Weighted-average number of shares used in per share amounts:

Basic and diluted 26,487 23,493 25,838 22,840

Comprehensive loss:

Net loss $ ( 14,505 ) $ ( 11,024 ) $ ( 14,423 ) $ ( 21,937 )

Basic 26,620 24,719

Diluted 26,620 26,179

Comprehensive income (loss):

Net income (loss) $ ( 800 ) $ 3,452

Unrealized holding gain (loss) for available for sales debt securities, net of tax ( 16 ) 25

Foreign currency translation adjustment ( 17 ) ( 31 )

Comprehensive loss $ ( 14,498 ) $ ( 11,058 ) $ ( 14,279 ) $ ( 21,967 )

Comprehensive income (loss) $ ( 833 ) $ 3,446

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(in thousands, unaudited)

Three Months Ended September 30, 2020

Three Months Ended March 31, 2021

Common Stock Additional Paid-in

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Shares Amount Shares Amount

Balance as of June 30, 2020 37,373 $ 37 $ 720,976 11,698 $ ( 199,998 ) $ 270,787 $ 253 $ 792,055

Balance as of December 31, 2020 37,755 $ 38 $ 721,013 11,831 $ ( 199,998 ) $ 316,155 $ 350 $ 837,558

Issuance of common stock in connection with equity incentive plans 238 — 285 — — — — 285

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Net loss — — — — — ( 800 ) — ( 800 )

Balance as of September 30, 2020 37,648 $ 38 $ 719,104 11,810 $ ( 199,998 ) $ 256,282 $ 260 $ 775,686

Three Months Ended September 30, 2019

Common Stock Additional Paid-in

Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income Total Stockholders’ Equity

Shares Amount Shares Amount

Balance as of June 30, 2019 34,267 $ 34 $ 449,046 11,482 $ ( 199,998 ) $ 194,052 $ 131 $ 443,265

Issuance of common stock in connection with equity incentive plans 335 1 1,912 — — — 1,913

Repurchase of shares to satisfy employee tax withholding obligations — — ( 8,059 ) 89 — — ( 8,059 )

Stock-based compensation — — 5,510 — — — 5,510

Foreign currency translation adjustment, net of taxes — — — — — ( 34 ) ( 34 )

Net loss — — — — — ( 11,024 ) — ( 11,024 )

Balance as of September 30, 2019 34,602 $ 35 $ 448,409 11,571 $ ( 199,998 ) $ 183,028 $ 97 $ 431,571

The accompanying notes are an integral part of these condensed consolidated financial statements.

EHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, unaudited)

Nine Months Ended September 30, 2020

Balance as of March 31, 2021 37,993 $ 38 $ 728,213 11,912 $ ( 199,998 ) $ 315,355 $ 317 $ 843,925

Three Months Ended March 31, 2020

Common Stock Additional Paid-in

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Other comprehensive income, net of tax — — — — — — ( 6 ) ( 6 )

Net loss — — — — — ( 14,423 ) — ( 14,423 )

Balance as of September 30, 2020 37,648 $ 38 $ 719,104 11,810 $ ( 199,998 ) $ 256,282 $ 260 $ 775,686

Nine Months Ended September 30, 2019

Common Stock Additional Paid-in

Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income Total Stockholders’ Equity

Shares Amount Shares Amount

Balance as of December 31, 2018 30,863 $ 31 $ 298,024 11,426 $ ( 199,998 ) $ 204,965 $ 127 $ 303,149

Issuance of common stock in connection with equity incentive plans 684 1 5,167 — — — — 5,168

Repurchase of shares to satisfy employee tax withholding obligations — — ( 11,511 ) 145 — — — ( 11,511 )

Shares issued in equity offering 2,760 3 126,048 — — — — 126,051

Settlement of earnout liability 295 — 17,264 — — — — 17,264

Stock-based compensation — — 13,417 — — — — 13,417

Foreign currency translation adjustment, net of taxes — — — — — — ( 30 ) ( 30 )

Net loss — — — — — ( 21,937 ) — ( 21,937 )

Balance as of September 30, 2019 34,602 $ 35 $ 448,409 11,571 $ ( 199,998 ) $ 183,028 $ 97 $ 431,571

Net income — — — — — 3,452 — 3,452

Balance as of March 31, 2020 37,258 $ 37 $ 717,380 11,649 $ ( 199,998 ) $ 274,157 $ 110 $ 791,686

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(in thousands, unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities:

Net loss $ ( 14,423 ) $ ( 21,937 )

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

Net income (loss) $ ( 800 ) $ 3,452

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 1,138 823

3 unchanged sentences

Deferred income taxes ( 570 ) ( 2,141 )

Change in fair value of earnout liability — 15,106

Other non-cash items 420 223

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Accrued expenses and other liabilities 1,305 2,009

Net cash used in operating activities ( 10,959 ) ( 14,714 )

Net cash provided by operating activities 42,809 8,907

Investing activities:

3 unchanged sentences

Proceeds from redemption and maturities of marketable securities 23,409 —

Payments for security deposits — ( 72 )

Net cash used in investing activities ( 128,291 ) ( 12,044 )

Net cash provided by (used in) investing activities 10,497 ( 64,136 )

Financing activities:

2 unchanged sentences

Repurchase of shares to satisfy employee tax withholding obligations ( 5,037 ) ( 4,375 )

Repayment of debt — ( 5,000 )

Acquisition-related contingent payments — ( 8,751 )

Principal payments in connection with leases ( 38 ) ( 58 )

Net cash provided by financing activities

203,555 105,085

Net cash provided by (used in) financing activities ( 4,790 ) 215,931

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 25 ) ( 2 )

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Our platform integrates proprietary and third-party developed educational content regarding health insurance plans with decision support tools to aid consumers in what has traditionally been a confusing and opaque health insurance purchasing process, and to help them obtain the health insurance products that meet their individual health and economic needs.

Our omni-channel consumer engagement platform is designed to meet the consumer wherever they prefer to engage with us, and enables consumers to use our services online, through interactive chat, or by telephone with a licensed insurance agent.

Our omnichannel consumer engagement platform is designed to meet the consumer wherever they prefer to engage with us, and enables consumers to use our services online, through interactive chat, or by telephone with a licensed insurance agent.

We have created a marketplace that offers consumers a broad choice of insurance products that includes thousands of Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual and family, small business and other ancillary health insurance products from over 200 health insurance carriers across all fifty states and the District of Columbia.

Basis of Presentation – The accompanying condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, the condensed consolidated statements of comprehensive loss and stockholders’ equity for the three and nine months ended September 30, 2020 and 2019, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019, respectively, are unaudited.

The condensed consolidated balance sheet data as of December 31, 2019 was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on March 2, 2020.

Basis of Presentation – The accompanying condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020 and the condensed consolidated statements of comprehensive income (loss), stockholders’ equity, and cash flows for the three months ended March 31, 2021 and 2020, respectively, are unaudited.

The condensed consolidated balance sheet data as of December 31, 2020 was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission on February 26, 2021.

The accompanying financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K.

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GAAP have been condensed or omitted in accordance with those rules and regulations.

Certain reclassifications have been made to conform with the current presentation.

However, the Company believes that the disclosures made are adequate to make the information not misleading.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019 and include all adjustments necessary for the fair presentation of our financial position as of September 30, 2020 and December 31, 2019, and our results of operations for the periods presented.

Our financial position as of September 30, 2020, results of operations for the three and nine months ended September 30, 2020, and cash flows for the nine months ended September 30, 2020 were not materially impacted by the COVID-19 pandemic but the Company is continuously assessing the evolving situation related to the pandemic.

The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for any subsequent period or for the year ending December 31, 2020 and therefore should not be relied upon as an indicator of future results.

Significant Accounting Polices, Estimates and Judgements – The preparation of condensed consolidated financial statements and related disclosures in conformity with U.S.

GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes.

On an ongoing basis, we evaluate our estimates, including those related to, but not limited to, the commissions we expect to collect for each approved member cohort, allowance for credit loss, the useful lives of intangible assets, fair value of investments, recoverability of intangible assets, valuation allowance for deferred income taxes, provision (benefit) for income taxes and the assumptions used in determining stock-based compensation.

We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that we believe to be reasonable.

Actual results may differ from these estimates.

Certain prior period amounts have been reclassified to conform with our current period presentation.

However, we believe that the disclosures made are adequate to make the information not misleading.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 and include all adjustments necessary for the fair presentation of our financial position as of March 31, 2021 and December 31, 2020, and our results of operations for the periods presented.

Our financial position as of March 31, 2021 and results of operations and cash flows for the three months ended March 31, 2021 were not materially impacted by the COVID-19 pandemic but the Company is continuously assessing the evolving situation related to the pandemic.

The results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for any subsequent period or for the year ending December 31, 2021 and therefore should not be relied upon as an indicator of future results.

Subsequent to the issuance of our consolidated financial statements for the year ended December 31, 2020, we identified certain errors, including a $ 3.0 million under-recognition of stock-based compensation expense and a $ 1.5 million over-recognition of licensing costs for the year ended December 31, 2020.

We adjusted for these items in the first quarter of 2021 and the adjustments reduced our net income (loss) by approximately $ 1.5 million in our Condensed Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 2021.

We evaluated the effects of these out-of-period adjustments, both qualitatively and quantitatively, and concluded that the errors and the correction thereof were immaterial both individually and in the aggregate to the current reporting period and the periods in which they originated, including quarterly reporting.

Significant Accounting Policies, Estimates and Judgments – The preparation of condensed consolidated financial statements and related disclosures in conformity with U.S.

GAAP requires management to make estimates, judgments and

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

With the exception of the change for the accounting of credit losses as a result of the adoption of Accounting Standard Updates (“ASU”) No.

2016-13, Financial Instruments – Credit Losses discussed below, there have been no material changes to our significant accounting policies discussed in our Annual Report on Form 10-K for the year ended December 31, 2019.

assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes.

On an ongoing basis, we evaluate our estimates, including those related to, but not limited to, the useful lives of intangible assets, fair value of investments, recoverability of intangible assets, the commissions we expect to collect for each approved member cohort, valuation allowance for deferred income taxes, provision (benefit) for income taxes and the assumptions used in determining stock-based compensation.

We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that we believe to be reasonable.

Actual results may differ from these estimates.

There have been no material changes to our significant accounting policies discussed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Seasonality – Open enrollment periods drive the seasonality of our business.

A greater number of our Medicare-related health insurance plans are sold in our fourth quarter during the Medicare annual enrollment period when Medicare-eligible individuals are permitted to change their Medicare Advantage, Medicare Supplement, and Medicare Part D prescription drug coverage for the following year.

A greater number of our Medicare-related health insurance plans are sold in our fourth quarter during the Medicare annual enrollment period when Medicare-eligible individuals are permitted to change their Medicare Advantage and Medicare Part D prescription drug coverage for the following year.

As a result, our Medicare plan-related commission revenue is highest in our fourth quarter.

Any changes or additional enrollment periods may change the seasonality of our business.

For instance, due to the recent reintroduction of the Medicare Advantage open enrollment period that takes place in the first quarter of the year, our first quarter is generally the second-highest revenue generating quarter.

The majority of our major medical individual and family health insurance plans are sold in the fourth quarter during the annual open enrollment period under the federal Patient Protection and Affordable Care Act and related amendments in the Health Care and Education Reconciliation Act.

Individuals and families generally are not able to purchase major medical individual and family health insurance outside of the open enrollment period, unless they qualify for a special enrollment period as a result of certain qualifying events, such as losing employer-sponsored health insurance or moving to another state.

For instance, due to the reintroduction of the Medicare Advantage open enrollment period that takes place in the first quarter of the year, our first quarter is generally the second-highest revenue generating quarter.

The majority of our individual and family health insurance plans are sold in the fourth quarter during the annual open enrollment period as defined under the federal Patient Protection and Affordable Care Act and related amendments in the Health Care and Education Reconciliation Act.

Individuals and families generally are not able to purchase individual and family health insurance outside of these open enrollment periods, unless they qualify for a special enrollment period as a result of certain qualifying events, such as losing employer-sponsored health insurance or moving to another state due to the recent COVID-19 pandemic.

Recently Adopted Accounting Pronouncement

Financial Instruments – Credit Losses (Topic 326) – In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326), that requires companies to present certain financial assets net of the amount expected to be collected.

The guidance requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectability.

Contract assets – commissions receivable were the Company's only financial assets that were materially impacted by this guidance.

We adopted ASU 2016-13, including applicable amendments in other ASUs issued subsequent to ASU 2016-13, using a modified retrospective transition method on January 1, 2020 for all financial assets measured at amortized cost.

Results for periods after January 1, 2020 are presented under ASU 2016-13 while prior period amounts continue to be reported under the previous accounting standards.

We recorded a $ 1.1 million decrease, net of income taxes, to retained earnings as of January 1, 2020 for the cumulative effect of adopting ASU 2016-13.

See Note 3 – Supplemental Financial Statement Information for further discussion on credit losses.

T he impact from the adoption of ASU 2016-13 is summarized as follows (in thousands):

Balance Sheet Impact:

December 31, 2019 Transition Adjustments January 1, 2020

Contract assets – commissions receivable – current $ 174,526 $ ( 71 ) $ 174,455

Contract assets – commissions receivable – non-current 414,696 ( 1,442 ) 413,254

Other assets* 18,004 366 18,370

Total assets 741,634 ( 1,147 ) 740,487

Retained earnings 271,852 ( 1,147 ) 270,705

* Adjustment to Other assets is due to the increase in deferred tax assets resulting from the adoption of ASU 2016-13.

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Financial Instruments (Topic 820) – In 2018, the FASB issued ASU No.

2018-13, to change the disclosure requirements for fair value measurement with the objective of improving the effectiveness of the notes to financial statements.

This new guidance removed and modified certain disclosure requirements under Topic 820.

We adopted this guidance in the first quarter of 2020 with no material impact on our condensed consolidated financial statements.

Intangible – Goodwill and Other (Topic 350) – In 2017, the FASB issued ASU 2017-04 to simplify the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment.

Instead, any goodwill impairment will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

In addition, the guidance eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.

This standard is effective for annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019.

We adopted this guidance in the first quarter of 2020 with no material impact on our condensed consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

Income Taxes (Topic 740) – In December 2019, the FASB issued ASU No.

2019-12, Income Tax, Simplifying the Accounting for Income Taxes , which aims to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and improve consistent application of and simplify U.S.

GAAP for other areas under this Topic by clarifying existing guidance.

ASU 2019-12 will be effective for us beginning January 1, 2021.

The amendments in this standard update have individually different adoption approaches.

We do not anticipate a material impact on our consolidated financial statements and disclosures from the adoption of this standard update.

2019-12, Income Tax, Simplifying the Accounting for Income Taxes , which aims to simplify the accounting for income taxes.

We adopted this guidance in the first quarter of 2021 and it did not have a material impact on our condensed consolidated financial statements.

Codification Improvements – In October 2020, the FASB issued ASU No.

2020-10, Codification Improvements .

ASU 2020-10 is intended to facilitate codification updates for technical corrections, such as conforming amendments, clarifications to guidance, simplifications to wording or structure of guidance, and other minor improvements.

It contains amendments that improve the consistency of the codification by including all disclosure guidance in the appropriate disclosure section and other updates that varies in nature.

We adopted this guidance in the first quarter of 2021 with no material impact on our condensed consolidated financial statements and disclosures.

Debt with Conversion and Other Options (Topic 470) and Contracts in Entity's Own Equity (Topic 815) – In June 2020, the FASB issued ASU No.

2020-06 to simplify the accounting for convertible instruments and improve the usefulness and relevance of information regarding convertible instruments.

This ASU reduces the number of accounting models for converting debt instruments and convertible preferred stock.

2020-06 is effective for us in 2022, with early adoption permitted.

We have early adopted this guidance in the first quarter of 2021 and it did not have a material impact on our condensed consolidated financial statements.

EHEALTH, INC.

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Note 2 – Revenue

Disaggregation of Revenue – The table below disaggregates our revenue by product (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Disaggregation of Revenue – The table below depicts the disaggregation of revenue by product and is consistent with how we evaluate our financial performance (in thousands):

Three Months Ended March 31,

Medicare Advantage $ 103,525 $ 68,347

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Other Revenue

Sponsorship and Advertising Revenue 5,814 5,890

Other 1,348 849

Total Other Revenue 7,162 6,739

Total Revenue $ 134,214 $ 106,408

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Individuals that purchase non-qualified health plans cannot receive a subsidy in connection with the purchase of non-qualified plans.

Revenue Recognition Based on Estimated Constrained LTV

Our revenue primarily consists of commission revenue generated from health insurance carriers, which we define as our customers under the Accounting Standards Codification 606 – Revenue from Contracts with Customers (“ASC 606”).

We recognize revenue for plans approved during the period by applying the latest estimated constrained lifetime value (“LTV”) for that product.

We recognize adjustment revenue for plans approved in prior periods when changes in assumptions for constrained LTV calculations are made and when there is sufficient evidence demonstrating a trend that is different from the estimated constrained LTV at the time of approval resulting in a change in estimate to expected cash collections.

Net adjustment revenue consists of increases in revenue for certain prior period cohorts as well as reductions in revenue for certain prior period cohorts.

We recognize positive adjustment revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

We assess the risk of significant revenue reversal based on statistical and qualitative analysis given historical information and current market conditions.

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our commission revenue for each product line is based on a number of assumptions, which include, but are not limited to, estimating conversion of an approved member to a paying member, forecasting average plan duration and forecasting the commission amounts likely to be received per member.

These assumptions are based on our analysis of historical trends for different cohorts and incorporate management’s judgment in interpreting those trends and in applying the constraints discussed below.

For our Medicare commission revenue, which represented 82 % and 78 % of our total commission revenue for the nine months ended September 30, 2020 and 2019, respectively, the estimated average plan duration, which is the average length of time paying members are active on their plans, used to calculate Medicare health insurance plan LTVs historically has been approximately 3 years for Medicare Advantage plans, approximately 5 years for Medicare Part D prescription drug plans, and approximately 5 years for Medicare Supplement plans.

While the average plan duration has been approximately 3 years for Medicare Advantage plans, certain members may have a duration of up to 15 years.

The estimated average plan duration used to calculate the LTV for major medical individual and family health insurance plans historically has been approximately 1.5 to 2 years.

For short term health insurance plan LTVs, the estimated average plan duration historically has been approximately six months.

For all other ancillary health insurance plan LTVs, the estimated average plan duration has historically varied from 1 to 3 years.

Constraints are applied to LTV for revenue recognition purposes to help ensure that the total estimated lifetime commissions expected to be collected for an approved member’s plan are recognized as revenue only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with future commissions receivable from the plan is subsequently resolved.

Significant judgment can be involved in determining the constraint.

To determine the constraints to be applied to LTV, we compare prior calculations of LTV to actual cash received and review the reasons for any variations.

We then apply judgment in assessing whether the difference between historical cash collections and LTV is representative of differences that can be expected in future periods.

We also analyze whether circumstances have changed and consider any known or potential modifications to the inputs into LTV in light of the factors that can impact the amount of cash expected to be collected in future periods, including but not limited to commission rates, carrier mix, plan duration, cancellations of insurance plans offered by health insurance carriers with which we have a relationship, changes in laws and regulations, and changes in the economic environment.

We evaluate the appropriateness of our constraints on a quarterly basis, and we update our assumptions when we observe a sufficient amount of evidence that would suggest that the long-term expectation underlying the assumptions has changed.

Since the adoption of ASC 606, we re-compute LTVs for all outstanding cohorts on a quarterly basis.

We continually review and monitor changes in the data used to estimate LTV and compare the cash received for each cohort to our original estimates at the time of approval.

The fluctuations of cash received for each cohort as compared to our estimates and the fluctuations in LTV can be significant and may or may not be indicative of the need to adjust revenue for prior period cohorts.

Changes in LTV may result in an increase or a decrease to revenue and a corresponding increase or decrease to contract assets – commissions receivable.

We analyze these fluctuations and, to the extent we see changes in our estimates of the cash commission collections that we believe are indicative of an increase or decrease to prior period LTVs, we adjust revenue for the affected cohorts at the time such determination is made and when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

As we accumulate more historical data, we continue to enhance our LTV estimation models using statistical tools to increase the accuracy of LTV estimates with an emphasis on improving member attrition forecasting.

The enhancements to the LTV estimation model provide greater statistical certainty on expected cash collections, particularly for earlier period cohorts where there is more historical data available.

During the first half of 2020, our LTV estimation models indicated increases in LTVs and estimates of future cash collections for earlier period cohorts of certain products within our Individual, Family and Small Business segment.

However, after considering various market factors and recent changes due to the impact of COVID-19 on the U.S.

economy, such as increases in unemployment rate, potential delays in insurance premium payments and/or health insurance carrier commission payments, potential changes to enrollment periods, and potential changes to qualified health plan subsidies, we limited the adjustment revenue recognized during the six months ended June 30, 2020 to actual cash collected in excess of previously recognized revenue for certain individual and family and ancillary plan cohorts.

During the three months ended September 30, 2020, despite the impact of COVID-19 and uncertainties regarding the Presidential election and the U.S.

economy, we continued to observe stronger member retention rates in our latest LTV assessment for the majority of the earlier period cohorts of certain products in our Individual, Family and Small Business segment.

Based on our evaluation of the updated LTV models and current retention trends, we recognized $ 18.2 million of net adjustment revenue for the Individual, Family and Small Business segment during the three months ended September 30, 2020.

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We will continue to monitor our member retention rates as compared to our forecasts and other market factors and evaluate whether any addition or reduction of adjustment revenue shall be recorded as we continue to assess our LTV models in future periods.

Commission revenue by segment is summarized as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Commission revenue by segment is presented in the table below (in thousands):

Three Months Ended March 31,

Commission Revenue from Members Approved During the Period (1)

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Net Commission Revenue from Members Approved in Prior Periods (2)

( 698 ) 3,813 8,966 5,226

Total Medicare Segment Commission Revenue $ 114,692 $ 90,104

2 unchanged sentences

$ 6,395 $ 5,796

Commission Revenue from Renewals of Small Business Members During the Period (3)

Net Commission Revenue from Members Approved in Prior Periods (2)

18,190 7,669 25,520 23,068

Total IFP/SMB Segment Commission Revenue $ 12,360 $ 9,565

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$ 121,073 $ 86,921

Commission Revenue from Renewals of Small Business Members During the Period (3)

Total Net Commission Revenue from Members Approved in Prior Periods (2)(4)

17,492 11,482 34,486 28,294

Total Commission Revenue $ 127,052 $ 99,669

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(1) These amounts include commission bonus revenue.

(2) These amounts reflect our revised estimates of cash collections for certain members approved prior to the relevant reporting period that are recognized as net adjustment revenue within the relevant reporting period.

(2) These amounts reflect our revised estimates of cash collections for certain members approved prior to the relevant reporting period that are recognized as adjustments to revenue within the relevant reporting period.

The net adjustment revenue includes both increases in revenue for certain prior period cohorts as well as reductions in revenue for certain prior period cohorts.

(3) The impacts of total net commission revenue from members approved in prior periods were $ 0.66 and $ 0.49 per basic and diluted share for the three months ended September 30, 2020 and 2019, respectively;

and $ 1.33 and $ 1.24 per basic and diluted share for the nine months ended September 30, 2020 and 2019, respectively.

The total reductions to revenue from members approved in prior periods were $ 5.3 million and $ 2.1 million for the nine months ended September 30, 2020 and 2019, respectively, and $ 3.7 million and $ 0.6 million for the three months ended September 30, 2020 and 2019, respectively.

These reductions to revenue primarily related to the Medicare segment.

(3) Commission revenue from renewals of small business members during the period was previously included in net commission revenue from members approved in prior periods.

However, starting in the first quarter of 2021, we enhanced our reporting by separately disclosing commission revenue from renewals of small business members during the period in a separate line item.

(4) The impacts of total net commission revenue from members approved in prior periods were $ 0.12 and $ 0.42 per basic share, respectively, or $ 0.12 and $ 0.40 per diluted share, respectively, for the three months ended March 31, 2021 and 2020, respectively.

The total reductions to revenue from members approved in prior periods were $ 0.9 million for the three months ended March 31, 2021 and immaterial for the three months ended March 31, 2020.

These reductions to revenue primarily related to the Individual, Family and Small Business segment.

Note 3 – Supplemental Financial Statement Information

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Cash and cash equivalents are stated at fair value.

We also invested in marketable securities that are measured and recorded at fair value.

We also invest in marketable securities that are measured and recorded at fair value.

See Note 4 – Fair Value Measurements for further discussion about our marketable securities.

As of September 30, 2020 and December 31, 2019, our cash, cash equivalent and restricted cash balances were invested as follows (in thousands):

September 30, 2020 December 31, 2019

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our cash, cash equivalent and restricted cash balances are summarized as follows (in thousands):

March 31, 2021 December 31, 2020

Cash $ 72,326 $ 39,552

Cash equivalents 19,924 4,207

Cash and cash equivalents 92,250 43,759

Restricted cash 3,354 3,354

Total cash, cash equivalents and restricted cash $ 95,604 $ 47,113

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2020 and December 31, 2019, we had $ 3.4 million of restricted cash which was classified as a non-current asset on our Condensed Consolidated Balance Sheets.

As of March 31, 2021 and December 31, 2020, we had $ 3.4 million of restricted cash which was classified as a non-current asset on our Condensed Consolidated Balance Sheets.

This amount collateralizes letters of credit related to certain lease commitments.

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We do not require collateral or other security for our contract assets and accounts receivable.

We believe the potential for collection issues with any of our customers was minimal as of September 30, 2020.

Our contract assets and accounts receivable consisted of the following for the periods presented (in thousands):

September 30, 2020 December 31, 2019

Contract assets – commissions receivable – current $ 158,773 $ 174,526

Contract assets – commissions receivable – non-current 445,572 414,696

Accounts receivable 3,854 2,332

Total contract assets and accounts receivable $ 608,199 $ 591,554

We estimate the allowance for credit loss balance using relevant available information from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts.

We believe the potential for collection issues with any of our customers was minimal as of March 31, 2021.

We estimate an allowance for credit losses using relevant available information from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts.

Specifically, for the purpose of measuring the probability of default parameters, we utilize Capital IQ’s, Standard & Poor’s and Moody’s analytics.

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As such, we apply an immediate reversion method and revert to historical loss information when computing our credit loss exposure.

Credit loss expenses are assessed quarterly and included in general and administrative expense on our Condensed Consolidated Statement of Comprehensive Loss.

Subsequent to the adoption of ASC 326, we considered the impact of recent events and global economic condition when evaluating the appropriate adjustments to our allowance as of September 30, 2020.

Determining the extent of these adjustments in the three and nine months ended September 30, 2020 was especially challenging because we do not have any historical loss information for a period of similar economic decline.

We considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not materially impacted as of September 30, 2020.

Credit loss expenses recorded during the three and nine months ended September 30, 2020 were immaterial.

Our contract assets – commission receivable activities, net of credit loss allowance are summarized as follows (in thousands):

Nine Months Ended September 30, 2020

Credit loss expenses are assessed quarterly and included in general and administrative expense on our Condensed Consolidated Statement of Comprehensive Income (Loss).

We considered the impact of recent events and global economic conditions when evaluating the appropriate adjustments to our allowance for credit losses as of March 31, 2021.

Determining the extent of these adjustments in the three months ended March 31, 2021 was especially challenging because we do not have any historical loss information for a period of similar economic uncertainty.

We also considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic.

The change in the allowance for credit losses for the three months ended March 31, 2021 is summarized as follows (in thousands):

Three Months Ended March 31, 2021

Beginning balance $ 2,026

Change in allowance ( 78 )

Ending balance $ 1,948

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our contract assets – commission receivable activities, net of credit loss allowances are summarized as follows (in thousands):

Three Months Ended March 31, 2021

Medicare Segment IFP/SMB Segment Total

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Commission revenue from members approved during the period 114,678 6,395 121,073

Commission revenue from renewals of small business members during the period (1)

— 2,687 2,687

Net commission revenue adjustments from members approved in prior period 14 3,278 3,292

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Ending balance $ 688,737 $ 53,110 $ 741,847

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September 30, 2019

Three Months Ended March 31, 2020

Medicare Segment IFP/SMB Segment Total

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Commission revenue from members approved during the period 81,125 5,796 86,921

Commission revenue from renewals of small business members during the period (1)

— 2,396 2,396

Net commission revenue adjustments from members approved in prior period 8,979 1,373 10,352

Cash receipts ( 112,731 ) ( 13,811 ) ( 126,542 )

Net change in credit loss allowance ( 1,574 ) ( 58 ) ( 1,632 )

Ending balance $ 526,721 $ 33,996 $ 560,717

_____________

* Amount consists of transition adjustment of $ 1.5 million related to the adoption of ASC 326 as of January 1, 2020 and the subsequent credit loss adjustment of $ 0.1 million during the nine months ended September 30, 2020.

See Note 1 – Summary of Business and Significant Accounting Policies for details regarding the adoption impact.

Our financial instruments that are exposed to concentrations of credit risk principally consist of cash, cash equivalents, contract assets – commissions receivable, and accounts receivable.

(1) Commission revenue from renewals of small business members during the period was previously included in net commission revenue from members approved in prior periods.

Our financial instruments that are exposed to concentrations of credit risk principally consist of cash, cash equivalents, marketable securities, contract assets – commissions receivable, and accounts receivable.

We invest our cash and cash equivalents with major banks and financial institutions and, at times, such investments are in excess of federally insured limits.

We also have deposits with a major bank in China that are denominated in both U.S.

We also have deposits with major banks in China that are denominated in both U.S.

dollars and Chinese Yuan Renminbi and are not insured by the U.S.

federal government.

The deposits in China were $ 3.4 million as of September 30, 2020.

The deposits in China were $ 3.5 million as of March 31, 2021.

See Note 4 – Fair Value Measurements for more information regarding our marketable securities.

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We do not require collateral or other security for either our contract assets or accounts receivable.

Carriers that represented 10% or more of our total contract assets and accounts receivable balance are summarized as of the dates presented below:

September 30, 2020 December 31, 2019

Humana 21 % 22 %

March 31, 2021 December 31, 2020

UnitedHealthCare (1)

Humana 21 % 21 %

Centene (1)(2)

_____________

(1) Aetna also includes other carriers owned by Aetna.

(2) UnitedHealthcare also includes other carriers owned by UnitedHealthcare .

Prepaid Expenses and Other Current Assets – Prepaid expenses and other current assets are summarized as follows (in thousands):

September 30, 2020 December 31, 2019

(1) Percentages include the carriers' subsidiaries.

(2) Centene Corporation acquired WellCare Health Plans, Inc.

in 2020, and the contract assets and accounts receivable of WellCare are included in the percentage calculation for March 31, 2021 and December 31, 2020.

Prepaid Expenses and Other Current Assets – Our prepaid expenses and other current assets are summarized as of the periods presented as follows (in thousands):

March 31, 2021 December 31, 2020

Prepaid maintenance contracts $ 6,583 $ 7,715

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Prepaid insurance 1,031 1,672

Income tax receivable 1,041 584

Other 592 260

Others 616 646

Prepaid expenses and other current assets $ 12,325 $ 16,661

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4 – Fair Value Measurements

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Level 2 Unadjusted quoted prices in active markets for similar assets or liabilities;

or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active;

or inputs other than quoted prices that are observable for the asset or liability;

unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active;

inputs other than quoted prices that are observable for the asset or liability.

Level 3 Unobservable inputs for the asset or liability.

Our financial assets and liabilities measured at fair value on a recurring basis are summarized below by their classification within the fair value hierarchy for the period presented below (in thousands):

As of September 30, 2020

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our financial assets measured at fair value on a recurring basis are summarized below by their classification within the fair value hierarchy as of the dates presented below (in thousands):

March 31, 2021

Carrying Value Level 1 Level 2 Level 3 Total

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Short-term marketable securities

Commercial paper 47,380 — 47,380 — 47,380

Agency bonds 26,826 — 26,826 — 26,826

Treasury bills 4,999 — 4,999 — 4,999

Long-term marketable securities

Agency bonds 1,294 — 1,294 — 1,294

Total assets measured and recorded at fair value $ 156,324 $ 16,205 $ 140,119 $ — $ 156,324

As of December 31, 2019

Commercial paper 7,096 — 7,096 — 7,096

Total assets measured at fair value $ 53,846 $ 5,602 $ 48,244 $ — $ 53,846

December 31, 2020

Carrying Value Level 1 Level 2 Level 3 Total

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Money market funds $ 4,207 $ 4,207 $ — $ — $ 4,207

Earnout liability – current

$ 37,273 $ — $ — $ 37,273 $ 37,273

Our cash equivalents invested in money market funds and commercial paper with original maturity of 90 days or less were classified as Level 1.

Short-term marketable securities

Agency bonds 35,423 — 35,423 — 35,423

Commercial paper 14,197 — 14,197 — 14,197

Total assets measured at fair value $ 53,827 $ 4,207 $ 49,620 $ — $ 53,827

Our cash equivalents were invested in money market funds and commercial paper with original maturity of 90 days or less were classified as Level 1.

We endeavor to utilize the best available information in measuring fair value.

We used observable prices in active markets in determining the classification of our investments as Level 1.

As of September 30, 2020, our Level 2 assets included our available for sale marketable securities, which consisted of commercial paper, agency bonds and treasury bills with maturity less than two years.

We used observable prices in active markets in determining the classification of our money market funds as Level 1.

As of March 31, 2021, our Level 2 assets included our available for sale marketable securities, which consisted of commercial paper and agency bonds with maturity less than one year.

We classify our marketable debt securities within Level 2 in the fair value hierarchy, because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value.

Our portfolio primarily consisted of financial

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

instruments with credit rating of AA+ or equivalent by S&P Rating and Moody's Investor Services.

There were no transfers between the hierarchy levels during the nine months ended September 30, 2020.

Our portfolio primarily consisted of financial instruments with a credit rating of AA or equivalent by S&P Rating and Moody's Investor Services.

There were no transfers between the hierarchy levels during the three months ended March 31, 2021 and year ended December 31, 2020.

The following table summarizes our cash equivalents and available-for-sale debt securities by contractual maturity (in thousands):

As of September 30, 2020

As of March 31, 2021

Amortized Cost Fair Value

Due in 1 year $ 53,827 $ 53,846

Due in 1 year through 5 years 1,288 1,294

Total $ 156,228 $ 156,324

Unrealized gains and losses on available-for-sale debt securities are included in accumulated other comprehensive income and summarized as follows as of September 30, 2020:

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unrealized gains and losses on available-for-sale debt securities that are not credit related are included in accumulated other comprehensive income and summarized as follows as of March 31, 2021 (in thousands):

Amortized Cost Unrealized Gain Unrealized Loss Fair Value

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Short-term marketable securities

Commercial paper 47,348 33 ( 1 ) 47,380

Agency bonds 26,805 21 — 26,826

Treasury bills 4,998 1 — 4,999

Long-term marketable securities

Agency bonds 1,288 6 — 1,294

Commercial paper 7,097 — ( 1 ) 7,096

Total $ 53,827 $ 21 $ ( 2 ) $ 53,846

As of September 30, 2020, there were twenty securities in net loss positions and their unrealized losses were immaterial.

We did not record any credit losses regarding our available-for-sales debt securities during the nine months ended September 30, 2020.

Earnout Liabilities

Our earnout liabilities in connection with our GoMedigap acquisition in 2018 were recognized at fair value.

We measured the earnout liability using internally developed assumptions;

therefore, it is classified as Level 3.

The fair value of the earnout liability was measured using probability-weighted analysis and was discounted using a rate that appropriately captured the risk associated with the obligation.

Key assumptions included new enrollments and volatility for the years ended December 31, 2019 and 2018 and our stock price at the time of payment.

Earnout liability activities are summarized as follows (in thousands):

Balance as of December 31, 2019 $ 37,273

Change in fair value —

Settlements ( 37,273 )

Balance as of September 30, 2020 $ —

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In February 2019, we made the first earnout payment to GoMedigap consisting of $ 9.5 million in cash and 294,608 shares of our common stock with a value of $ 17.3 million.

In January 2020, we made the second and last payment, which consisted of $ 8.8 million in cash and 294,608 shares of our common stock with a value of $ 28.5 million.

As of March 31, 2021, there were twelve securities in net loss positions and their unrealized losses were immaterial.

We did not record any credit losses regarding our available-for-sales debt securities during the three months ended March 31, 2021.

We do not intend to sell these securities and it is more likely than not that we will not be required to sell these securities before the recovery of their amortized cost basis.

Note 5 – Equity

Public Offering of Common Stock – Pursuant to an effective registration statement which was filed on December 17, 2018, and amended on January 22, 2019 and March 2, 2020, we entered into an underwriting agreement in March 2020 to issue a total of 2,070,000 shares of common stock, which included the exercise in full of the underwriters’ option to purchase 270,000 additional shares of common stock, at a price to the public of $ 115.00 per share.

Public Offering of Common Stock – Pursuant to an effective registration statement that was filed on December 17, 2018, and amended on January 22, 2019 and March 2, 2020, we entered into an underwriting agreement in March 2020 to issue a total of 2.1 million shares of common stock, which included the exercise in full of the underwriters’ option to purchase 0.3 million additional shares of common stock, at a price to the public of $ 115.00 per share in March 2020.

Net proceeds from the offering were approximately $ 228.0 million after deducting underwriting discounts, commissions and expenses of the offering.

We intend to use the net proceeds of the offering for general corporate purposes, including working capital.

Stock Repurchase Programs – We had no stock repurchase activity during the three and nine months ended September 30, 2020.

In addition to 10,663,888 shares repurchased under our previous repurchase programs, we have in treasury 1,146,720 shares as of September 30, 2020 that were previously surrendered by employees to satisfy tax withholding due in connection with the vesting of certain restricted stock units.

As of September 30, 2020 and December 31, 2019, we had a total of 11,810,608 shares and 11,615,558 shares, respectively, held in treasury.

Stock Repurchase Programs – We had no stock repurchase activity during the three months ended March 31, 2021.

In addition to 10.7 million shares repurchased under our previous repurchase programs, we have in treasury 1.2 million shares as of March 31, 2021 that were previously surrendered by employees to satisfy tax withholding due in connection with the vesting of certain restricted stock units.

As of March 31, 2021 and December 31, 2020, we had a total of 11.9 million shares and 11.8 million shares, respectively, held in treasury.

For accounting purposes, common stock repurchased under our stock repurchase programs is recorded based upon the settlement date of the applicable trade.

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Stock-Based Compensation Expense – Our stock-based compensation expense is summarized as follows by award types (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

Common stock options $ 180 $ 306

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Total stock-based compensation expense $ 11,402 $ 8,714

Our stock-based compensation expense is summarized as follows by operating functions (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

* Amounts include market-based and performance-based RSUs.

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes stock-based compensation expense by operating function for the periods presented below (in thousands):

Three Months Ended March 31,

Marketing and advertising $ 2,485 $ 1,730

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Total stock-based compensation expense $ 11,402 $ 8,714

Amount capitalized internal-use software 548 — 1,278 —

Amount capitalized in internal-use software 550 248

Total stock-based compensation $ 11,952 $ 8,962

Note 6 — Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period.

Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common and common equivalent shares outstanding during the period.

Diluted net income (loss) per share is computed giving effect to all potential dilutive common stock equivalent shares, including options, restricted stock units and shares to be issued under our ESPP.

The dilutive effect of outstanding awards is reflected in diluted net income (loss) per share by application of the treasury stock method.

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share amounts):

Three Months Ended March 31,

Net income (loss) $ ( 800 ) $ 3,452

Shares used in per share calculation – basic 26,620 24,719

Dilutive effect of common stock — 1,460

Shares used in diluted share calculation 26,620 26,179

Net income (loss) per share – basic $ ( 0.03 ) $ 0.14

Net income (loss) per share – diluted $ ( 0.03 ) $ 0.13

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 6 — Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period.

Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common and common equivalent shares outstanding during the period.

Diluted net loss per share is computed giving effect to all potential dilutive common stock equivalent shares, including options and restricted stock units.

The dilutive effect of outstanding awards is reflected in diluted net loss per share by application of the treasury stock method.

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share amounts):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Basic and Diluted:

Net loss $ ( 14,505 ) $ ( 11,024 ) $ ( 14,423 ) $ ( 21,937 )

Shares used in per share calculation – basic and diluted 26,487 23,493 25,838 22,840

Net loss per share – basic and diluted $ ( 0.55 ) $ ( 0.47 ) $ ( 0.56 ) $ ( 0.96 )

For the three and nine months ended September 30, 2020 and 2019, we had securities outstanding that could potentially dilute earnings per share, but the shares from the assumed conversion or exercise of these securities were excluded in the computation of diluted net loss per share as their effect would have been anti-dilutive.

The number of outstanding anti-dilutive shares that were excluded from the computation of diluted net loss per share consisted of the following (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Common stock options 414 729 453 850

Restricted stock units 599 1,461 748 1,537

Total 1,013 2,190 1,201 2,387

For each of the three months ended March 31, 2021 and 2020, we had securities outstanding that could potentially dilute per share amounts, but the shares from the assumed conversion or exercise of these securities were excluded in the computation of diluted net income (loss) per share as their effect would have been anti-dilutive.

The number of outstanding anti-dilutive shares that were excluded from the computation of diluted net income (loss) per share consisted of the following (in thousands):

Three Months Ended March 31,

Common stock options 363 n/a

Restricted stock units 1,090 n/a

Total 1,460 n/a

* There were no antidilutive shares for this period.

Note 7 – Commitments and Contingencies

Service and Licensing Obligations

We have entered into service and licensing agreements with third party vendors to provide various services, including network access, equipment maintenance, and software licensing.

As the benefits of these agreements are experienced uniformly over the applicable contractual periods, we record the related service and licensing expenses on a straight-line basis, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements.

Our future minimum payments under non-cancellable contractual service and licensing obligations as of March 31, 2021 (in thousands):

For the Years Ending December 31,

Remainder of 2021 $ 4,246

Thereafter 1,353

Total $ 15,225

Operating Leases

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From time to time, we receive inquiries from governmental bodies and also may be subject to various legal proceedings and claims arising in the ordinary course of business.

We assess contingencies to determine the degree of probability and range of possible loss for potential accrual in our consolidated financial statements.

An estimated loss contingency is accrued in the consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

We assess contingencies to determine the degree of probability and range of possible loss for potential accrual in our condensed consolidated financial statements.

An estimated loss contingency is accrued in the condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

There was no material litigation-related accrual during the three months ended March 31, 2021.

Legal proceedings or other contingencies could result in material costs, even if we ultimately prevail.

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Legal Proceedings

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Flanders, our chief financial officer, Derek N.

Yung, and our then-chief operating

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

officer, David K.

Yung, and our then-chief operating officer, David K.

Francis, in the United States District Court for the Northern District of California.

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The lead plaintiff filed an amended complaint on August 25, 2020, which Defendants moved to dismiss.

The motion to dismiss is set to be heard by the court on February 17, 2021.

The motion to dismiss has been fully briefed.

Derivative Actions – On July 7, 2020 and October 13, 2020, two derivative lawsuits were filed against our chief executive officer, Mr.

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The complaints seek damages, restitution, attorneys’ fees and costs, and certain measures with respect to the Company’s corporate governance and internal procedures, and (in the Lincolnshire lawsuit) equitable and/or injunctive relief.

The Chernet and Lincolnshire lawsuits have both been stayed pending the resolution of the motion to dismiss in the Securities Class Action, In re eHealth Securities Litig ., Master File No.

4:20-cv-02395-JST (N.D.

The Gonzalez and Le ’ Vias Complaints – On April 6, 2018, a former employee, Lupita Gonzalez, filed a complaint against us in the Superior Court of the State of California for the County of Sacramento (the “Gonzalez Complaint”).

The Gonzalez Complaint is brought under the California Private Attorney General Act (“PAGA”) on behalf of all current and former hourly-paid or non-exempt employees who work or have worked for us in California.

The claim alleges that we violated wage and hour laws with respect to these non-exempt employees, including, among other things, the failure to comply with California law as to (i) the payment of overtime wages;

(ii) the payment of minimum wages;

(iii) providing compliant meal and rest periods, (iv) the payment of wages earned during employment and owed upon the termination of employment;

(v) providing complete and accurate wage statements, (vi) keeping of accurate payroll records;

and (vii) the proper reimbursement for necessary business-related expenses and costs.

The Gonzalez Complaint seeks penalties and costs, expenses and attorneys’ fees.

On July 1, 2019, two other current or former employees, Michael Le’Vias and Ramona Meadows, filed a related complaint against us and eHealth Ins.

Co., in the Superior Court of the State of California for the County of Santa Clara (the “Le’Vias Complaint”).

A substantial overlap exists between the facts and circumstances alleged in the Gonzalez Complaint and the Le’Vias Complaint.

Specifically, the Le’Vias Complaint is also brought under PAGA on behalf of all current and former hourly-paid or non-exempt employees who work or have worked for us in California.

(ii) the payment of minimum wages;

(iii) providing compliant meal and rest periods, (iv) the payment of wages earned during employment and owed upon the termination of employment;

(v) providing complete and accurate wage statements, (vi) keeping of accurate payroll records;

and (vii) the proper reimbursement for necessary business-related expenses and costs.

The Le’Vias Complaint seeks unpaid wages, penalties and costs, expenses and attorneys’ fees.

The parties have agreed to resolve both the Le’Vias and Gonzalez Complaints and have executed a settlement agreement to resolve both matters, which settlement will require court approval.

In the interim, the parties have filed notices of conditional settlement in both matters, and the April 13, 2020 trial date for the Gonzalez matter was vacated.

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Service and Licensing Obligations

We have entered into service and licensing agreements with third party vendors to provide various services, including network access, equipment maintenance, and software licensing.

Our future minimum payments under non-cancellable contractual service and licensing obligations as of September 30, 2020 are summarized as follows (in thousands):

For the Years Ending December 31, Service and Licensing Obligations

Remainder of 2020 $ 2,593

Thereafter 2,706

Total $ 15,700

Both complaints asserted claims under the California Private Attorney General Act (“PAGA”) on behalf of all current and former hourly-paid or non-exempt employees who work or have worked for us in California, based on alleged failures to comply with California wage and hour laws.

The parties have entered into a court-approved settlement agreement that resolves both matters related to the Gonzalez and Le'Vias Complaints, and Plaintiffs Michael Le’Vias and Ramona Meadows have sought dismissal with prejudice of the Le’Vias Complaint.

Upon the completion of the distribution of the settlement funds in accordance with the settlement agreement and the court order approving the settlement agreement, the parties will seek a dismissal with prejudice of the Gonzalez Complaint.

Note 8 – Segment and Geographic Information

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The performance measures of our segments include total revenue and profit.

Our business structure is comprised of two operating segments:

Medicare and Individual, Family and Small Business.

Please refer to Note 1 – Summary of Business and Significant Accounting Policies of the Notes to Consolidated Financial Statements in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2019 for our accounting policies relating to operating segments.

Our business structure is comprised

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents summary results of our operating segments for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

of two operating segments:

Medicare and Individual, Family and Small Business.

Please refer to Note 1 – Summary of Business and Significant Accounting Policies of the Notes to Consolidated Financial Statements in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2020 for our accounting policies relating to operating segments.

The results of our operating segments are summarized for the periods presented below (in thousands):

Three Months Ended March 31,

Medicare $ 121,021 $ 96,151

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Total revenue $ 134,214 $ 106,408

Segment profit (loss):

Medicare segment profit (loss) $ ( 16,010 ) $ ( 11,004 ) $ 19,380 $ 5,917

Segment profit:

Medicare segment profit (1)

$ 24,545 $ 23,136

Individual, Family and Small Business segment profit (1)

Total segment profit (loss) 2,276 ( 7,251 ) 42,839 20,962

Total segment profit 32,597 26,064

Corporate ( 15,286 ) ( 13,448 )

Stock-based compensation expense ( 11,402 ) ( 8,714 )

Change in fair value of earnout liability — 5,400 — ( 15,106 )

Depreciation and amortization (2)

( 3,944 ) ( 2,324 )

Amortization of intangible assets ( 176 ) ( 547 )

Other (income) expense, net ( 101 ) 568 724 1,824

Loss before benefit from income taxes $ ( 20,948 ) $ ( 19,673 ) $ ( 25,346 ) $ ( 39,911 )

Restructuring charges ( 2,431 ) —

Other income, net 150 373

Income (loss) before provision for (benefit from) income taxes $ ( 492 ) $ 1,404

_____________

(1) During the first quarter of 2021, we revised the calculation of segment profit by excluding amortization of capitalized software development costs to enhance comparability of our financial metrics with peer companies.

The amortization of capitalized software development costs were $ 2.8 million and $ 1.5 million for the first quarter of 2021 and 2020, respectively.

(2) Depreciation and amortization has been adjusted to include amortization of software development costs.

There were no inter-segment revenue transactions for the periods presented.

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Long-lived assets by geographical area are summarized as follows (in thousands):

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

United States $ 41,829 $ 40,500

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Significant Customers

Substantially all revenue for the three and nine months ended September 30, 2020 and 2019 was generated from customers located in the United States.

Carriers representing 10% or more of our total revenue for the three and nine months ended September 30, 2020 and 2019 are presented in the table below:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Humana 26 % 26 % 21 % 24 %

Substantially all revenue for the three months ended March 31, 2021 and 2020 was generated from customers located in the United States.

Carriers representing 10% or more of our total revenue are summarized as follows:

Three Months Ended March 31,

UnitedHealthcare (1)

17 % 18 % 21 % 18 %

12 % 17 % 14 % 17 %

(1) UnitedHealthcare also includes other carriers owned by UnitedHealthcare.

(2) Aetna also includes other carriers owned by Aetna.

Humana 17 % 19 %

(1) Percentages include the carriers' subsidiaries.

(2) Centene Corporation acquired WellCare Health Plans, Inc.

in 2020, and the revenue of WellCare is included in the percentage calculation for March 31, 2021 and 2020.

Note 9 – Leases

We have operating and finance leases for our corporate offices and certain equipment.

Our leases have remaining lease terms of one month to nine years .

Our operating lease expense recognized under ASC 842 was $ 2.1 million and $ 2.0 million for the three months ended September 30, 2020 and 2019, respectively, and $ 6.4 million and $ 4.9 million for the nine months ended September 30, 2020 and 2019, respectively.

Our cash outflows related to operating leases were $ 5.2 million and $ 3.5 million for the nine months ended September 30, 2020 and 2019, respectively.

During the nine months ended September 30, 2020 and 2019, we had non-cash investing activities of $ 10.9 million and $ 39.2 million, respectively, related to right-of-use assets on the Condensed Consolidated Statements of Cash Flows, of which $ 23.3 million related to the adoption of ASC 842 as of January 1, 2019.

Supplemental information as of September 30, 2020 related to leases is as follows (in thousands):

Our leases have remaining lease terms of 3 to 9 years.

Certain of these leases have free or escalating rent payment provisions.

We recognize lease expense on a straight-line basis over the terms of the leases, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements.

Most leases include options to renew, and the exercise of these options is at our discretion.

Total operating lease expenses were $ 2.0 million and $ 2.1 million for the three months ended March 31, 2021 and 2020, respectively and sublease income was immaterial for both periods.

The following table summarizes the lease-related assets and liabilities recorded on the Condensed Consolidated Balance Sheets as of the dates presented below (in thousands):

March 31, 2021 December 31, 2020

Operating lease right-of-use assets $ 41,284 $ 42,558

Operating lease liabilities $ 47,511

Weighted-average remaining lease term of operating leases 7.5 years

Lease liabilities – current $ 5,316 $ 5,192

Lease liabilities – non-current 39,984 41,369

Total operating lease liabilities $ 45,300 $ 46,561

Supplemental information related to leases are as follows (in thousands):

March 31, 2021 December 31, 2020

Operating cash outflows from operating leases $ 1,900 $ 7,090

Weighted-average remaining lease term of operating leases 7.0 years 7.2 years

Weighted-average discount rate used to recognize operating lease right-of-use-assets 5.4 % 5.4 %

As of September 30, 2020, maturities of operating lease liabilities are as follows (in thousands):

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2021, maturities of operating lease liabilities are as follows (in thousands):

Year ending December 31,

Reminder of 2020 $ 1,915

Remainder of 2021 $ 5,744

Thereafter 19,407

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Total $ 45,300

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Operating Lease Obligations

We lease our operating facilities and certain of our equipment, furniture and fixtures under various operating leases, the latest of which expires in January 2030.

Certain of these leases have free or escalating rent payment provisions.

We recognize rent expense on our operating leases on a straight-line basis over the terms of the leases, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements.

In January 2020, we entered into an amendment to the lease agreement for our Gold River, California, office of 63,206 square feet.

The amended lease term commenced on January 1, 2020 and has been extended to December 31, 2027.

As of September 30, 2020, the total expected future minimum payments were $ 13.0 million over the remaining term of the lease plus our proportionate share of certain operating expenses, insurance costs and taxes for each calendar year during the lease.

In addition, we have an option to extend the lease for one additional period of five years at the end of the lease term and will receive a one-time refurbishment allowance from the landlord if the option to renew is exercised.

On August 19, 2019, we entered into an amendment to the lease agreement for our Santa Clara, California office to expand our office space to a total of 45,657 square feet from 32,492 square feet.

The lease term for the expanded office space commenced on April 15, 2020.

The term of the lease for the expanded office space was coterminous with the term of the lease for the existing space, which is scheduled to expire on March 31, 2029.

As of September 30, 2020, the expected future minimum payments related to our Santa Clara office totaled $ 21.0 million, including $ 6.1 million from this amendment, over the remaining term of the lease plus our proportionate share of certain operating expenses, insurance costs and taxes for each calendar year during the lease.

(1) Noncancellable sublease income for the remainder of 2021 and years ending December 31, 2022 and 2023 of $ 0.9 million, $ 0.4 million and $ 0.4 million, respectively, is not included in the table above.

Note 10 — Restructuring

In February 2021, we eliminated approximately 89 full-time positions, primarily in the United States, representing approximately 5 % of our workforce, primarily within our customer care and enrollment group, and to a lesser extent, in our marketing and advertising, technology and content, and general and administrative groups.

Total pre-tax restructuring charges for the three months ended March 31, 2021 were $ 2.4 million, which primarily related to employee termination benefits.

Substantially all of the restructuring charges resulted in cash expenditures.

The restructuring activities were completed by March 31, 2021.

Accrued restructuring charges balance was $ 0.3 million as of March 31, 2021.

Note 11 – Debt

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The maturity date has been extended to December 20, 2022.

The borrowing base under the Credit Agreement is comprised of an amount equal to (a) the lesser of (i) eighty percent ( 80 %) of Eligible Commissions Receivables (as defined in the Credit Agreement) we actually collected by during the immediately preceding period of three months or (ii) eighty percent ( 80 %) of our Eligible Commission Receivables for the immediately succeeding period of three months, plus (b) fifty percent ( 50 %) of our Eligible Commission Receivables for the immediately succeeding period of six months (excluding the immediately succeeding period of three months), in each case subject to reserves established by RBC (the “Borrowing Base”).

The borrowing base under the Credit Agreement is comprised of an amount equal to (a) the lesser of (i) eighty percent ( 80 %) of Eligible Commissions Receivables (as defined in the Credit Agreement) we actually collected during the immediately preceding period of three months or (ii) eighty percent ( 80 %) of our Eligible Commission Receivables for the immediately succeeding period of three months, plus (b) fifty percent ( 50 %) of our Eligible Commission Receivables for the immediately succeeding period of six months (excluding the immediately succeeding period of three months), in each case subject to reserves established by RBC (the “Borrowing Base”).

The proceeds of the loans under the Credit Agreement may be used for working capital and general corporate purposes.

1 unchanged sentence

Subject to availability under the Borrowing Base, amounts repaid may be reborrowed.

Amounts not borrowed under the Credit Agreement are subject to a commitment fee of 0.5 % per annum on the daily unused portion of the credit facility, to be paid in arrears on the first business day of each calendar quarter.

At closing, we paid a one-time facility fee of 1.75 % of the total commitments of $ 40.0 million.

We also paid a one-time closing fee of 0.5 % of the new commitment of $ 75.0 million in connection with the Amendment.

We are also obligated to pay other customary administration fees for a credit facility of this size and type.

The availability under the credit facility is up to the lesser of $ 40 million or the Borrowing Base, which may be reduced from time to time pursuant to the Credit Agreement.

The Amendment increased the availability up to the lesser of $ 75.0 million or the Borrowing Base, which may be reduced from time to time pursuant to the Credit Agreement.

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Amounts not borrowed under the Credit Agreement will be subject to a commitment fee of 0.5 % per annum on the daily unused portion of the credit facility, to be paid in arrears on the first business day of each calendar quarter.

At the closing of the Credit Agreement, we paid a one-time facility fee of 1.75 % of the total commitments of $ 40.0 million.

We also paid a one-time closing fee of 0.5 % of the new commitment of $ 75.0 million in connection with the Amendment.

The Company is also obligated to pay other customary administration fees for a credit facility of this size and type.

The availability under the credit facility was up to the lesser of $ 40.0 million or the Borrowing Base in the original credit agreement.

The Amendment increased the availability up to the lesser of $ 75.0 million or the Borrowing Base, which may be reduced from time to time pursuant to the Credit Agreement.

Financial covenants in the original Credit Agreement required that we maintain Excess Availability (as defined in the Credit Agreement) at or above $ 6.0 million at any time.

The Amendment also changed the financial covenants to require us to maintain at least $ 6.0 million of Excess Availability at all times or, if greater, up to $ 11.3 million depending on our borrowing base as determined by eligible past and future commission receivables.

In addition, the Amendment also included changes in the payment conditions to, among other things, require us to have at least $ 10.0 million of liquidity or, if greater, up to $ 18.8 million depending on our borrowing base as determined by eligible past and future commission receivables, in order for us to make certain permitted acquisitions, investments, distributions and payments of indebtedness.

In addition, the Amendment also included changes in the payment conditions to, among other things, require us to have at least $ 10.0 million of liquidity or, if greater, up to $ 18.8 million depending on our borrowing base as determined by eligible past and future commissions receivable, in order for us to make certain permitted acquisitions, investments, distributions and payments of indebtedness.

The Amendment also stated the seasonal amount thresholds used in connection with the cash dominion and field examination covenants in the Credit Agreement.

1 unchanged sentence

The Amendment did not change the interest rate.

In connection with the Amendment, we incurred closing costs totaling $ 0.5 million, which were capitalized and recorded as Other assets on our Consolidated Balance Sheet as of December 31, 2019.

The remaining balance of unamortized issuance costs was $ 0.8 million and $ 1.1 million as of September 30, 2020 and December 31, 2019.

As of September 30, 2020, we had no outstanding borrowings under our revolving credit facility.

In connection with the Amendment, we incurred closing costs totaling $ 0.5 million, which were capitalized and recorded as other assets on our Condensed Consolidated Balance Sheet as of March 31, 2021.

The remaining balance of unamortized issuance costs was $ 0.7 million as of March 31, 2021 and December 31, 2020.

As of March 31, 2021, we had no outstanding borrowings under our revolving credit facility.

Note 12 – Income Taxes

The following table summarizes our benefit from income taxes and our effective tax rates for the three and nine months ended September 30, 2020 and 2019 (in thousands, except effective tax rate):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Loss before benefit from income taxes $ ( 20,948 ) $ ( 19,673 ) $ ( 25,346 ) $ ( 39,911 )

Benefit from income taxes ( 6,443 ) ( 8,649 ) ( 10,923 ) ( 17,974 )

The following table summarizes our provision for (benefit from) income taxes and our effective tax rates for the periods presented below (in thousands, except effective tax rate):

Three Months Ended March 31,

Income (loss) before provision for (benefit from) income taxes $ ( 492 ) $ 1,404

Provision for (benefit from) income taxes 308 ( 2,048 )

Effective tax rate ( 62.6 ) % ( 145.9 ) %

For the three months ended September 30, 2020, we recognized a benefit from income taxes of $ 6.4 million, representing an effective tax rate of 30.8 % which was higher than the statutory federal tax rate due primarily to stock-based compensation adjustments, lobbying expenses and state taxes, partially offset by research and development credits.

For the three months ended September 30, 2019, we recognized a benefit from income taxes of $ 8.6 million, representing an effective tax rate of 44.0 %, which was higher than the statutory federal tax rate due primarily to stock-based compensation adjustments, lobbying expenses, and state taxes, partially offset by research and development credits.

For the nine months ended September 30, 2020, we recognized a benefit from income taxes of $ 10.9 million, representing an effective tax rate of 43.1 %, which was higher than the statutory federal tax rate due primarily to stock-based compensation adjustments, lobbying expenses and state taxes, partially offset by research and development credits.

For the nine months ended September 30, 2019, we recognized a benefit from income taxes of $ 18.0 million, representing an effective tax rate of 45.0 %, which was higher than the statutory federal tax rate due primarily to stock-based compensation adjustments, lobbying expenses and state taxes, partially offset by research and development credits.

For the three months ended March 31, 2021, we recognized a provision for income taxes of $ 0.3 million, representing an effective tax rate of ( 62.6 )%, which was lower than the statutory federal tax rate due primarily to one-time state tax adjustments.

For the three months ended March 31, 2020, we recognized a benefit from income taxes of $ 2.0 million, representing an effective tax rate of ( 145.9 )%, which was lower than the statutory federal tax rate due primarily to stock-based compensation windfalls.

Assessing the realizability of our deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible.

2 unchanged sentences

As a result, the amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.

We continue to recognize our deferred tax assets as of September 30, 2020, as we believe it is more likely than not that the net deferred tax assets will be

We continue to recognize our

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

realized, with the exception of certain state net operating losses that are expected to expire unutilized which have a valuation allowance.

The Coronavirus Aid, Relief and Economic Security ("CARES") Act was signed into law on March 27, 2020.

The business tax provisions of the CARES Act include temporary changes to income based tax laws, including the ability to utilize net operating losses, interest expense deductions, alternative minimum tax credit refunds, charitable contributions, and depreciation of qualified improvement property.

The income tax provisions of the CARES Act did not have a material impact on our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2020.

deferred tax assets as of March 31, 2021, as we believe it is more likely than not that the net deferred tax assets will be realized, with the exception of certain net operating losses and credits that are expected to expire unutilized which have a valuation allowance.

Note 13 – Subsequent Event

On April 30, 2021, we issued and sold to Echelon Health SPV, LP ("H.I.G."), an investment vehicle of H.I.G.

Capital, in a private placement, 2,250,000 shares of our newly designated Series A convertible preferred stock, in par value of $ 0.001 per share (“Series A Preferred Stock”), at an aggregate purchase price of $ 225.0 million, at a price of $ 100 per share.

We received $ 216.2 million in proceeds from the private placement with H.I.G., net of sales commissions and certain transaction fees.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements