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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Eargo Inc | NASDAQ:EAR | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 2.57 | 2.47 | 2.49 | 0 | 01:00:00 |
(Mark |
One) |
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware |
27-3879805 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
2665 North First Street, Suite 300 San Jose, California |
95134 | |
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Common Stock, par value $0.0001 per share |
EAR |
The Nasdaq Stock Market LLC |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
• | the impact on our business of the civil settlement agreement with the U.S. government that resolved the investigation by the U.S. Department of Justice (the “DOJ”) related to insurance reimbursement claims submitted to various federal employee health plans under the Federal Employee Health Benefits (“FEHB”) program, and the extent to which we may be able to validate and establish processes to support the submission of claims for reimbursement to health plans under the FEHB program in the future, if at all, and our ability to obtain, maintain or increase insurance coverage for our hearing aids in the future; |
• | the timing or results of claims audits and medical records reviews by third-party payors; |
• | the expense, timing and outcome of the purported securities class action litigation alleging that certain of our disclosures about our business, operations and prospects, including reimbursements from third-party payors, violated the federal securities laws and the purported derivative action alleging that our directors breached their fiduciary duties by failing to implement and maintain an effective system of internal controls; |
• | our ability to continue to maintain the listing of our securities on The Nasdaq Stock Market LLC (“Nasdaq”), including our ability to execute a plan to regain compliance with the Nasdaq requirements regarding the timely filing of periodic financial reports with the Securities and Exchange Commission (the “SEC”); |
• | estimates of our future revenue and expenses, including the extent of any losses we incur from hearing aids delivered to customers where we have not submitted an insurance claim and may not receive payment; |
• | estimates of our future capital needs and our ability to raise capital on favorable terms, if at all, including the timing of future capital requirements and the terms or timing of any future financings; |
• | our expectations with regard to changes in the regulatory landscape for hearing aid devices, including the anticipated implementation of a pending over-the-counter |
• | our ability to attract and retain customers; |
• | our expectations concerning additional orders by existing customers; |
• | our expectations regarding the potential market size and size of the potential consumer populations for our products and any future products, including our ability to obtain, maintain or increase insurance coverage of and reimbursement of insurance claims for Eargo hearing aids, which is substantially dependent on, among other things, the outcomes of our efforts to validate and establish processes to support the submission of claims for reimbursement from various federal health plans, any third-party payor audits and pending regulations; |
• | our ability to release new hearing aids and the anticipated features of any such hearing aids and our ability to transition our existing customers to new hearing aids, including when older models are discontinued; |
• | developments and projections relating to our competitors and our industry, including competing products; |
• | our ability to maintain our competitive technological advantages against new entrants in our industry; |
• | the pricing of our hearing aids; |
• | our expectations regarding the availability, supply, cost and inflationary pressures related to the component parts of our hearing aids; |
• | our expectations regarding the ability to make certain claims related to the performance of our hearing aids relative to competitive products; |
• | our commercialization and marketing capabilities and expectations; |
• | our relationships with, and the capabilities of, our component manufacturers, suppliers and freight carriers; |
• | the implementation of our business model and strategic plans for our business, products and technology; |
• | the scope of protection we are able to establish and maintain for intellectual property rights covering our products, including the projected terms of patent protection; |
• | our ability to effectively manage our business in light of the civil settlement agreement with the U.S. government, third-party payor claims audits and medical records reviews, purported securities class action and derivative litigations, and pending regulations; |
• | our ability to retain existing talent and attract new, highly skilled talent; |
• | our estimates regarding the COVID-19 pandemic, including but not limited to, its duration and its impact on our business and results of operations; and |
• | our future financial performance. |
• | Virtually invisible behind-the-ear, in-the-canal |
• | Comfort and performance |
• | Rechargeable |
• | Ease of use high-end consumer electronics and allows for personalization by users to their unique hearing preferences. Users can cycle through up to four different sound profiles and personalize the settings to their unique preferences for amplification or noise reduction settings to accommodate listening in different environments. All products other than Eargo Max also offer customers a companion mobile application that helps them easily personalize their Eargo hearing aids to fit their needs and allow for remote updates. |
• | Simplified, consumer-centric experience |
• | Accessible |
• | Affordable |
• | Decreased COVID-19 exposureCOVID-19 while conducting an essential activity without the need to physically visit a clinic. |
• | We suspended our practice of granting equity awards, except for new restricted stock unit grants that we have the option to settle in cash at the time of vesting, suspended our 2020 Employee Stock Purchase Plan (“ESPP”) and deferred the settlement of outstanding restricted stock units (“RSUs”), in each case effective as of November 9, 2021 (collectively, the “employee equity actions”). |
• | Our Board of Directors suspended the non-employee director compensation program with respect to the option awards that would otherwise have been awarded to non-employee directors automatically on the date of our annual meeting of stockholders held on November 9, 2021. |
• | On December 7, 2021, we announced a plan to reduce our employee workforce to streamline our organization in response to declines in customer orders since we announced the investigation of the Company by the DOJ. We substantially completed the employee workforce reduction during the fourth quarter of 2021, resulting in a reduction of approximately 27% of our employee workforce, or approximately 90 people. |
• | product quality and performance, including but not limited to, the size, sound quality, comfort, whether the batteries are rechargeable, reliability and connectivity of the hearing aid; |
• | customer purchasing experience; |
• | visibility of hearing aid; |
• | pricing, including access to insurance benefits; |
• | product support and service; |
• | effective marketing and education; |
• | technological innovation, product enhancements and speed of innovation; and |
• | sales and distribution capabilities. |
• | warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; |
• | customer notifications or repair, replacement, refund, recall, administrative detention or seizure of our products; |
• | operating restrictions or partial suspension or total shutdown of production; |
• | FDA refusals or delays on requests for 510(k) clearance or PMA approval of new or modified products; |
• | withdrawal of 510(k) clearances or PMA approvals that have already been granted; |
• | refusal to grant export approval for products; or |
• | civil penalties or criminal prosecution. |
• | our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as well as our proxy statement, as soon as reasonably practicable after we electronically file that material with or furnish it to the SEC; |
• | announcements of investor conferences and events at which our executives talk about our products and competitive strategies, as well as archives of these events; |
• | press releases on quarterly earnings, product announcements, legal developments and other material news that we may post from time to time; |
• | corporate governance information, including our Corporate Governance Guidelines, Code of Business Conduct and Ethics, information concerning our Board of Directors and its committees, including the charters of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee; |
• | stockholder services information, including ways to contact our transfer agent; and |
• | opportunities to sign up for email alerts. |
• | We face considerable uncertainty in our business prospects, as a significant portion of our revenue has historically been dependent upon reimbursement from third-party payors participating in the FEHB program but we have operated on a “cash pay” only basis since December 8, 2021. Following the civil settlement with the U.S. government on April 29 , 2022, we may be unsuccessful in validating and establishing processes to support the submission of claims for reimbursement from third-party payors participating in the FEHB program in the future. As a result, we have faced a significant reduction in revenue and any failure to establish processes to support reimbursement from third-party payors in the future may significantly and adversely impact our business and growth prospects and our ability to sell our products. |
• | Our negative cash flows and current lack of financial resources raise substantial doubt as to our ability to continue as a going concern. If we are unable to raise additional funding to meet our operational needs, we will be forced to limit or cease our operations and/or liquidate our assets. |
• | Potential opportunities for growth in our business outside of the FEHB program, such as the anticipated implementation of the pending OTC hearing aid regulatory framework and any potential Medicare, or other insurance, coverage for certain hearing aids, may not materialize and, as such, our business and growth prospects and our ability to sell our products may be materially and adversely impacted. |
• | We are subject to risks from legal proceedings, investigations and inquiries, including a number of recent legal proceedings and investigations, which have had and could continue to have a material adverse effect on our reputation, business, financial condition, cash flows and results of operations, and could result in additional claims and material liabilities. |
• | We have a limited operating history and have grown significantly in a short period of time. If we are unable to manage our business and anticipated growth effectively, our business and growth prospects could be materially and adversely affected. |
• | If we fail to attract and retain senior management and key technology personnel, our business may be materially and adversely affected. |
• | We have a history of net losses, and expect to incur additional substantial losses in the foreseeable future. |
• | Changes in the regulatory landscape for hearing aid devices could render our direct-to-consumer |
• | If we cannot innovate at the pace of our hearing aid manufacturing competitors, we may not be able to develop or exploit new technologies in time to remain competitive. |
• | We are deploying a new business model in an effort to disrupt a relatively mature industry. In order to successfully challenge incumbent business models and become profitable, we will need to continue to refine our product and strategy. |
• | We operate in a highly competitive industry, and competitive pressures could have a material adverse effect on our business. |
• | If we are unable to reduce our return rates or if our return rates continue to increase, our net revenue may continue to decrease, and our business, financial condition and results of operations could be adversely affected. |
• | We rely on a limited number of manufacturers for the assembly of our hearing aids. If we encounter manufacturing problems or delays, we may be unable to promptly transition to alternative manufacturers and our ability to generate revenue will be limited. |
• | We rely on the timely supply of high-quality components, parts and finished products, and our business could suffer if suppliers or manufacturers are unable to procure raw materials or other components of an acceptable quality (or at all) or otherwise fail to meet their delivery obligations, raise prices or cease to supply us with components, parts or products or acceptable quality. |
• | If the quality of our hearing aid products does not meet consumer expectations, or if our products wear out more quickly than expected, then our brand and reputation or our business could be adversely affected. |
• | There are a variety of hearing aid products and technologies, and consumer confusion about product features and technology could lead consumers to purchase competitive products instead of our products, or to conflate any adverse events or safety issues associated with third-party hearing aid products with our products, which could adversely affect our business, financial condition and results of operations. |
• | Our success depends in part on our proprietary technology, and if we are unable to obtain, maintain or successfully enforce our intellectual property rights, the commercial value of our products and services will be adversely affected and our competitive position may be harmed. |
• | investor confidence in our ability to continue as a going concern; |
• | the timing, receipt and amount of sales from our current and future products; |
• | the costs involved in resolving third-party claims audits and recoupment of previous claims paid, as well as other legal proceedings (including the shareholder class action and derivative suits discussed in |
Note 6 to the Consolidated Financial Statements included in this Annual Report on Form 10-K), and their duration and impact on our business generally (particularly with respect to our ability in future periods to accept insurance as a direct method of payment); |
• | the availability of insurance coverage for our hearing aid devices, and any costs associated with reimbursement and compliance, including anticipated implementation of a pending OTC regulatory framework (which may lead insurance providers to take actions limiting our ability to access insurance coverage and may also generally result in additional compliance or other regulatory requirements for us), and any resulting changes to our business model, including a potential long-term shift to a model that excludes insurance benefits as a method of direct payment to Eargo, which would likely result in a sustained increased cost of customer acquisition; |
• | the cost and timing of expanding our sales, marketing and distribution capabilities; |
• | any expenses, as well as the impact to our business and operating model, as a result of changes in the regulatory landscape for hearing aid devices; |
• | the cost of manufacturing, either ourselves or through third-party manufacturers, our products; |
• | the terms, timing and success of any other licensing, partnership, omni-channel, including retail, or other arrangements that we may establish; |
• | any product liability or other lawsuits related to our current or future products; |
• | the expenses needed to attract, hire and retain skilled personnel; |
• | the extent of our spending to support research and development activities and the expansion of our product offerings; |
• | the costs associated with being a public company; |
• | the duration and severity of the COVID-19 pandemic and its impact on our business and financial markets generally; |
• | the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our intellectual property portfolio; and |
• | the extent to which we acquire or invest in businesses. |
• | manage our commercial operations effectively; |
• | identify, recruit, retain, incentivize and integrate additional employees; |
• | manage our internal development and operational efforts effectively while carrying out our contractual obligations to third parties; and |
• | continue to improve our operational, financial and management controls, reports systems and procedures. |
• | decreased demand for our current or future products; |
• | injury to our reputation; |
• | costs to defend the related litigation; |
• | a diversion of management’s time and our resources; |
• | substantial monetary awards to customers; |
• | regulatory investigations, product recalls, withdrawals or labeling, marketing or promotional restrictions; |
• | loss of revenue; and |
• | the inability to sell our current or any future products. |
• | controlling quality of supplies and finished product; |
• | trade protection measures, tariffs and other duties, especially in light of trade disputes between the United States and several foreign countries, including China and countries in Europe; |
• | political, social and economic instability (for example, Russia’s invasion of Ukraine in February 2022 and the resultant sanctions and export controls introduced against Russia have created such instability and have and may continue to disrupt business activity both in the immediately affected region and around the world, the full effects of which remain unknown); |
• | the outbreak of contagious diseases, such as COVID-19; |
• | laws and business practices that favor local companies; |
• | interruptions and limitations in telecommunication services; |
• | product or material delays or disruption, including logistics challenges such as delays or disruptions in shipping; |
• | import and export license requirements and restrictions; |
• | difficulties in the protection of intellectual property; |
• | inflation and/or deflation; |
• | the threat of nationalization and expropriation; |
• | exchange controls, currency restrictions and fluctuations in currency values; and |
• | potential adverse tax consequences. |
• | encumber or license our intellectual property subject to certain exceptions; |
• | sell, transfer, lease or dispose of our assets subject to certain exclusions; |
• | create, incur or assume additional indebtedness; |
• | encumber or permit liens on any of our assets other than certain permitted liens; |
• | make restricted payments, including paying dividends on, repurchasing or making distributions with respect to any of our capital stock; |
• | make specified investments (including loans and advances); |
• | consolidate, merge with, or acquire any other entity, or sell or otherwise dispose of all or substantially all of our assets; and |
• | enter into certain transactions with our affiliates. |
• | the U.S. federal civil and criminal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under U.S. federal and state healthcare programs such as Medicare, state Medicaid programs and TRICARE. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; |
• | the U.S. federal false claims laws, including the False Claims Act, which can be enforced through whistleblower actions, and civil monetary penalties laws, which, among other things, impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented, to the U.S. federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act; |
• | Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; |
• | state law equivalents of each of the above federal laws, including state anti-kickback, self-referral and false claims laws that apply more broadly to healthcare items or services paid by all payors, including self-pay patients and private insurers, that govern our interactions with consumers or restrict payments that may be made to healthcare providers and other potential referral sources; |
• | the Federal Trade Commission Act and federal and state consumer protection, advertisement and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; |
• | the U.S. Physician Payments Sunshine Act and its implementing regulations, which require certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, |
Medicaid or the Children’s Health Insurance Program to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare providers (physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members; |
• | the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), and similar regulations in other countries, which prohibit, among other things, companies and their employees and agents from authorizing, promising, offering or providing, directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations and foreign government owned or affiliated entities, candidates for foreign political office and foreign political parties or officials thereof and require companies to keep books and records that accurately and fairly reflect the transactions of the company and to maintain an adequate system of internal accounting controls; |
• | foreign or U.S. analogous state laws and regulations, which may apply to our business practices, including but not limited to, state laws that require manufacturers to comply with the voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government; state laws and regulations that require manufacturers to file reports relating to pricing and marketing information or that require tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; and |
• | similar healthcare laws and regulations in the EU and other jurisdictions in which we may conduct activities in the future, including reporting requirements detailing interactions with and payments to healthcare providers. |
• | inability to demonstrate to the FDA’s satisfaction that the product or modification is substantially equivalent to the proposed predicate device or safe and effective for its intended use, as applicable; |
• | the data from pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required; and |
• | the manufacturing process or facilities do not meet applicable requirements. |
• | fines, injunctions or civil penalties; |
• | suspension or withdrawal of future clearances or approvals; |
• | refusal to clear or approve pending applications; |
• | seizures or recalls of our products; |
• | total or partial suspension of production or distribution; |
• | administrative or judicially imposed sanctions; |
• | refusal to permit the import or export of our products; and |
• | criminal prosecution. |
• | the liquidity of our common stock; |
• | the market price of our common stock; |
• | our ability to raise additional capital; |
• | the number of institutional and general investors that will consider investing in our common stock; |
• | the number of market makers in our common stock; |
• | the availability of information concerning the trading prices and volume of our common stock; and |
• | the number of broker-dealers willing to execute trades in shares of our common stock. |
• | a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; |
• | no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; |
• | the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; |
• | the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror; |
• | the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval; |
• | the required approval of at least 66 2 ⁄3 % of the shares entitled to vote at an election of directors to adopt, amend or repeal our amended and restated bylaws or to repeal certain provisions of our amended and restated certificate of incorporation; |
• | a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; |
• | the requirement that a special meeting of stockholders may be called only by our board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and |
• | advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us. |
• | We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful. |
• | We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law. |
• | We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification. |
• | We will not be obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification. |
• | The rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons. |
• | We may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents. |
• | increased operating expenses and cash requirements; |
• | the assumption of additional indebtedness or contingent liabilities; |
• | assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel; |
• | the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition; |
• | loss of key personnel, and uncertainties in our ability to maintain key business relationships; |
• | uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals; |
• | our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs; and |
• | causing us to become subject to additional laws and regulations. |
• | We suspended our practice of granting equity awards, except for new restricted stock unit grants that we have the option to settle in cash at the time of vesting, suspended our 2020 Employee Stock Purchase Plan (“ESPP”) and deferred the settlement of outstanding restricted stock units (“RSUs”), in each case effective as of November 9, 2021 (collectively, the “employee equity actions”). |
• | Our Board of Directors suspended the non-employee director compensation program with respect to the option awards that would otherwise have been awarded to non-employee directors automatically on the date of our annual meeting of stockholders held on November 9, 2021. |
• | On December 7, 2021, we announced a plan to reduce our employee workforce to streamline our organization in response to declines in customer orders since we announced the investigation of the Company by the DOJ. We substantially completed the employee workforce reduction during the fourth quarter of 2021, resulting in a reduction of approximately 27% of our employee workforce, or approximately 90 people. |
• | Gross systems shipped |
further harm our reputation and lead to a further decline in gross systems shipped. See “—DOJ investigation and settlement and claims audits” and “—Factors affecting our business.” |
• | Sales returns rates |
Three months ended |
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March 31, 2020 |
June 30, 2020 |
September 30, 2020 |
December 31, 2020 |
March 31, 2021 |
June 30, 2021 |
September 30, 2021 |
December 31, 2021 |
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Gross systems shipped |
7,030 | 9,040 | 10,077 | 12,096 | 11,704 | 12,548 | 13,117 | 7,767 | ||||||||||||||||||||||||
Sales returns rate |
28.2 | % | 27.1 | % | 25.2 | % | 24.3 | % | 23.2 | % | 24.1 | % | 46.4 | % | 34.0 | % |
Year ended December 31, |
Change |
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(dollars in thousands) |
2021 |
2020 |
Amount |
% |
||||||||||||
Revenue, net |
$ | 32,122 | $ | 69,154 | $ | (37,032 | ) | (53.6 | )% | |||||||
Cost of revenue |
27,956 | 21,873 | 6,083 | 27.8 | ||||||||||||
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Gross profit |
4,166 | 47,281 | (43,115 | ) | (91.2 | ) | ||||||||||
Operating expenses: |
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Research and development |
25,232 | 12,045 | 13,187 | 109.5 | ||||||||||||
Sales and marketing |
85,759 | 49,525 | 36,234 | 73.2 | ||||||||||||
General and administrative |
49,882 | 20,582 | 29,300 | 142.4 | ||||||||||||
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Total operating expenses |
160,873 | 82,152 | 78,721 | 95.8 | ||||||||||||
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Loss from operations |
(156,707 | ) | (34,871 | ) | (121,836 | ) | 349.4 | |||||||||
Other income (expense), net: |
||||||||||||||||
Interest income |
21 | 37 | (16 | ) | (43.2 | ) | ||||||||||
Interest expense |
(1,068 | ) | (1,920 | ) | 852 | (44.4 | ) | |||||||||
Other income (expense), net |
— | (1,474 | ) | 1,474 | (100.0 | ) | ||||||||||
Loss on extinguishment of debt |
— | (1,627 | ) | 1,627 | (100.0 | ) | ||||||||||
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Total other income (expense), net |
(1,047 | ) | (4,984 | ) | 3,937 | (79.0 | ) | |||||||||
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Loss before income taxes |
(157,754 | ) | (39,855 | ) | (117,899 | ) | 295.8 | |||||||||
Income tax provision |
— | — | — | — | ||||||||||||
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Net loss and comprehensive loss |
$ | (157,754 | ) | $ | (39,855 | ) | $ | (117,899 | ) | 295.8 | % | |||||
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Year ended December 31, |
Change |
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(dollars in thousands) |
2021 |
2020 |
Amount |
% |
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Revenue, net |
$ | 32,122 | $ | 69,154 | $ | (37,032 | ) | (53.6 | )% | |||||||
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Year ended December 31, |
Change |
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(dollars in thousands) |
2021 |
2020 |
Amount |
% |
||||||||||||
Cost of revenue |
$ | 27,956 | $ | 21,873 | $ | 6,083 | 27.8 | % | ||||||||
Gross profit |
4,166 | 47,281 | (43,115 | ) | (91.2 | )% | ||||||||||
Gross margin |
13.0 | % | 68.4 | % | ||||||||||||
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Year ended December 31, |
Change |
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(dollars in thousands) |
2021 |
2020 |
Amount |
% |
||||||||||||
Research and development |
$ | 25,232 | $ | 12,045 | $ | 13,187 | 109.5 | % | ||||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2021 |
2020 |
Amount |
% |
||||||||||||
Sales and marketing |
$ | 85,759 | $ | 49,525 | $ | 36,234 | 73.2 | % | ||||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2021 |
2020 |
Amount |
% |
||||||||||||
General and administrative |
$ | 49,882 | $ | 20,582 | $ | 29,300 | 142.4 | % | ||||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2021 |
2020 |
Amount |
% |
||||||||||||
Interest expense |
$ | (1,068 | ) | $ | (1,920 | ) | $ | 852 | (44.4 | )% | ||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2021 |
2020 |
Amount |
% |
||||||||||||
Other income (expense), net |
$ | — | $ | (1,474 | ) | $ | 1,474 | (100.0 | )% | |||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2020 |
2019 |
Amount |
% |
||||||||||||
Revenue, net |
$ | 69,154 | $ | 32,790 | $ | 36,364 | 110.9 | % | ||||||||
Cost of revenue |
21,873 | 15,790 | 6,083 | 38.5 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
47,281 | 17,000 | 30,281 | 178.1 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
12,045 | 12,841 | (796 | ) | (6.2 | ) | ||||||||||
Sales and marketing |
49,525 | 35,725 | 13,800 | 38.6 | ||||||||||||
General and administrative |
20,582 | 12,470 | 8,112 | 65.1 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
82,152 | 61,036 | 21,116 | 34.6 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss from operations |
(34,871 | ) | (44,036 | ) | 9,165 | (20.8 | ) | |||||||||
Other income (expense), net: |
||||||||||||||||
Interest income |
37 | 627 | (590 | ) | (94.1 | ) | ||||||||||
Interest expense |
(1,920 | ) | (711 | ) | (1,209 | ) | 170.0 | |||||||||
Other income (expense), net |
(1,474 | ) | (366 | ) | (1,108 | ) | 302.7 | |||||||||
Loss on extinguishment of debt |
(1,627 | ) | — | (1,627 | ) | * | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other income (expense), net |
(4,984 | ) | (450 | ) | (4,534 | ) | 1,008 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss before income taxes |
(39,855 | ) | (44,486 | ) | 4,631 | (10.4 | ) | |||||||||
Income tax provision |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss and comprehensive loss |
$ | (39,855 | ) | $ | (44,486 | ) | $ | 4,631 | (10.4 | )% | ||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2020 |
2019 |
Amount |
% |
||||||||||||
Revenue, net |
$ | 69,154 | $ | 32,790 | $ | 36,364 | 110.9 | % | ||||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2020 |
2019 |
Amount |
% |
||||||||||||
Cost of revenue |
$ | 21,873 | $ | 15,790 | $ | 6,083 | 38.5 | % | ||||||||
Gross profit |
47,281 | 17,000 | 30,281 | 178.1 | % | |||||||||||
Gross margin |
68.4 | % | 51.8 | % | ||||||||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2020 |
2019 |
Amount |
% |
||||||||||||
Research and development |
$ | 12,045 | $ | 12,841 | $ | (796 | ) | (6.2 | )% | |||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2020 |
2019 |
Amount |
% |
||||||||||||
Sales and marketing |
$ | 49,525 | $ | 35,725 | $ | 13,800 | 38.6 | % | ||||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2020 |
2019 |
Amount |
% |
||||||||||||
General and administrative |
$ | 20,582 | $ | 12,470 | $ | 8,112 | 65.1 | % | ||||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2020 |
2019 |
Amount |
% |
||||||||||||
Interest income |
$ | 37 | $ | 627 | $ | (590 | ) | (94.1 | )% | |||||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2020 |
2019 |
Amount |
% |
||||||||||||
Interest expense |
$ | (1,920 | ) | $ | (711 | ) | $ | (1,209 | ) | 170.0 | % | |||||
|
|
|
|
|
|
|
|
Year ended December 31, |
Change |
|||||||||||||||
(dollars in thousands) |
2020 |
2019 |
Amount |
% |
||||||||||||
Other income (expense), net |
$ | (1,474 | ) | $ | (366 | ) | $ | (1,108 | ) | 302.7 | % | |||||
|
|
|
|
|
|
|
|
• | investor confidence in our ability to continue as a going concern; |
• | the timing, receipt and amount of sales from our current and future products; |
• | the costs involved in resolving the third-party claims audits and potential recoupment of previous claims paid, as well as other legal proceedings (including the shareholder class action and derivative suits discussed in Note 6 to the Consolidated Financial Statements included in this Annual Report on Form 10-K), and their duration and impact on our business generally (particularly with respect to our ability in future periods to accept insurance as a direct method of payment); |
• | the availability of insurance coverage for our hearing aid devices, and any costs associated with reimbursement and compliance, including the anticipated implementation of a pending OTC regulatory framework (which may lead insurance providers to take actions limiting our ability to access insurance coverage and may also generally result in additional compliance or other regulatory requirements for us), and any resulting changes to our business model, including a potential long-term shift to a model that excludes insurance benefits as a method of direct payment to Eargo, which would likely result in a sustained increased cost of customer acquisition; |
• | the cost and timing of expanding our sales, marketing and distribution capabilities and our continued success in reducing our customer acquisition costs; |
• | any expenses, as well as the impact to our business and operating model, as a result of changes in the regulatory landscape for hearing aid devices; |
• | the cost of manufacturing, either ourselves or through third-party manufacturers, our products; |
• | the terms, timing and success of any other licensing, partnership, omni-channel, including retail, or other arrangements that we may establish; |
• | any product liability or other lawsuits related to our current or future products; |
• | the expenses needed to attract, hire and retain skilled personnel; |
• | the extent of our spending to support research and development activities and the expansion of our product offerings; |
• | the costs associated with being a public company; |
• | the duration and severity of the COVID-19 pandemic and its impact on our business and financial markets generally; |
• | the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our intellectual property portfolio; and |
• | the extent to which we acquire or invest in businesses. |
Payments due by period |
||||||||||||||||||||
(in thousands) |
Total |
Less than 1 year |
1-3 years |
3-5 years |
More than 5 years |
|||||||||||||||
Operating lease obligations |
$ | 9,832 | $ | 1,327 | $ | 2,195 | $ | 2,703 | $ | 3,607 | ||||||||||
Debt, principal and interest (1) |
17,016 | 3,950 | 13,066 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 26,848 | $ | 5,277 | $ | 15,261 | $ | 2,703 | $ | 3,607 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(1) | We borrowed $15.0 million pursuant to a term loan under the 2018 Loan. Principal payments associated with the 2018 Loan are included in the above table. Interest expense is included in the above table based on obligations outstanding and rates effective as of December 31, 2021, including a final one-time payment of $0.9 million in September 2024. |
Year ended December 31, |
||||||||
(in thousands) |
2021 |
2020 |
||||||
Net cash used in operating activities |
$ | (98,456 | ) | $ | (26,041 | ) | ||
Net cash used in investing activities |
(7,587 | ) | (5,079 | ) | ||||
Net cash provided by financing activities |
4,358 | 229,921 | ||||||
|
|
|
|
|||||
Net increase (decrease) in cash |
$ | (101,685 | ) | $ | 198,801 | |||
|
|
|
|
• | Fair value of common stock |
order to determine the fair value of our common stock underlying option grants, our board of directors considered, among other things, valuations of our common stock prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. For all grants subsequent to our IPO in October 2020, the fair value of common stock was determined by using the closing price per share of common stock as reported on the Nasdaq Global Select Market. |
• |
Expected term time-to-vesting |
• |
Expected volatility |
• |
Risk-free interest rate |
• |
Expected dividend |
98 |
||||
102 |
||||
103 |
||||
104 |
||||
105 |
||||
106 |
• |
With the assistance of professionals in our firm having expertise in revenue recognition and receivables, we evaluated the Company’s accounting considerations and conclusions to account for product shipments with potential insurance coverage during the current period through consideration of possible alternatives under accounting principles generally accepted in the United States of America. |
• |
We tested the methodology and assumptions used by management to calculate its sales returns reserve and allowance for credit losses related to product shipments with potential insurance coverage by: |
• |
Testing the mathematical accuracy of management’s calculations and the completeness and accuracy of the underlying source information. |
• |
Evaluating the estimated sales returns rate for customers with unpaid claims used in management’s calculation of the sales returns reserve by performing a retrospective review of historical returns and by evaluating the appropriateness of the internal and external factors used by management to determine the sales returns rate. |
• |
Reviewing recent return activity including after the most recent balance sheet date. |
• |
We developed an independent expectation of the sales returns reserve and compared it to the recorded balance. |
• |
We developed an independent expectation of the allowance for credit losses for unpaid insurance claims recorded in accounts receivable and compared it to the recorded balance. |
December 31, 2021 |
December 31, 2020 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 110,500 | $ | 212,185 | ||||
Accounts receivable, net |
12,547 | 3,793 | ||||||
Inventories |
5,712 | 2,739 | ||||||
Prepaid expenses and other current assets |
10,873 | 3,740 | ||||||
|
|
|
|
|||||
Total current assets |
139,632 | 222,457 | ||||||
Operating lease right-of-use |
7,165 | 1,079 | ||||||
Property and equipment, net |
9,551 | 8,034 | ||||||
Intangible assets, net |
1,681 | — | ||||||
Goodwill |
873 | — | ||||||
Other assets |
1,209 | 1,062 | ||||||
|
|
|
|
|||||
Total assets |
$ | 160,111 | $ | 232,632 | ||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 9,053 | $ | 6,020 | ||||
Accrued expenses |
9,235 | 9,583 | ||||||
Sales returns reserve |
13,827 | 4,326 | ||||||
Settlement liability |
34,372 | — | ||||||
Long-term debt, current portion |
3,333 | — | ||||||
Other current liabilities |
1,813 | 2,448 | ||||||
Deferred revenue, current portion |
— | 311 | ||||||
Lease liability, current portion |
750 | 1,030 | ||||||
|
|
|
|
|||||
Total current liabilities |
72,383 | 23,718 | ||||||
Lease liability, noncurrent portion |
6,640 | 166 | ||||||
Long-term debt, noncurrent portion |
11,924 | 14,837 | ||||||
|
|
|
|
|||||
Total liabilities |
90,947 | 38,721 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 6) |
||||||||
Stockholders’ equity: |
||||||||
Preferred stock, $0.0001 par value per share; 5,000,000 shares authorized as of December 31, 2021 and 2020, respectively; zero shares issued and outstanding as of December 31, 2021 and 2020, respectively |
— | — | ||||||
Common stock; $0.0001 par value; 110,000,000 shares authorized as of December 31, 2021 and 2020, respectively; 39,307,093 and 38,246,601 shares issued and outstanding as of December 31, 2021 and 2020, respectively |
4 | 4 | ||||||
Additional paid-in capital |
425,972 | 392,965 | ||||||
Accumulated deficit |
(356,812 | ) | (199,058 | ) | ||||
|
|
|
|
|||||
Total stockholders’ equity |
69,164 | 193,911 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
$ | 160,111 | $ | 232,632 | ||||
|
|
|
|
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Revenue, net |
$ | 32,122 | $ |
69,154 | $ |
32,790 | ||||||
Cost of revenue |
27,956 | 21,873 | 15,790 | |||||||||
|
|
|
|
|
|
|||||||
Gross profit |
4,166 | 47,281 | 17,000 | |||||||||
Operating expenses: |
||||||||||||
Research and development |
25,232 | 12,045 | 12,841 | |||||||||
Sales and marketing |
85,759 | 49,525 | 35,725 | |||||||||
General and administrative |
49,882 | 20,582 | 12,470 | |||||||||
|
|
|
|
|
|
|||||||
Total operating expenses |
160,873 | 82,152 | 61,036 | |||||||||
|
|
|
|
|
|
|||||||
Loss from operations |
(156,707 | ) | (34,871 | ) | (44,036 | ) | ||||||
Other income (expense), net: |
||||||||||||
Interest income |
21 | 37 | 627 | |||||||||
Interest expense |
(1,068 | ) |
(1,920 | ) |
(711 | ) | ||||||
Other income (expense), net |
— | (1,474 | ) | (366 | ) | |||||||
Loss on extinguishment of debt |
— | (1,627 | ) |
— | ||||||||
|
|
|
|
|
|
|||||||
Total other income (expense), net |
(1,047 | ) |
(4,984 | ) |
(450 | ) | ||||||
|
|
|
|
|
|
|||||||
Loss before income taxes |
(157,754 | ) | (39,855 | ) |
(44,486 | ) | ||||||
Income tax provision |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Net loss and comprehensive loss |
$ | (157,754 | ) |
$ |
(39,855 | ) |
$ |
(44,486 | ) | |||
|
|
|
|
|
|
|||||||
Net loss attributable to common stockholders, basic and diluted |
$ |
(157,754 | ) |
$ |
(30,015 | ) |
$ |
(44,486 | ) | |||
|
|
|
|
|
|
|||||||
Net loss per share attributable to common stockholders, basic and diluted |
$ |
(4.06 | ) |
$ |
(3.80 | ) |
$ |
(173.47 | ) | |||
|
|
|
|
|
|
|||||||
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted |
38,899,457 | 7,890,375 | 256,452 | |||||||||
|
|
|
|
|
|
Convertible preferred stock |
Common stock |
Additional paid-in capital |
Accumulated deficit |
Total stockholders’ equity (deficit) |
||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||||||
Balance December 31, 2018 |
11,761,159 | $ | 152,015 | 231,831 | $ | — | $ | 1,718 | $ | (114,717 | ) | $ | (112,999 | ) | ||||||||||||||||||
Issuance of Series D convertible preferred stock, net of issuance costs of $0 |
64,653 | 865 | — | — | — | — | — | |||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | 1,339 | — | 1,339 | |||||||||||||||||||||||||
Exercise of stock options |
— | — | 34,112 | — | 43 | — | 43 | |||||||||||||||||||||||||
Net loss and comprehensive loss |
— | — | — | — | — | (44,486 | ) | (44,486 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance December 31, 2019 |
11,825,812 | 152,880 | 265,943 | — | 3,100 | (159,203 | ) | (156,103 | ) | |||||||||||||||||||||||
Issuance of Series E convertible preferred stock, net of issuance costs of $4,056 |
10,513,921 | 67,267 | — | — | — | — | — | |||||||||||||||||||||||||
Issuance of Series E convertible preferred stock, upon extinguishment of convertible notes |
1,889,548 | 12,818 | — | — | — | — | — | |||||||||||||||||||||||||
Gain on extinguishment of Series C and Series C-1 convertible preferred stock |
— | (9,840 | ) | — | — | 9,840 | — | 9,840 | ||||||||||||||||||||||||
Conversion of convertible preferred stock to common stock upon initial public offering |
(24,229,281 | ) | (223,125 | ) | 28,196,388 | 3 | 223,122 | — | 223,125 | |||||||||||||||||||||||
Conversion of convertible preferred stock warrants to common stock warrants upon initial public offering |
— | — | — | — | 1,931 | — | 1,931 | |||||||||||||||||||||||||
Issuance of common stock upon initial public offering, net of underwriting discounts and commissions and other offering costs of $14,031 |
— | — | 9,029,629 | 1 | 148,501 | — | 148,502 | |||||||||||||||||||||||||
Exercise of common stock warrants |
— | — | 107,790 | — | — | — | — | |||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | 5,292 | — | 5,292 | |||||||||||||||||||||||||
Exercise of stock options |
— | — | 646,851 | — | 1,179 | — | 1,179 | |||||||||||||||||||||||||
Net loss and comprehensive loss |
— | — | — | — | — | (39,855 | ) | (39,855 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance December 31, 2020 |
— | — | 38,246,601 | 4 | 392,965 | (199,058 | ) | 193,911 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Stock-based compensation |
— | — | — | — | 28,609 | — | 28,609 | |||||||||||||||||||||||||
Exercise of stock options and release of restricted stock units |
— | — | 885,749 | — | 1,724 | — | 1,724 | |||||||||||||||||||||||||
Issuance of common stock in connection with employee stock purchase plan |
— | — | 174,743 | — | 2,674 | — | 2,674 | |||||||||||||||||||||||||
Net loss and comprehensive loss |
— | — | — | — | — | (157,754 | ) | (157,754 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance December 31, 2021 |
— | $ | — | 39,307,093 | $ | 4 | $ | 425,972 | $ | (356,812 | ) | $ | 69,164 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Operating activities: |
||||||||||||
Net loss |
$ | (157,754 | ) | $ | (39,855 | ) | $ | (44,486 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
Depreciation and amortization |
4,202 | 2,525 | 1,528 | |||||||||
Stock-based compensation |
27,731 | 5,089 | 1,339 | |||||||||
Non-cash interest expense and amortization of debt discount |
420 | 1,513 | 297 | |||||||||
Non-cash operating lease expense |
1,063 | 1,128 | — | |||||||||
Bad debt expense |
9,615 | 2,352 | 313 | |||||||||
Loss on disposal of property and equipment |
155 | — | 24 | |||||||||
Loss on extinguishment of debt |
— | 1,627 | — | |||||||||
Change in fair value of financial instruments |
— | 1,471 | 274 | |||||||||
Changes in operating assets and liabilities: |
||||||||||||
Accounts receivable |
(18,369 | ) | (4,094 | ) | (1,399 | ) | ||||||
Inventories |
(2,973 | ) | 141 | (720 | ) | |||||||
Prepaid expenses and other current and noncurrent assets |
(7,383 | ) | (1,636 | ) | (641 | ) | ||||||
Accounts payable |
3,130 | 187 | 163 | |||||||||
Accrued expenses |
(368 | ) | 3,900 | 2,692 | ||||||||
Sales returns reserve |
9,501 | 567 | 1,046 | |||||||||
Settlement liability |
34,372 | — | — | |||||||||
Other current and noncurrent liabilities |
(946 | ) | 240 | 462 | ||||||||
Operating lease liabilities |
(852 | ) | (1,196 | ) | — | |||||||
|
|
|
|
|
|
|||||||
Net cash used in operating activities |
(98,456 | ) | (26,041 | ) | (39,108 | ) | ||||||
|
|
|
|
|
|
|||||||
Investing activities: |
||||||||||||
Purchases of property and equipment |
(882 | ) | (1,624 | ) | (2,167 | ) | ||||||
Capitalized software development costs |
(3,842 | ) | (3,455 | ) | (1,692 | ) | ||||||
Cash paid for acquisition of business |
(2,863 | ) | — | — | ||||||||
|
|
|
|
|
|
|||||||
Net cash used in investing activities |
(7,587 | ) | (5,079 | ) | (3,859 | ) | ||||||
|
|
|
|
|
|
|||||||
Financing activities: |
||||||||||||
Proceeds from stock options exercised |
1,724 | 1,179 | 43 | |||||||||
Proceeds from employee stock purchase plan purchases |
2,674 | — | — | |||||||||
Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts and commissions |
— | 151,156 | — | |||||||||
Payments of other offering costs related to the initial public offering |
(40 | ) | (2,614 | ) | (758 | ) | ||||||
Proceeds from convertible preferred stock issuance, net of issuance costs |
— | 67,867 | 865 | |||||||||
Proceeds from issuance of convertible notes, net of issuance costs |
— | 10,053 | — | |||||||||
Proceeds from debt financing |
— | 15,000 | 5,000 | |||||||||
Debt repayments |
— | (12,720 | ) | — | ||||||||
Proceeds from PPP loan |
— | 4,574 | — | |||||||||
Repayment of PPP loan |
— | (4,574 | ) | — | ||||||||
|
|
|
|
|
|
|||||||
Net cash provided by financing activities |
4,358 | 229,921 | 5,150 | |||||||||
|
|
|
|
|
|
|||||||
Net increase (decrease) in cash and cash equivalents and restricted cash |
(101,685 | ) | 198,801 | (37,817 | ) | |||||||
Cash and cash equivalents and restricted cash at beginning of period |
212,185 | 13,384 | 51,201 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents and restricted cash at end of period |
$ | 110,500 | $ | 212,185 | $ | 13,384 | ||||||
|
|
|
|
|
|
|||||||
Supplemental disclosure of cash flow information: |
||||||||||||
Cash paid for taxes |
$ | 107 | $ | 63 | $ | — | ||||||
|
|
|
|
|
|
|||||||
Cash paid for interest |
$ | 646 | $ | 398 | $ | 395 | ||||||
|
|
|
|
|
|
|||||||
Non-cash operating activities: |
||||||||||||
Lease liability obtained in exchange for right-of-use |
$ | 7,046 | $ | 2,392 | $ | — | ||||||
|
|
|
|
|
|
|||||||
Non-cash investing and financing activities: |
||||||||||||
Property and equipment and capitalized software costs in accounts payable and accrued liabilities |
$ | 357 | $ | 393 | $ | 515 | ||||||
|
|
|
|
|
|
|||||||
Stock-based compensation included in capitalized software costs |
$ | 878 | $ | 203 | $ | — | ||||||
|
|
|
|
|
|
|||||||
Convertible preferred stock issuance costs included in accounts payable |
$ | 600 | $ | 600 | $ | — | ||||||
|
|
|
|
|
|
|||||||
Common stock issued on conversion of convertible preferred stock upon initial public offering |
$ | — | $ | 223,125 | $ | — | ||||||
|
|
|
|
|
|
|||||||
Conversion of convertible preferred stock warrants to common stock warrants and related reclassification of convertible preferred stock warrant liability to additional paid-in capital |
$ | — | $ | 1,931 | $ | — | ||||||
|
|
|
|
|
|
|||||||
Offering costs in accounts payable and accrued liabilities |
$ | — | $ | 40 | $ | 424 | ||||||
|
|
|
|
|
|
|||||||
Issuance of Series E convertible preferred stock upon extinguishment of convertible notes |
$ | — | $ | 12,818 | $ | — | ||||||
|
|
|
|
|
|
Total (in thousands) |
||||
Balance—December 31, 2019 |
396 | |||
Fair value of convertible preferred stock warrants issued in connection with debt financing |
270 | |||
Change in fair value of warrant liability |
1,265 | |||
Conversion of preferred stock warrants to common stock warrants upon the closing of the IPO |
(1,931 | ) | ||
|
|
|||
Balance—December 31, 2020 |
$ | — | ||
|
|
Valuation assumptions: |
December 31, 2020 |
|||
Expected volatility |
67%-71% |
|||
Expected term |
2.17-9.9 years |
|||
Risk-free interest rate |
0.15%-0.75% |
|||
Dividend yield |
— |
Total (in thousands) |
||||
Balance—December 31, 2019 |
$ | — | ||
Initial fair value of derivative liability |
2,879 | |||
Change in fair value of derivative liability |
206 | |||
Extinguishment of derivative liability |
(3,085 | ) | ||
|
|
|||
Balance—December 31, 2020 |
$ | — | ||
|
|
December 31, |
||||||||
2021 |
2020 |
|||||||
(in thousands) |
||||||||
Raw materials |
$ | 1,905 | $ | 853 | ||||
Finished goods |
3,807 | 1,886 | ||||||
|
|
|
|
|||||
Total inventories |
$ | 5,712 | $ | 2,739 | ||||
|
|
|
|
December 31, |
||||||||
2021 |
2020 |
|||||||
(in thousands) |
||||||||
Advanced payroll deposits |
$ | 3,889 | $ | — | ||||
Prepaid insurance fees |
2,945 | 1,931 | ||||||
Prepaid marketing costs |
1,948 | 245 | ||||||
Prepaid software subscription |
1,468 | 995 | ||||||
Other |
623 | 569 | ||||||
|
|
|
|
|||||
Total prepaid expenses and other current assets |
$ | 10,873 | $ | 3,740 | ||||
|
|
|
|
December 31, |
||||||||
2021 |
2020 |
|||||||
(in thousands) |
||||||||
Capitalized software |
$ | 11,569 | $ | 6,744 | ||||
Tools and lab equipment |
4,712 | 4,426 | ||||||
Furniture and fixtures |
906 | 906 | ||||||
Leasehold improvements |
861 | 757 | ||||||
Computer and equipment |
401 | 288 | ||||||
|
|
|
|
|||||
18,449 | 13,121 | |||||||
Less accumulated depreciation and amortization |
(8,898 | ) | (5,087 | ) | ||||
|
|
|
|
|||||
Total property and equipment, net |
$ | 9,551 | $ | 8,034 | ||||
|
|
|
|
December 31, |
||||||||
2021 |
2020 |
|||||||
(in thousands) |
||||||||
Accrued compensation |
$ | 4,845 | $ | 5,861 | ||||
Accrued warranty reserve |
4,014 | 2,390 | ||||||
Refunds due to customers |
376 | 581 | ||||||
Accrued vendor costs |
— | 751 | ||||||
|
|
|
|
|||||
Total accrued expenses |
$ | 9,235 | $ | 9,583 | ||||
|
|
|
|
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
(in thousands) |
||||||||||||
Sales returns reserve, beginning balance |
$ | 4,326 | $ | 3,759 | $ | 2,713 | ||||||
Reduction of revenue |
37,674 | 22,676 | 17,739 | |||||||||
Utilization of sales returns reserve |
(28,172 | ) | (22,109 | ) | (16,693 | ) | ||||||
|
|
|
|
|
|
|||||||
Sales returns reserve, ending balance |
$ | 13,828 | $ | 4,326 | $ | 3,759 | ||||||
|
|
|
|
|
|
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
(in thousands) |
||||||||||||
Allowance for credit losses, beginning balance |
$ | 1,868 | $ | 225 | $ | — | ||||||
Charged to expense |
9,615 | 2,352 | 225 | |||||||||
Accounts written off, net of recoveries |
(6,645 | ) | (709 | ) | — | |||||||
|
|
|
|
|
|
|||||||
Allowance for credit losses, ending balance |
$ | 4,838 | $ | 1,868 | $ | 225 | ||||||
|
|
|
|
|
|
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
(in thousands) |
||||||||||||
Accrued warranty reserve, beginning balance |
$ | 2,390 | $ | 450 | $ | 53 | ||||||
Charged to cost of revenue |
3,229 | 3,178 | 1,589 | |||||||||
Utilization of accrued warranty reserve |
(1,605 | ) | (1,238 | ) | (1,192 | ) | ||||||
|
|
|
|
|
|
|||||||
Accrued warranty reserve, ending balance |
$ | 4,014 | $ | 2,390 | $ | 450 | ||||||
|
|
|
|
|
|
(in thousands) |
||||
Goodwill |
$ | 873 | ||
Intangible assets |
1,990 | |||
|
|
|||
Total fair value of consideration |
$ | 2,863 | ||
|
|
Operating leases |
||||
(in thousands) |
||||
2022 |
$ | 1,327 | ||
2023 |
1,114 | |||
2024 |
1,081 | |||
2025 |
1,331 | |||
2026 |
1,372 | |||
Thereafter |
3,607 | |||
|
|
|||
Total minimum future lease payments |
9,832 | |||
Present value adjustment for minimum lease commitments | (2,442 | ) | ||
|
|
|||
Total lease liability |
$ | 7,390 | ||
|
|
Total |
||||
(in thousands) |
||||
Balance December 31, 2020 |
$ | — | ||
Addition due to business acquisition |
873 | |||
|
|
|||
Balance December 31, 2021 |
$ | 873 | ||
|
|
Gross carrying value |
Accumulated amortization |
Net carrying value |
||||||||||
(in thousands) |
||||||||||||
Developed technologies |
$ | 1,700 | $ | 212 | $ | 1,488 | ||||||
Other |
290 | 97 | 193 | |||||||||
|
|
|
|
|
|
|||||||
Total intangible assets, net |
$ | 1,990 | $ | 309 | $ | 1,681 | ||||||
|
|
|
|
|
|
Amount |
||||
(in thousands) |
||||
2022 |
$ | 618 | ||
2023 |
425 | |||
2024 |
425 | |||
2025 |
213 | |||
|
|
|||
Total |
$ | 1,681 | ||
|
|
December 31, |
||||||||
2021 |
2020 |
|||||||
(in thousands) |
||||||||
Principal value of long-term debt |
$ | 15,000 | $ | 15,000 | ||||
Net of debt discount and accretion of final payment |
257 | (163 | ) | |||||
|
|
|
|
|||||
Long-term debt, current and noncurrent |
15,257 | 14,837 | ||||||
Less: Long-term debt, current portion |
(3,333 | ) | — | |||||
|
|
|
|
|||||
Long-term debt, noncurrent portion |
$ | 11,924 | $ | 14,837 |
Total |
||||
(in thousands) |
||||
2022 |
$ | 3,950 | ||
2023 |
7,038 | |||
2024 |
6,028 | |||
|
|
|||
Total future payments |
17,016 | |||
Less amounts representing interest |
(1,078 | ) | ||
Less final payment |
(938 | ) | ||
|
|
|||
Total principal amount of term loan payments |
$ | 15,000 |
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
(in thousands) |
||||||||||||
Cost of revenue |
$ | 738 | $ | 60 | $ | 16 | ||||||
Research and development |
6,939 | 822 | 232 | |||||||||
Sales and marketing |
11,213 | 1,629 | 188 | |||||||||
General and administrative |
8,841 | 2,578 | 903 | |||||||||
|
|
|
|
|
|
|||||||
Total stock-based compensation |
$ | 27,731 | $ | 5,089 | $ | 1,339 | ||||||
|
|
|
|
|
|
Number of shares |
Weighted average exercise price |
Weighted average remaining contractual term |
Aggregate intrinsic value |
|||||||||||||
(in years) |
(in thousands) |
|||||||||||||||
Balance December 31, 2020 |
6,468,844 | $ | 2.78 | 8.77 | $ | 271,944 | ||||||||||
Grants |
323,105 | 46.97 | ||||||||||||||
Exercises |
(859,200 | ) | 2.01 | |||||||||||||
Cancelled/forfeited |
(525,934 | ) | 9.68 | |||||||||||||
|
|
|||||||||||||||
Balance December 31, 2021 |
5,406,815 | $ | 4.87 | 7.88 | $ | 12,860 | ||||||||||
|
|
|||||||||||||||
Vested and exercisable at December 31, 2021 |
2,377,275 | $ | 3.21 | 7.18 | $ | 6,585 |
Year ended December 31, |
||||||||||||
Valuation assumptions: |
2021 |
2020 |
2019 |
|||||||||
Expected volatility |
53%-57% | 60%-71% | 58%-60% | |||||||||
Expected term |
5.8-6.7 years | 5.1-7.0 years | 5.0-10.0 years | |||||||||
Risk-free interest rate |
0.62%- 1.11% |
0.23%- 1.20% |
1.46%-2.51% | |||||||||
Dividend yield |
— | — | — |
Number of shares |
Weighted average grant date fair value per share |
|||||||
Unvested as of December 31, 2020 |
8,270 | $ | 50.70 | |||||
RSUs granted |
509,860 | 43.40 | ||||||
RSUs vested |
(43,859 | ) | 52.34 | |||||
RSUs forfeited |
(125,820 | ) | 41.36 | |||||
|
|
|||||||
Unvested as of December 31, 2021 |
348,451 | $ | 43.19 | |||||
|
|
Valuation assumptions: |
Year ended December 31, 2021 |
|||
Expected volatility |
44%-57% | |||
Expected term |
0.5-2.0 years | |||
Risk-free interest rate |
0.04%-0.16% |
|||
Dividend yield |
— |
December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
(in thousands) |
||||||||||||
Income tax provision at statutory rate |
$ | (33,128 | ) | $ | (8,370 | ) | $ | (9,342 | ) | |||
State income taxes, net of federal benefit |
(3,104 | ) | (826 | ) | (2,350 | ) | ||||||
Change in valuation allowance |
37,792 | 8,720 | 3,064 | |||||||||
Stock-based compensation |
(716 | ) | (621 | ) | 190 | |||||||
Section 382 limitation on net operating loss and credit carryforwards |
— | — | 9,956 | |||||||||
Research and development tax credits |
(1,210 | ) | (1,442 | ) | (1,306 | ) | ||||||
Change in fair value of warrants |
21 | 326 | 79 | |||||||||
Derivative liability and extinguishment of debt |
— | 545 | — | |||||||||
Return-to-provision |
308 | 1,261 | (413 | ) | ||||||||
Other |
37 | 407 | 122 | |||||||||
|
|
|
|
|
|
|||||||
Total current income tax provision |
$ | — | $ | — | $ | — | ||||||
|
|
|
|
|
|
December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
(in thousands) |
||||||||||||
Deferred tax assets: |
||||||||||||
Net operating loss carryforwards |
$ | 62,322 | $ | 35,943 | $ | 29,684 | ||||||
Depreciation and amortization |
— | — | — | |||||||||
Research and development credits |
5,120 | 3,910 | 2,468 | |||||||||
Accruals and reserves |
13,597 | 2,986 | 1,667 | |||||||||
Lease liability |
1,690 | — | — | |||||||||
Stock-based compensation |
565 | 589 | 345 | |||||||||
|
|
|
|
|
|
|||||||
Total deferred tax assets |
83,294 | 43,428 | 34,164 | |||||||||
Valuation allowance |
(80,226 | ) | (42,435 | ) | (33,714 | ) | ||||||
|
|
|
|
|
|
|||||||
Deferred tax assets after valuation allowance |
3,068 | 993 | 450 | |||||||||
Deferred tax liabilities: |
||||||||||||
Depreciation and amortization |
(1,429 | ) | (993 | ) | (450 | ) | ||||||
Right-of-use |
(1,639 | ) | — | — | ||||||||
|
|
|
|
|
|
|||||||
Total deferred tax liabilities |
(3,068 | ) | (993 | ) | (450 | ) | ||||||
|
|
|
|
|
|
|||||||
Net deferred tax assets |
$ | — | $ | — | $ | — | ||||||
|
|
|
|
|
|
December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
(in thousands) |
||||||||||||
Beginning balance |
$ | 1,676 | $ | 1,058 | $ | 576 | ||||||
Increases related to current year tax positions |
518 | 618 | 482 | |||||||||
|
|
|
|
|
|
|||||||
Ending balance |
$ | 2,194 | $ | 1,676 | $ | 1,058 | ||||||
|
|
|
|
|
|
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Convertible preferred stock |
— | — | 13,710,242 | |||||||||
Common stock options issued and outstanding |
5,406,815 | 6,468,844 | 3,474,052 | |||||||||
Restricted stock units |
428,451 | 8,270 | — | |||||||||
Shares issuable pursuant to ESPP |
— | 17,865 | — | |||||||||
Convertible preferred stock warrants |
— | — | 73,913 | |||||||||
|
|
|
|
|
|
|||||||
Total |
5,835,266 | 6,494,979 | 17,258,207 | |||||||||
|
|
|
|
|
|
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
(in thousands, except share and per share amounts) |
||||||||||||
Numerator: |
||||||||||||
Net loss |
$ | (157,754 | ) | $ | (39,855 | ) | $ | (44,486 | ) | |||
Gain on extinguishment of Series C and Series C-1 convertible preferred stock |
— | 9,840 | — | |||||||||
|
|
|
|
|
|
|||||||
Net loss attributable to common stockholders, basic and diluted |
$ | (157,754 | ) | $ | (30,015 | ) | $ | (44,486 | ) | |||
|
|
|
|
|
|
|||||||
Denominator: |
||||||||||||
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted |
38,899,457 | 7,890,375 | 256,452 | |||||||||
|
|
|
|
|
|
|||||||
Net loss per share attributable to common stockholders, basic and diluted |
$ | (4.06 | ) | $ | (3.80 | ) | $ | (173.47 | ) | |||
|
|
|
|
|
|
Name |
Age |
Position(s) | ||||
Executive Officers |
||||||
Christian Gormsen |
45 | President, Chief Executive Officer and Director | ||||
William Brownie |
55 | Chief Operating Officer | ||||
Adam Laponis |
45 | Chief Financial Officer | ||||
Non-Employee Directors |
||||||
Josh Makower, M.D. (2)(3) |
58 | Chair and Director | ||||
Katie Bayne (3) |
55 | Director | ||||
Peter Tuxen Bisgaard (2)(3) |
48 | Director | ||||
Doug Hughes (1) |
60 | Director | ||||
Nina Richardson (2) |
63 | Director | ||||
A. Brooke Seawell (1) |
74 | Director | ||||
David Wu (1) |
53 | Director |
(1) | Member of our audit committee. |
(2) | Member of our compensation committee. |
(3) | Member of our nominating and corporate governance committee. |
• | Class I directors: |
• | Class II directors: |
• | Class III directors: |
• | appoints our independent registered public accounting firm; |
• | evaluates the independent registered public accounting firm’s qualifications, independence and performance; |
• | determines the engagement of the independent registered public accounting firm; |
• | reviews and approves the scope of the annual audit and pre-approves the audit and non-audit fees and services; |
• | reviews and approves all related party transactions on an ongoing basis; |
• | establishes procedures for the receipt, retention and treatment of any complaints received by the Company regarding accounting, internal accounting controls or auditing matters; |
• | discusses with management and the independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements; |
• | approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services; |
• | discusses on a periodic basis, or as appropriate, with management the Company’s policies and procedures with respect to risk assessment and risk management; |
• | is responsible for reviewing our financial statements and our management’s discussion and analysis of financial condition and results of operations to be included in our annual and quarterly reports to be filed with the SEC; |
• | investigates any reports received through the ethics helpline and reports to the Board periodically with respect to any information received through the ethics helpline and any related investigations; and |
• | reviews the Audit Committee Charter and the Audit Committee’s performance on an annual basis. |
• | One Form 4 report was inadvertently filed late for one of our executive officers, William Brownie, with respect to one transaction. |
• | One Form 4 report was inadvertently filed late for one of our executive officers, Adam Laponis, with respect to one transaction. |
• | Christian Gormsen, our President and Chief Executive Officer; |
• | William Brownie, our Chief Operating Officer; and |
• | Adam Laponis, our Chief Financial Officer. |
• | Attraction and Retention: |
• | Paying for Performance: |
• | Stockholder Alignment: |
• | Reviewing the compensation and stock performance of peer companies and recommending changes to our peer group, as necessary; |
• | Reviewing executive and senior officer compensation based on an analysis of market-based compensation data; and |
• | Assisting our Compensation Committee in analyzing the effectiveness of our executive compensation program and recommending changes, as necessary. |
• | base salary; |
• | annual cash performance-based compensation; |
• | equity-based incentive awards; and |
• | other benefits as may be determined from time to time. |
Name |
2021 base salary |
|||
Christian Gormsen |
$ | 550,000 | ||
William Brownie |
390,000 | |||
Adam Laponis |
390,000 |
Performance Metric |
Weighting |
Threshold (50% payout) |
Target (100% payout) |
Maximum (150% payout) |
||||||||||||
Net Revenue |
25 | % | $ | 85.0 | $ | 94.0 | $ | 103.5 | ||||||||
Non-GAAP Sales and Marketing Expenses(1) |
25 | % | 66 | % | 63 | % | 61 | % | ||||||||
Non-GAAP Operating Loss(2) |
25 | % | (37 | )% | (34 | )% | (31 | )% | ||||||||
Launch of Eargo 6 |
25 | % | |
Initial launch by January 31, 2022 |
|
(1) | Non-GAAP Sales and Marketing expense is determined as GAAP sales and marketing expense, less the impact of stock-based compensation for the relevant period. |
(2) | Non-GAAP Operating Loss is determined as GAAP operating loss, less the impact of stock-based compensation for the relevant period. |
Name |
Number of shares underlying stock options (#) |
Number of RSUs (#) |
Grant date fair value |
|||||||||
Christian Gormsen |
50,800 | 50,800 | $ | 4,891,697 | ||||||||
William Brownie |
16,500 | 16,500 | $ | 1,326,180 | ||||||||
Adam Laponis |
16,500 | 16,500 | $ | 1,325,469 |
Name and principal position |
Year |
Salary ($) (1) |
Bonus ($) |
Stock awards ($) (2) |
Option awards ($) (2) |
Non-equity incentive plan compensation ($) (3) |
Total ($) |
|||||||||||||||||||||
Christian Gormsen |
2021 | $ | 538,301 | $ | — | $ | 3,201,416 | $ | 1,690,280 | $ | 110,000 | $ | 5,539,997 | |||||||||||||||
President and Chief Executive Officer |
2020 | 452,279 | 61,982 | — | 3,149,564 | 147,911 | 3,811,736 | |||||||||||||||||||||
2019 | 502,170 | — | — | 1,022,911 | — | 1,525,081 | ||||||||||||||||||||||
William Brownie |
2021 | 369,950 | — | 867,570 | 458,610 | 58,500 | 1,754,630 | |||||||||||||||||||||
Chief Operating Officer |
2020 | 257,500 | 52,800 | — | 891,393 | 88,200 | 1,289,893 | |||||||||||||||||||||
2019 | 300,000 | — | — | 230,826 | — | 530,826 | ||||||||||||||||||||||
Adam Laponis |
2021 | 369,950 | — | 867,570 | 457,898 | 48,750 | 1,744,168 | |||||||||||||||||||||
Chief Financial Officer |
2020 | 257,500 | 52,800 | — | 998,198 | 88,200 | 1,396,698 | |||||||||||||||||||||
2019 | 161,539 | — | — | 490,510 | — | 652,049 |
(1) | The amount reported for Mr. Gormsen includes a housing allowance of $25,000 that does not require substantiation and is indistinguishable from base salary. The housing allowance was discontinued on February 28, 2021. |
(2) | In accordance with SEC rules, these columns reflect the aggregate grant date fair value of the stock awards and stock options granted during fiscal year 2021, computed in accordance with ASC 718 for stock-based compensation transactions. These amounts do not reflect the actual economic value realized by our NEOs. |
For a discussion of the valuation of the equity awards, including the assumptions used, see Notes 2 and 10 to our audited consolidated financial statements included in this Annual Report on Form 10-K for a discussion of these awards. |
(3) | The amounts reported represent the annual bonus earned by each NEO based on the timely launch of the Eargo 6. |
Grant Date |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) |
All Other Stock Awards: Number of Shares of Stock or Units (#) (2) |
All Other Option Awards: Number of Securities Underlying Options (#) (2) |
Exercise or Base Price of Option Awards ($/Share) |
Grant Date Fair Value of Stock and Option Awards ($) |
|||||||||||||||||||||||||||
Name |
Threshold ($) |
Target ($) |
Maximum ($) |
|||||||||||||||||||||||||||||
Christian Gormsen |
55,000 | 440,000 | 605,000 | |||||||||||||||||||||||||||||
2/3/2021 | 50,800 | 63.02 | 1,690,280 | |||||||||||||||||||||||||||||
2/3/2021 | 50,800 | 3,201,416 | ||||||||||||||||||||||||||||||
William Brownie |
29,250 | 234,000 | 321,750 | |||||||||||||||||||||||||||||
1/29/2021 | 16,500 | 52.58 | 458,610 | |||||||||||||||||||||||||||||
1/29/2021 | 16,500 | 867,570 | ||||||||||||||||||||||||||||||
Adam Laponis |
24,375 | 195,000 | 268,125 | |||||||||||||||||||||||||||||
1/29/2021 | 16,500 | 52.58 | 457,898 | |||||||||||||||||||||||||||||
1/29/2021 | 16,500 | 867,570 |
(1) | Threshold amounts determined by assuming achievement of one performance goal at threshold. Maximum amounts determined by assuming achievement of each performance goal at maximum, other than the Eargo 6 performance goal, which was only payable at target. |
(2) | Options and RSUs granted during 2021 vest in 16 quarterly installments commencing on February 15, 2021, subject to continued service. Vesting accelerates in full in the event the holder is terminated by us without cause or the holder resigns for good reason, in each case, within the 12-month period commencing on a change in control. |
(3) | In accordance with SEC rules, this column reflects the aggregate grant date fair value of the stock awards and option awards granted during fiscal year 2021, computed in accordance with ASC 718 for stock-based compensation transactions. These amounts do not reflect the actual economic value realized by our NEOs. For a discussion of the valuation of the equity awards, including the assumptions used, see Notes 2 and 10 to our audited consolidated financial statements included in this Annual Report on Form 10-K for a discussion of these awards. |
Name and principal position |
Grant date (1) |
Vesting commencement date |
Number of securities underlying unexercised options (#) (exercisable) |
Number of securities underlying unexercised options (#) (unexercisable) |
Equity incentive plan awards: number of securities underlying unexercised unearned options (#) (2) |
Option exercise price ($) |
Option expiration date |
Number of shares or units of stock that have not vested (#) |
Market value of shares or units of stock that have not vested ($) (3) |
|||||||||||||||||||||||||||
Christian Gormsen |
4/22/2014 | 1,100 | — | — | $ | 1.29 | 4/22/2024 | |||||||||||||||||||||||||||||
President |
11/20/2014 | 11,000 | — | — | 1.29 | 11/20/2024 | ||||||||||||||||||||||||||||||
and Chief |
9/1/2016 | 37,148 | — | — | 1.29 | 9/1/2026 | ||||||||||||||||||||||||||||||
Executive Officer |
10/11/2016 | 37,148 | — | — | 1.29 | 10/11/2026 | ||||||||||||||||||||||||||||||
7/12/2017 | 7/12/2017 | — | — | 18,574 | 1.29 | 7/11/2027 | ||||||||||||||||||||||||||||||
11/29/2017 | 11/29/2017 | (4) |
437,907 | — | — | 1.29 | 11/28/2027 | |||||||||||||||||||||||||||||
11/3/2018 | 4/24/2019 | (5) |
43,333 | — | — | 1.41 | 11/2/2028 | |||||||||||||||||||||||||||||
4/24/2019 | 4/24/2019 | (6) |
229,737 | — | — | 2.55 | (7) |
4/23/2029 | ||||||||||||||||||||||||||||
4/24/2019 | 2/26/2020 | (8) |
59,167 | — | — | 2.55 | (7) |
4/23/2029 | ||||||||||||||||||||||||||||
8/3/2020 | 8/3/2020 | (9) |
147,548 | 295,090 | — | 2.55 | 8/2/2030 | |||||||||||||||||||||||||||||
8/20/2020 | 8/20/2020 | (9) |
168,408 | 336,816 | — | 2.55 | 8/19/2030 | |||||||||||||||||||||||||||||
2/3/2021 | 2/15/2021 | (11) |
9,525 | 41,275 | — | 63.02 | 2/2/2031 | |||||||||||||||||||||||||||||
2/3/2021 | 2/15/2021 | (12) |
41,275 | 210,503 | ||||||||||||||||||||||||||||||||
William Brownie |
9/1/2016 | 387 | — | — | 1.29 | 9/1/2026 | ||||||||||||||||||||||||||||||
Chief Operating |
2/14/2017 | 2/14/2017 | (4) |
290 | — | — | 1.29 | 2/13/2027 | ||||||||||||||||||||||||||||
Officer |
7/12/2017 | 145 | — | — | 1.29 | 7/11/2027 | ||||||||||||||||||||||||||||||
7/12/2017 | 7/12/2017 | — | — | 9,287 | 1.29 | 7/11/2027 | ||||||||||||||||||||||||||||||
11/29/2017 | 11/29/2017 | (6) |
59,522 | — | — | 1.29 | 11/28/2027 | |||||||||||||||||||||||||||||
11/3/2018 | 4/24/2019 | (5) |
7,637 | — | — | 1.41 | 11/2/2028 | |||||||||||||||||||||||||||||
4/24/2019 | 4/24/2019 | (6) |
32,166 | — | — | 2.55 | (7) |
4/23/2029 | ||||||||||||||||||||||||||||
4/24/2019 | 2/26/2020 | (8) |
10,400 | — | — | 2.55 | (7) |
4/23/2029 | ||||||||||||||||||||||||||||
8/3/2020 | 8/3/2020 | (9) |
45,454 | 90,901 | — | 2.55 | 8/2/2030 | |||||||||||||||||||||||||||||
8/20/2020 | 8/20/2020 | (9) |
52,380 | 104,765 | — | 2.55 | 8/19/2030 | |||||||||||||||||||||||||||||
1/29/2021 | 2/15/2021 | (11) |
3,093 | 13,407 | — | 52.58 | 1/28/2031 | |||||||||||||||||||||||||||||
1/29/2021 | 2/15/2021 | (12) |
13,407 | 68,376 | ||||||||||||||||||||||||||||||||
Adam Laponis |
6/19/2019 | 7/3/2019 | (10) |
67,308 | 66,384 | — | 2.55 | (7) |
6/18/2029 | |||||||||||||||||||||||||||
Chief Financial |
8/3/2020 | 8/3/2020 | (9) |
27,736 | 55,466 | — | 2.55 | 8/2/2030 | ||||||||||||||||||||||||||||
Officer |
8/20/2020 | 8/20/2020 | (9) |
43,743 | 87,480 | — | 2.55 | 8/19/2030 | ||||||||||||||||||||||||||||
1/29/2021 | 2/15/2021 | (11) |
3,093 | 13,407 | — | 52.58 | 1/28/2031 | |||||||||||||||||||||||||||||
1/29/2021 | 2/15/2021 | (12) |
13,407 | 68,376 |
(1) | The exercise price of each option granted prior to November 29, 2017 was repriced to $1.29 per share on November 29, 2017. |
(2) | This option will vest in full in the event the holder is terminated by us without cause or the holder resigns for good reason, in each case, within the 12-month period commencing on a change in control. |
(3) | Market value calculated by multiplying $5.10, the closing trading price per share of our common stock as of December 31, 2021, by the number of unvested RSUs outstanding as of December 31, 2021. |
(4) | This option includes an early exercise provision with respect to unvested shares, which are subject to repurchase by us at the original exercise price in the event of a termination of service. The option vests as to 25% of the total number of shares subject to the option on the first anniversary of the vesting commencement date and as to 1/48th of the total number of shares subject to the option on each monthly anniversary thereafter, in each case, subject to continued service. Vesting accelerates in full in the event the holder is terminated by us without cause or the holder resigns for good reason, in each case, within the 12-month period commencing on a change in control. |
(5) | This option includes an early exercise provision with respect to unvested shares, which are subject to repurchase by us at the original exercise price in the event of a termination of service. This option was set to vest and become exercisable based on the achievement of certain performance goals, subject to continued service through the date of achievement. On April 24, 2019, our Board approved the amendment of this option such that the option would not terminate as a result of the failure to achieve the performance conditions and was converted to a time-based vesting option that vests as to 1/48th of the total number of shares subject to the option on each monthly anniversary of the vesting commencement date, subject to continued service. Vesting accelerates in full in the event the holder is terminated by us without cause or the holder resigns for good reason, in each case, within the 12-month period commencing on a change in control. |
(6) | This option includes an early exercise provision with respect to unvested shares, which are subject to repurchase by us at the original exercise price in the event of a termination of service. The option vests as to 1/48th of the total number of shares subject to the option on each monthly anniversary of the vesting commencement date, subject to continued service. Vesting accelerates in full in the event the holder is terminated by us without cause or the holder resigns for good reason, in each case, within the 12-month period commencing on a change in control. |
(7) | The exercise price of each option with an exercise price greater than $2.55 per share was repriced to $2.55 per share on August 3, 2020. Prior to the repricing, the exercise price per share of these options was $4.728. |
(8) | This option includes an early exercise provision with respect to unvested shares, which are subject to repurchase by us at the original exercise price in the event of a termination of service. This option vests and becomes exercisable following the determination of the achievement of certain performance goals, subject to continued service through the date of achievement and subsequent vesting. On February 26, 2020, the number of options was reduced, pursuant to its terms, based on the achievement of such goals, and the option vests as to 1/48th of the number of shares subject to the option on each monthly anniversary of this date. Vesting accelerates in full in the event the holder is terminated by us without cause or the holder resigns for good reason, in each case, within the 12-month period commencing on a change in control. |
(9) | This option vests and becomes exercisable as to 1/48th of the total number of shares subject to the option on the one-month anniversary of the vesting commencement date and as to 1/48th of the total number of shares subject to the option on each monthly anniversary thereafter, in each case, subject to continued service. Vesting accelerates in full in the event the holder is terminated by us without cause or the holder resigns for good reason, in each case, within the 12-month period immediately following a change in control. |
(10) | This option vests and becomes exercisable as to 25% of the total number of shares subject to the option on the first anniversary of the vesting commencement date and as to 1/48th of the total number of shares subject to the option on each monthly anniversary thereafter, in each case, subject to continued service. Vesting accelerates in full in the event the holder is terminated by us without cause or the holder resigns for good reason, in each case, within the 12-month period commencing on a change in control. |
(11) | This option vests and becomes exercisable as to 1/16 th of the number of shares underlying the option on each quarterly anniversary of the vesting commencement date, subject to continued service. Vesting accelerates in full in the event the holder is terminated by us without cause or the holder resigns for good reason, in each case, within the 12-month period commencing on a change in control. |
(12) | These RSUs vest as to 1/16 th of the number of RSUs on each quarterly anniversary of the vesting commencement date, subject to continued service. Vesting accelerates in full in the event the holder is terminated by us without cause or the holder resigns for good reason, in each case, within the 12-month period commencing on a change in control. |
Name |
Option awards |
Stock awards (1) |
||||||||||||||
Number of shares acquired on exercise (#) |
Value realized on exercise ($) |
Number of shares acquired on vesting (#) |
Value realized on vesting ($) (2) |
|||||||||||||
Christian Gormsen |
9,525 | 209,773 | ||||||||||||||
Adam Laponis |
10,000 | 358,800 | 3,093 | 68,119 | ||||||||||||
William Brownie |
24,196 | 434,656 | 3,093 | 68,119 |
(1) | Reflects RSUs that vested during 2021. Included in the table are an additional 3,175, 1,031, and 1,031 RSUs for each of Mr. Gormsen, Mr. Brownie, and Mr. Laponis, respectively, which vested in November 2021 when the underlying stock was valued at $21,876, $7,104 and $7,104, respectively, based on the closing trading price of our common stock on November 15, 2021, but were settled in cash in March 2022 for $12,732, $4,134, and $4,134, respectively. |
(2) | The value realized upon vesting of these awards represents the aggregate dollar amount computed by multiplying the number of RSUs vesting by the closing price of the underlying shares on the applicable vesting dates. |
Name |
Executive Contributions in Last Fiscal Year ($) |
Company Contributions in Last Fiscal Year ($) (1) |
Aggregate Earnings in Last Fiscal Year ($) (2) |
Aggregate Withdrawals/ Distributions in Last Fiscal Year ($) |
Aggregate Balance at December 31, 2021 ($) (3) |
|||||||||||||||
Christian Gormsen |
— | 21,876 | (5,683 | ) | — | 16,193 | ||||||||||||||
Adam Laponis |
— | 7,104 | (1,846 | ) | — | 5,258 | ||||||||||||||
William Brownie |
— | 7,104 | (1,846 | ) | — | 5,258 |
(1) | Amount is also captured in the “Value Realized on Vesting” reflected in the 2021 Option Exercises and Stock Vested table above. Represents the value of the shares of common stock underlying the RSUs that vested on November 15, 2021, multiplied by $6.89, the closing per share price of our common stock on the vesting date. The RSUs were settled in cash in March 2022. |
(2) | Represents the change in value of shares of our common stock subject to the vested RSUs based on the change in the closing per share price from $6.89 on the vesting date to $5.10 on December 31, 2021. |
(3) | Represents the aggregate value of the vested RSUs based on $5.10, the closing trading price per share of our common stock on December 31, 2021. |
Name |
Cash severance |
COBRA (1) |
RSU acceleration (2) |
Stock option acceleration (3) |
Total |
|||||||||||||||
Christian Gormsen |
||||||||||||||||||||
Covered Termination (Non-CIC) |
990,000 | 26,000 | — | — | 1,016,000 | |||||||||||||||
Covered Termination (CIC) |
1,980,000 | 52,000 | 226,695 | 5,382,016 | 7,640,711 | |||||||||||||||
William Brownie |
||||||||||||||||||||
Covered Termination (Non-CIC) |
468,000 | 17,000 | — | — | 485,000 | |||||||||||||||
Covered Termination (CIC) |
624,000 | 23,000 | 73,634 | 1,150,443 | 1,871,077 | |||||||||||||||
Adam Laponis |
||||||||||||||||||||
Covered Termination (Non-CIC) |
438,750 | — | — | — | 438,750 | |||||||||||||||
Covered Termination (CIC) |
585,000 | — | 73,634 | 887,698 | 1,546,332 |
(1) | Reflects the estimated lump-sum present value of all future COBRA premiums which will be paid on behalf of the NEO under the Company’s health and welfare benefit plans for the applicable continuation period specified in the NEO’s employment agreement. |
(2) | The amounts reported reflect the amount determined by multiplying the number of unvested RSUs held by the NEO on December 31, 2021 by $5.10, the closing trading price per share of our common stock on December 31, 2021. |
(3) | The amounts reported reflect the sum of the positive difference, if any, between $5.10, the closing trading price per share of our common stock on December 31, 2021, and the exercise price per share of each option, multiplied by the number of unvested shares underlying the option. |
• | Each non-employee director receives an annual cash retainer in the amount of $40,000 per year. |
• | The non-executive Chairperson receives an additional annual cash retainer in the amount of $35,000 per year. |
• | The chairperson of the Audit Committee receives additional annual cash compensation in the amount of $20,000 per year for such chairperson’s service on the Audit Committee. Each non-chairperson member of the Audit Committee receives additional annual cash compensation in the amount of $10,000 per year for such member’s service on the Audit Committee. |
• | The chairperson of the Compensation Committee receives additional annual cash compensation in the amount of $15,000 per year for such chairperson’s service on the Compensation Committee. Each non-chairperson member of the Compensation Committee receives additional annual cash compensation in the amount of $7,500 per year for such member’s service on the Compensation Committee. |
• | The chairperson of the Nominating and Corporate Governance Committee receives additional annual cash compensation in the amount of $10,000 per year for such chairperson’s service on the Nominating and Corporate Governance Committee. Each non-chairperson member of the Nominating and Corporate Governance Committee receives additional annual cash compensation in the amount of $5,000 per year for such member’s service on the Nominating and Corporate Governance Committee. |
Name (1) |
Fees earned or paid in cash ($) (2) |
Option awards ($) (3) |
All other compensation ($) |
Total ($) |
||||||||||||
Josh Makower, M.D. |
$ | 95,000 | $ | — | $ | — | $ | 95,000 | ||||||||
Katie Bayne |
25,125 | 196,023 | — | 221,148 | ||||||||||||
Peter Tuxen Bisgaard |
55,292 | — | — | 55,292 | ||||||||||||
Doug Hughes |
50,000 | — | — | 50,000 | ||||||||||||
Geoff Pardo |
31,882 | — | — | 31,882 | ||||||||||||
Nina Richardson |
47,500 | — | — | 47,500 | ||||||||||||
A. Brooke Seawell |
60,000 | — | — | 60,000 | ||||||||||||
Juliet Tammenoms Bakker |
25,396 | — | — | 25,396 | ||||||||||||
David Wu |
44,011 | — | — | 44,011 |
(1) | Juliet Tammenoms Bakker resigned from our Board in June 2021, and Geoff Pardo resigned from our Board in July 2021. Katie Bayne joined our Board in June 2021. |
(2) | These amounts include fees earned in 2021 and paid in 2022 in accordance with our Director Compensation Program, described above. Amounts earned by Messrs. Bisgaard, Hughes, and Seawell, Ms. Bayne, and Ms. Richardson were paid to them directly. Amounts earned by Ms. Tammenoms Bakker were paid to Longitude Capital Management Co., LLC; amounts earned by Mr. Makower were paid to NEA Management Company LLC; amounts earned by Mr. Pardo were paid to Gilde (as defined below); and amounts earned by Mr. Wu were paid to Maveron LLC. |
(3) | Amounts reported represent the aggregate grant date fair value of stock options granted to our non-employee directors during 2021 under our 2020 Plan, computed in accordance with ASC Topic 718. Assumptions used in the calculation of these amounts are included in Notes 2 and 10 to our audited consolidated financial statements included in this Annual Report on Form 10-K. As of December 31, 2021, our non-employee directors held the following outstanding options: |
Name |
Shares subject to outstanding options (#) |
|||
Josh Makower, M.D. |
6,666 | |||
Katie Bayne |
10,325 | |||
Peter Tuxen Bisgaard |
6,666 | |||
Doug Hughes |
29,500 | |||
Geoff Pardo |
— | |||
Nina Richardson |
56,832 | |||
A. Brooke Seawell |
29,500 | |||
Juliet Tammenoms Bakker |
— | |||
David Wu |
6,666 |
Name |
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted- average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans |
|||||||||
Equity compensation plans approved by security holders (1)(2)(3) |
5,835,266 | $ | 4.87 | (4) |
7,179,165 | (5) | ||||||
Equity compensation plans not approved by security holders |
||||||||||||
|
|
|
|
|
|
|||||||
Total |
5,835,266 | $ | 4.87 | 7,179,165 | ||||||||
|
|
|
|
|
|
(1) | Consists of options outstanding and available for issuance under our 2010 Plan, 2020 Plan and the Employee Stock Purchase Plan (ESPP). |
(2) | The 2020 Plan contains an “evergreen” provision, pursuant to which the number of shares of common stock reserved for issuance or transfer pursuant to awards under the 2020 Plan shall be increased on the first day of each year beginning in 2021 and ending in 2030 equal to the lesser of (A) five percent (5.0%) of the shares of common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (B) such smaller number of shares of stock as determined by our Board; provided, however, that no more than 28,344,144 shares of stock may be issued upon the exercise of incentive stock options. |
(3) | The ESPP contains an “evergreen” provision, pursuant to which the maximum number of shares of our common stock authorized for sale under the ESPP shall be increased on the first day of each year beginning in 2021 and ending in 2030, equal to the lesser of (A) one percent (1.0%) of the shares of common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (B) such number of shares of common stock as determined by our Board; provided, however, no more than 5,450,797 shares of our common stock may be issued thereunder. |
(4) | Excludes restricted stock units, which have no exercise price. |
(5) | Includes 934,496 shares available for future issuance under the ESPP. |
• | each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock; |
• | each of our named executive officers; |
• | each of our directors; and |
• | all of our executive officers and directors as a group. |
Name of beneficial owner |
Number of outstanding shares beneficially owned |
Number of shares exercisable within 60 days |
Number of shares beneficially owned |
Percentage of beneficial ownership |
||||||||||||
5% and greater stockholders: |
||||||||||||||||
Entities affiliated with New Enterprise Associates (1) |
4,520,670 | — | 4,520,670 | 11.49 | % | |||||||||||
Cooperatieve Gilde Healthcare V U.A. (2) |
2,996,686 | — | 2,996,686 | 7.62 | % | |||||||||||
Entities affiliated with Pivotal Alpha Limited (3) |
2,886,724 | — | 2,886,724 | 7.34 | % | |||||||||||
The Charles and Helen Schwab Living Trust U/A DTD 11/22/1985 |
2,062,684 | — | 2,062,684 | 5.24 | % | |||||||||||
Named executive officers and directors: |
||||||||||||||||
Christian Gormsen (4) |
87,887 | 1,198,089 | 1,285,976 | 3.17 | % | |||||||||||
William Brownie (5) |
180,020 | 225,419 | 405,439 | 1.02 | % | |||||||||||
Adam Laponis (6) |
47,578 | 186,778 | 234,356 | * | ||||||||||||
Josh Makower, M.D. (7) |
508 | 6,666 | 7,174 | * | ||||||||||||
Katie Bayne (8) |
— | 2,581 | 2,581 | * | ||||||||||||
Peter Tuxen Bisgaard (9) |
2,928,694 | 6,666 | 2,935,360 | 7.46 | % | |||||||||||
Doug Hughes (10) |
35,709 | 16,391 | 52,100 | * | ||||||||||||
Nina Richardson (11) |
— | 43,723 | 43,723 | * | ||||||||||||
A. Brooke Seawell (12) |
394 | 16,391 | 16,785 | * | ||||||||||||
David Wu (13) |
1,552,369 | 6,666 | 1,559,035 | 3.96 | % | |||||||||||
All current directors and executive officers as a group (10 persons) |
4,833,158 | 1,709,370 | 6,542,528 | 16.63 | % |
* | Indicates beneficial ownership of less than 1% of the total outstanding common stock. |
(1) | Consists of (a) 4,520,019 shares of our common stock held by New Enterprise Associates 15, L.P. (“NEA 15”) (based on the most recently available Schedule 13D/A filed jointly with the SEC on June 3, 2021) and (b) 651 shares of our common stock held by NEA Ventures 2015, L.P. (“Ven 2015”). The shares held directly by NEA 15 are indirectly held by NEA Partners 15, L.P. (“NEA Partners 15”), which is the sole general partner of NEA 15, NEA 15 GP, LLC (“NEA 15 LLC”), which is the sole general partner of NEA Partners 15, and the individual managers of NEA 15 LLC (the “NEA Managers”). The NEA Managers are |
Forest Baskett, Anthony A. Florence, Jr., Mohamad H. Makhzoumi, Scott D. Sandell and Peter W. Sonsini. The NEA Managers share voting and dispositive power with regard to the shares held by NEA 15. The shares directly held by Ven 2015 are indirectly held by Karen P. Welsh, the general partner of Ven 2015. Karen P. Welsh has voting and dispositive power with regard to the shares held by Ven 2015. All indirect owners of the above-referenced shares disclaim beneficial ownership of all applicable shares except to the extent of their actual pecuniary interest in such shares. The principal address for NEA 15 is c/o New Enterprise Associates, Inc., 1954 Greenspring Drive, Suite 600, Timonium, Maryland 21093. |
(2) | Based on the Form 4 filed with the SEC on May 4, 2021 by Geoff Pardo. According to the Form 4, this amount consists of 2,996,686 shares of our common stock held directly by Coöperatieve Gilde Healthcare V U.A. (“Gilde”). Gilde is managed by Gilde Healthcare V Management B.V. (“Gilde Management”), which is owned and managed by Gilde Healthcare Holding B.V. (“Gilde Holding”). Each of Gilde Management and Gilde Holding may be deemed to share voting, investment and dispositive power with respect to the shares held by Gilde. Mr. Pardo was a member of our Board until his resignation in July 2021 and is a partner of Gilde and may be deemed to share voting and dispositive power over the shares held by Gilde. According to the most recently available Schedule 13D/A filed with the SEC on April 28, 2021, the managing partners of Gilde Holding are Edwin de Graaf, Marc Olivier Perret and Martemanshurk BV (of which Pieter van der Meer is the owner and manager). Each of these individuals disclaim beneficial ownership of all applicable shares except to the extent of their actual pecuniary interest in such shares. The principal office of Gilde is located at Newtonlaan 91, 3584 BP Utrecht, the Netherlands. |
(3) | Based on the most recently available Schedule 13D filed jointly with the SEC on October 29, 2020 by Nan Fung Group Holdings Limited (“NFGHL”), NF Investment Holdings Limited (“NFIHL”), Permwell Management Limited (“Permwell”), Grand Epoch Holdings Limited (“Grand Epoch”), Eternal Sky Holdings Limited (“Eternal Sky”), and Pivotal Alpha Limited (“Pivotal Alpha”). According to the Schedule 13D, this amount consists of 2,664,502 shares of our common stock held directly by Pivotal Alpha and 222,222 shares of our common stock held by Permwell. Pivotal Alpha is wholly owned by Eternal Sky, which is wholly owned by Grand Epoch. Grand Epoch and Permwell are both wholly owned by NFIHL, which is wholly owned by NFGHL. The members of the Executive Committee of NFGHL make investment decisions with respect to shares of our common stock held by Pivotal Alpha and Permwell. Mr. Kam Chung Leung, Mr. Frank Kai Shui Seto, Mr. Vincent Sai Sing Cheung, Mr. Pui Kuen Cheung, Mr. Kin Ho Kwok, Ms. Vanessa Tih Lin Cheung, Mr. Meng Gao and Mr. Chun Wai Nelson Tang are the members of the Executive Committee of NFGHL. Pivotal Alpha, Eternal Sky and Grand Epoch each disclaims beneficial ownership of all applicable shares beneficially owned by Permwell and Permwell disclaims beneficial ownership of all applicable shares beneficially owned by Pivotal Alpha, Eternal Sky and Grand Epoch. The principal business address of NFGHL, Permwell, Pivotal Alpha and the named members of the NFGHL executive committee is 23rd Floor, Nan Fung Tower, 88 Connaught Road Central and 173 Des Voeux Road Central, Central, Hong Kong. The registered office address of NFIHL, Grand Epoch and Eternal Sky is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. |
(4) | Consists of (a) 87,887 shares of common stock held directly, (b) 3,175 restricted stock units that vested on February 15, 2022 but have not yet settled in stock, (c) 3,175 restricted stock units that are scheduled to vest within 60 days of March 21, 2022 and (d) 1,191,739 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 21, 2022. |
(5) | Consists of (a) 180,020 shares of our common stock held directly, (b) 1,031 restricted stock units that vested on February 15, 2022 but have not yet settled in stock, (c) 1,031 restricted stock units that are scheduled to vest within 60 days of March 21, 2022 and (d) 223,357 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 21, 2022. |
(6) | Consists of (a) 47,578 shares of our common stock held directly, (b) 1,031 restricted stock units that vested on February 15, 2022 but have not yet settled in stock, (c) 1,031 restricted stock units that are scheduled to vest within 60 days of March 21, 2022 and (d) 184,716 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 21, 2022. |
(7) | Consists of (a) 508 shares of our common stock held by the Makower Family Trust and (b) 6,666 shares of common stock that may be acquired pursuant to the exercise of stock options held by Dr. Makower within 60 days of March 31, 2022. As of August 1, 2021, Dr. Makower is a Special Partner of NEA, which is |
affiliated with NEA 15 and Ven 2015. Dr. Makower has no voting or dispositive power with regard to any of the shares of our common stock held by NEA 15 and Ven 2015 as described in footnote (1) above and disclaims beneficial ownership of the above-referenced shares held by NEA 15 and Ven 2015, except to the extent of his actual pecuniary interest in such shares. |
(8) | Consists of 2,581 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 21, 2022. |
(9) | Consists of (a) 2,886,724 shares of common stock beneficially owned by Pivotal Alpha and Permwell, (b) 41,970 shares of common stock held directly and (c) 6,666 shares of common stock that may be acquired pursuant to the exercise of stock options held by Mr. Bisgaard within 60 days of March 21, 2022. Investment and voting decisions by Pivotal Alpha are made jointly by three or more individuals and therefore no individual is the beneficial owner of the shares held by Pivotal Alpha. Mr. Bisgaard is a Managing Partner of Pivotal Bioventure Partners LLC, which is affiliated with Pivotal Alpha and Permwell, and disclaims beneficial ownership of all applicable shares except to the extent of his actual pecuniary interest in such shares. |
(10) | Consists of (a) 35,709 shares of common stock held directly and (b) 16,391 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 21, 2022. |
(11) | Consists of 43,723 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 21, 2022. |
(12) | Consists of (a) 394 shares of common stock held directly, and (b) 16,391 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 21, 2022. |
(13) | Consists of (a) 1,552,369 shares of common stock beneficially owned by Maveron Equity Partners IV, L.P., Maveron Equity Partners V, L.P., Maveron IV Entrepreneurs Fund L.P., Maveron V Entrepreneurs Fund L.P., MEP Associates IV, L.P., and MEP Associates V, L.P., and (b) 6,666 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 21, 2022. The stock options are held in Mr. Wu’s name but are contractually assigned to Maveron LLC. Mr. Wu is a Partner at Maveron LLC, which is affiliated with Maveron Equity Partners IV, L.P., Maveron Equity Partners V, L.P., Maveron IV Entrepreneurs Fund L.P., Maveron V Entrepreneurs Fund L.P., MEP Associates IV, L.P., and MEP Associates V, L.P. and disclaims beneficial ownership of all applicable shares except to the extent of his actual pecuniary interest in such shares. |
• | we were a party or will be a party; |
• | the amounts involved exceeded or will exceed $120,000; and |
• | any of our directors, executive officers or holders of more than 5% of our capital stock, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest. |
Item 14. |
Principal Accountant Fees and Services. |
2021 |
2020 |
|||||||
(in thousands) |
||||||||
Audit fees (1) |
$ | 1,988 | $ | 1,625 | ||||
Audit-related fees (2) |
— | — | ||||||
Tax fees (3) |
57 | 37 | ||||||
All other fees (4) |
— | — | ||||||
|
|
|
|
|||||
Total |
$ | 2,045 | $ | 1,662 | ||||
|
|
|
|
(1) | Represents the aggregate fees billed for the audit of the Company’s consolidated financial statements, review of the condensed consolidated financial statements included in the Company’s quarterly reports and |
services in connection with the statutory and regulatory filings or engagements for those years. Fees for our fiscal year ended December 31, 2020 also consisted of professional services rendered in connection with our Registration Statement on Form S-1 related to our IPO. |
(2) | Represents the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “audit fees.” |
(3) | Represents the aggregate fees billed for tax compliance, advice and planning. |
(4) | Represents the aggregate fees billed for all products and services that are not included under “audit fees,” “audit-related fees” or “tax fees.” |
1. | Financial Statements: The financial statements included in “Index to Consolidated Financial Statements” in Part II, Item 8 are filed as part of this Annual Report on Form 10-K |
2. | Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K. |
# | Indicates management contract or compensatory plan. |
* | Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Registration S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the SEC upon request. |
† | Filed herewith. |
‡ | Furnished herewith. |
Eargo, Inc. | ||||||
Date: May 13, 2022 | By: | /s/ Christian Gormsen | ||||
Christian Gormsen | ||||||
President and Chief Executive Officer |
Name |
Title |
Date | ||
/s/ Christian Gormsen Christian Gormsen |
President, Chief Executive Officer and Director (Principal Executive Officer) |
May 13, 2022 | ||
/s/ Adam Laponis Adam Laponis |
Chief Financial Officer (Principal Financial Officer) |
May 13, 2022 | ||
/s/ Mark Thorpe Mark Thorpe |
Chief Accounting Officer (Principal Accounting Officer) |
May 13, 2022 | ||
/s/ Josh Makower, M.D. Josh Makower, M.D. |
Chair of the Board of Directors |
May 13, 2022 | ||
/s/ Katie J. Bayne Katie J. Bayne |
Director |
May 13, 2022 | ||
/s/ Peter Tuxen Bisgaard Peter Tuxen Bisgaard |
Director |
May 13, 2022 | ||
/s/ Doug Hughes Doug Hughes |
Director |
May 13, 2022 | ||
/s/ Nina Richardson Nina Richardson |
Director |
May 13, 2022 | ||
/s/ A. Brooke Seawell A. Brooke Seawell |
Director |
May 13, 2022 | ||
/s/ David Wu David Wu |
Director |
May 13, 2022 |
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