SEC Company Response from electroCore, Inc. (ECOR) (CIK 0001560258) (ECOR) — Jun 4, 2018
electroCore, Inc. (ECOR) (CIK 0001560258)
Date: June 4, 2018 · CIK: 0001560258 · Accession: 0001193125-18-183432
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-225084
Referenced dates: March 12, 2018
Letter
VIA EDGAR AND FEDERAL EXPRESS United States Securities and Exchange Commission Division of Corporation Finance Attention: Geoff Kruczek Registration Statement on Form S-1 Confidentially Submitted on February 13, 2018 (Registration No. 333-225084) CIK No. 0001560258
Dear Mr. Kruczek:
Rule 83 Confidential Treatment Request by electroCore, LLC.
Request #1
On behalf of ElectroCore, LLC (the “Company”), we submit this supplemental letter to the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (“Commission”) related to the Company’s Registration Statement on Form S-1 (the “Registration Statement”), which the Company first confidentially submitted on February 13, 2018 and amended by confidential submission No. 2 on May 12, 2018. The Registration Statement was most recently filed publicly on May 21, 2018 (the “Public Filing”). This letter is also being submitted to respond to comment 9 to the Staff’s comment letter dated March 12, 2018 (the “Comment Letter”) relating to the Registration Statement.
United States Securities and Exchange Commission
June 4, 2018
Page
dentons.com
Because of the commercially sensitive nature of information contained herein, this submission is accompanied by the Company’s request for confidential treatment for selected portions of this letter. The Company has filed a separate letter with the Office of Freedom of Information and Privacy Act Operations in connection with the confidential treatment request, pursuant to Rule 83 of the Commission’s Rules on Information and Requests, 17 C.F.R. § 200.83. For the Staff’s reference, we have enclosed a copy of the Company’s letter to the Office of Freedom of Information and Privacy Act Operations, as well as a copy of this correspondence, marked to show the portions redacted from the version filed via EDGAR and for which the Company is requesting confidential treatment.
For the convenience of the Staff, we have recited prior comment 9 from the Comment Letter in bold face type.
Critical Accounting Policies and Estimates, Determination of Fair Value of Common Units, page 85
9. Please tell us the estimated IPO price range once you have that information. To the extent there is a significant difference between the estimated grant-date fair value of your common shares (as converted from common units) during the past twelve months and the estimated IPO price range, discuss for us each significant factor contributing to the difference.
The Company advises the Staff that it preliminarily estimates a price range (assuming a one-to-one conversion ratio of the Company’s units to shares of common stock to be effective immediately following the effectiveness of the Registration Statement1) of approximately $[***] to $[***] per share pre-split (the “Price Range”) for its initial public offering (“IPO”). This represents a pre-offering equity value of the Company of $[***] million to $[***] million.
As is typical in IPOs, the Price Range was not derived using a formal determination of fair value, but was determined by negotiations between the Company and the underwriters. Among the factors that were considered in setting the Price Range were: (i) the general conditions of the securities market and the recent market prices of, and the demand for, publicly traded common stock of comparable companies; (ii) the Company’s financial condition and prospects; (iii) estimates of business potential and earnings prospects for the Company and the industry in which it operates; (iv) recent performance of IPOs of companies in the pharmaceutical and medical device sectors; and (v) input received from the lead underwriters, including discussions that took place on May 18, 2018 between senior management of the Company and representatives of the underwriting syndicate, including Evercore Group L.L.C., the lead underwriter for the offering. The Price Range does not take into account the current lack of liquidity for the Company’s membership units and assumes a successful IPO with no weighting attributed to any other outcome for the Company’s business, such as remaining a privately held company or being sold in an acquisition transaction.
The Company advises the Staff that actual split ratio is expected to vary in order to provide for a customary offering price per share of common stock, but that for ease of reference, the historical conversion ratio, prices and values are used in this letter.
[***] CONFIDENTIAL TREATMENT REQUESTED BY ELECTROCORE, LLC
United States Securities and Exchange Commission
June 4, 2018
Page
dentons.com
The Company expects to include the Price Range in an amendment to the Registration Statement that would shortly precede the commencement of the Company’s road show. The Company confirms to the Staff that in accordance with Item 501(b)(3) of Regulation S-K and CD&I 134.04, the Price Range will not be in excess of 20% of the high end of the range, as adjusted to give effect to any change in the conversion ratio. The parameters of the narrower price range to be included in an amendment to the Registration Statement that would shortly precede the road show will be subject to then-current market conditions, continuing discussions with the underwriters and any business developments impacting the Company.
Equity-Based Compensation Transactions since June 1, 2017
The Company is supplementally providing information and analysis with respect to equity-based compensation granted to employees and consultants under its equity incentive arrangements since June 1, 2017.
The Company periodically grants common units (the “Common Units”) to certain of its employees, managers and consultants. These Common Units are issued as “profits interests” (the “Profits Interests”) for tax purposes and do not require the payment of an exercise price, but rather entitle the holder to participate only in the Company’s future appreciation from and after the date of grant of the applicable Profits Interests. The Company utilizes the fair value of its Common Units (as determined by applying the methodologies described below) to set the fair value of its Profits Interests at the time of grant.
In order to equate the value of these Profits Interests to the common stock of a corporation, the Company believes that the appropriate comparison is to the fair value of the Profits Interests, as of each respective grant date, at a minimum enterprise valuation threshold (the “Enterprise Valuation Threshold”), because the Enterprise Valuation Threshold and the distribution preferences will terminate upon the Company’s conversion to a corporation.
The table below sets forth a summary of the equity awards granted since June 1, 2017. Included in the summary table is the Grant Date, the Enterprise Valuation Threshold and the per unit fair value of a Common Unit at the Grant Date.
electroCore, LLC – Profits Interests
Grant Date
Enterprise
Valuation
Threshold2
Number of Units
Underlying
Grants
Enterprise
Valuation Threshold
per Common Unit at
Grant Date
6/1/17
$81,100,000
10,000
$0.17
6/1/17
$81,100,000
200,000
$0.17
8/16/17
$142,760,000
200,000
$0.503
8/18/17
$142,760,000
10,970,335
$0.21
10/16/17
$227,230,000
235,000
$0.35
11/13/17
$227,230,000
25,000
$0.35
11/16/17
$227,230,000
50,000
$0.35
11/23/17
$227,230,000
6,723,754
$0.35
12/1/17
$227,230,000
150.000
$0.35
12/4/17
$227,230,000
10,000
$0.35
1/1/18
$294,370,000
18,919,665
$0.69
1/29/18
$294,370,000
90,000
$0.69
3/1/18
$294,370,000
150,000
$0.69
4/1/18
$303,450,000
75,000
$0.77
4/9/18
$303,450,000
50,000
$0.77
4/16/18
$303,450,000
60,000
$0.77
All Profits Interests are subject to an Enterprise Valuation Threshold that must be met upon a liquidity event, such as a change of control, dissolution, or sale of the company, before the participant is entitled to a distribution in respect of such Profit Interest. The holders of Profits Interests only participate in a distribution to the extent that the Enterprise Valuation Threshold of their Profits Interests is exceeded.
The Company made this grant above the Enterprise Valuation Threshold. The Enterprise Valuation Threshold per Unit at the date of this grant was $0.21.
[***] CONFIDENTIAL TREATMENT REQUESTED BY ELECTROCORE, LLC
United States Securities and Exchange Commission
June 4, 2018
Page
dentons.com
Company Methodology in Determining Fair Value
As described beginning on page 89 of the Registration Statement, the Company regularly performs contemporaneous valuations of its Units, including its Common Units, to assist the Company’s Board of Managers (the “Board”) in determining the fair value of its Common Units for purposes of granting the Profits Interests as a form of equity based compensation. The Board has generally considered numerous objective and subjective factors it believes to be relevant as of the grant date, including (i) contemporaneous reports prepared by an independent third-party valuation specialist, (ii) valuations derived from the Company’s recent financing transactions, (iii) the Company’s stage of development, (iv) the Company’s operating and financial performance, and (v) general business and financial market conditions in the pharmaceutical and medical device sectors. As disclosed in the Registration Statement, the Company’s Common Unit valuations were prepared using the discounted cash flow (“DCF”) method, a form of the income approach, to estimate its equity values. In order to estimate equity value, the DCF method uses the estimated present value of future net cash flows for the expected life of the related assets or business, discounted at a rate of return that considers the relative risk of achieving those cash flows, the time value of money and the current stage of development of the business. The total fair value of equity on a marketable basis was then allocated between each class of equity, including Common Units, preferred units, Profits Interests, and warrants, applying a hybrid method of allocation. Under the hybrid method, a probability-weighted expected return method and an option pricing model were utilized.
The probability weighted expected return method (“PWERM”) is based upon an analysis of future outcomes probability weighted. The assumed future outcomes include an IPO, merger or sale, dissolution, and/or going concern. When applying the method, the analyst must estimate future cash flows and the associated future values. Then the value is allocated to each class of equity, discounted to the present value, and finally assigned probabilities to future outcomes. This method is generally considered to be conceptually sound by valuation experts and explicitly considers the rights of each class at the date in which those rights will be considered. Furthermore, it is forward looking, not static, capturing the future value that is anticipated to be created in the future. However, the method can be complex and requires a number of assumptions. The Company utilized a PWERM for its initial IPO scenario since its financing requirements and associated changes in the capitalization table were fairly certain.
[***] CONFIDENTIAL TREATMENT REQUESTED BY ELECTROCORE, LLC
United States Securities and Exchange Commission
June 4, 2018
Page
dentons.com
The Option Pricing Method (“OPM”) treats the common and preferred equity of the Company as call options on the enterprise’s value. The OPM applies the Black-Scholes model to price the call options. The option’s exercise price is based on a comparison with the enterprise value of the Company rather than, as in the case of a “regular” call option, a comparison with a per-share stock price. Both the common and preferred equity have, at the time of a liquidity event, “payoff diagrams” that consider the relevant rights of each class of equity – including the level of seniority among the securities, dividend policy, conversion ratios, and cash allocations – upon liquidation of the enterprise. The method implicitly considers the effect of the liquidation preference as of the future liquidation date, not as of the valuation date. This method is often characterized as costly, complex, and difficult to formulate assumptions. However, over time, this method has gained widespread acceptance among valuation practitioners and auditors alike. The Company utilized an OPM to allocate value to the various tranches of equity for the strategic exit and second IPO attempt due to the unknown capital raises required to achieve exit over long holding periods.
Factors Contributing to the Difference Between the Grant Date Estimated Fair Value and the Price Range
In determining the estimated fair value of the Common Units for purposes of determining the fair value of Profits Interests granted, the Board and management consider the most recent contemporaneous independent third-party valuations of the Company’s Common Units and an also assessment of the objective and subjective factors described above. The additional factors considered when determining any changes in estimated fair value between the most recent contemporaneous valuation and the grant date include, when applicable, the prices paid in the Company’s recent financing transactions, the Company’s stage of development, the Company’s operating and financial performance, and general business and financial market conditions in the pharmaceutical and medical device sectors. Each of the Common Unit valuations since June 1, 2017 are discussed below.
June 2017: Prior to June 30, 2017, the Company had independent third-party valuations of its Common Units performed on an annual basis rather than on a quarterly basis. On June 1, 2017, the most recent independent third party valuation of the Common Units was determined as of September 30, 2016 and indicated a fair value of the Common Units of $0.17 per unit. The Enterprise Valuation Threshold as of the valuation date was $81,100,000.
August 2017: In August 2017, the Company sold Series B Preferred Units at a price of $0.70 per unit raising net proceeds of $35,800,000 million in the aggregate. The Company and its Board believe that the purchase price for the Series B Preferred Units of $0.70 provides evidence of a freely negotiated, arm’s-length transaction with knowledgeable buyers. The Series B Preferred Units retained preferences over the Company’s Series A Preferred Units and Common Units including the Profits Interests, pursuant to the Company’s limited liability company agreement, resulting in a difference in the purchase price of the Series B Preferred Units and fair value of the Common Units including Profits Interests. The Company had a third-party valuation performed in conjunction with the Series B Preferred Unit financing (the “Series B Financing”), which utilized the DCF methodology and indicated a fair value of the Common Units of $0.21 per unit. The Enterprise Valuation Threshold as of the valuation date was $142,760,000. The derived Enterprise Threshold Value was allocated be
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CORRESP 1 filename1.htm CORRESP Ira L. Kotel Partner ira.kotel@dentons.com D +1 212 398-5787 Dentons US LLP 1221 Avenue of the Americas New York, NY 10020-1089 dentons.com June 4, 2018 FOIA Confidential Treatment Request The entity requesting confidential treatment is electroCore, LLC 150 Allen Road, Suite 201 Attn: Francis R. Amato Telephone: +1 (973) 290-0097 CERTAIN PORTIONS OF THIS LETTER HAVE BEEN OMITTED FROM THE VERSION FILED VIA EDGAR. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. INFORMATION THAT WAS OMITTED IN THE EDGAR VERSION HAS BEEN NOTED IN THIS LETTER WITH A PLACEHOLDER IDENTIFIED BY THE MARK “[***].” VIA EDGAR AND FEDERAL EXPRESS CONFIDENTIAL TREATMENT REQUESTED BY ELECTROCORE, LLC United States Securities and Exchange Commission Division of Corporation Finance 100 F. Street, N.E. Washington, D.C. 20549 Attention: Geoff Kruczek Re: ElectroCore, LLC Registration Statement on Form S-1 Confidentially Submitted on February 13, 2018 (Registration No. 333-225084) CIK No. 0001560258 Dear Mr. Kruczek: Rule 83 Confidential Treatment Request by electroCore, LLC. Request #1 On behalf of ElectroCore, LLC (the “Company”), we submit this supplemental letter to the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (“Commission”) related to the Company’s Registration Statement on Form S-1 (the “Registration Statement”), which the Company first confidentially submitted on February 13, 2018 and amended by confidential submission No. 2 on May 12, 2018. The Registration Statement was most recently filed publicly on May 21, 2018 (the “Public Filing”). This letter is also being submitted to respond to comment 9 to the Staff’s comment letter dated March 12, 2018 (the “Comment Letter”) relating to the Registration Statement. United States Securities and Exchange Commission June 4, 2018 Page 2 dentons.com Because of the commercially sensitive nature of information contained herein, this submission is accompanied by the Company’s request for confidential treatment for selected portions of this letter. The Company has filed a separate letter with the Office of Freedom of Information and Privacy Act Operations in connection with the confidential treatment request, pursuant to Rule 83 of the Commission’s Rules on Information and Requests, 17 C.F.R. § 200.83. For the Staff’s reference, we have enclosed a copy of the Company’s letter to the Office of Freedom of Information and Privacy Act Operations, as well as a copy of this correspondence, marked to show the portions redacted from the version filed via EDGAR and for which the Company is requesting confidential treatment. For the convenience of the Staff, we have recited prior comment 9 from the Comment Letter in bold face type. Critical Accounting Policies and Estimates, Determination of Fair Value of Common Units, page 85 9. Please tell us the estimated IPO price range once you have that information. To the extent there is a significant difference between the estimated grant-date fair value of your common shares (as converted from common units) during the past twelve months and the estimated IPO price range, discuss for us each significant factor contributing to the difference. The Company advises the Staff that it preliminarily estimates a price range (assuming a one-to-one conversion ratio of the Company’s units to shares of common stock to be effective immediately following the effectiveness of the Registration Statement1) of approximately $[***] to $[***] per share pre-split (the “Price Range”) for its initial public offering (“IPO”). This represents a pre-offering equity value of the Company of $[***] million to $[***] million. As is typical in IPOs, the Price Range was not derived using a formal determination of fair value, but was determined by negotiations between the Company and the underwriters. Among the factors that were considered in setting the Price Range were: (i) the general conditions of the securities market and the recent market prices of, and the demand for, publicly traded common stock of comparable companies; (ii) the Company’s financial condition and prospects; (iii) estimates of business potential and earnings prospects for the Company and the industry in which it operates; (iv) recent performance of IPOs of companies in the pharmaceutical and medical device sectors; and (v) input received from the lead underwriters, including discussions that took place on May 18, 2018 between senior management of the Company and representatives of the underwriting syndicate, including Evercore Group L.L.C., the lead underwriter for the offering. The Price Range does not take into account the current lack of liquidity for the Company’s membership units and assumes a successful IPO with no weighting attributed to any other outcome for the Company’s business, such as remaining a privately held company or being sold in an acquisition transaction. 1 The Company advises the Staff that actual split ratio is expected to vary in order to provide for a customary offering price per share of common stock, but that for ease of reference, the historical conversion ratio, prices and values are used in this letter. [***] CONFIDENTIAL TREATMENT REQUESTED BY ELECTROCORE, LLC United States Securities and Exchange Commission June 4, 2018 Page 3 dentons.com The Company expects to include the Price Range in an amendment to the Registration Statement that would shortly precede the commencement of the Company’s road show. The Company confirms to the Staff that in accordance with Item 501(b)(3) of Regulation S-K and CD&I 134.04, the Price Range will not be in excess of 20% of the high end of the range, as adjusted to give effect to any change in the conversion ratio. The parameters of the narrower price range to be included in an amendment to the Registration Statement that would shortly precede the road show will be subject to then-current market conditions, continuing discussions with the underwriters and any business developments impacting the Company. Equity-Based Compensation Transactions since June 1, 2017 The Company is supplementally providing information and analysis with respect to equity-based compensation granted to employees and consultants under its equity incentive arrangements since June 1, 2017. The Company periodically grants common units (the “Common Units”) to certain of its employees, managers and consultants. These Common Units are issued as “profits interests” (the “Profits Interests”) for tax purposes and do not require the payment of an exercise price, but rather entitle the holder to participate only in the Company’s future appreciation from and after the date of grant of the applicable Profits Interests. The Company utilizes the fair value of its Common Units (as determined by applying the methodologies described below) to set the fair value of its Profits Interests at the time of grant. In order to equate the value of these Profits Interests to the common stock of a corporation, the Company believes that the appropriate comparison is to the fair value of the Profits Interests, as of each respective grant date, at a minimum enterprise valuation threshold (the “Enterprise Valuation Threshold”), because the Enterprise Valuation Threshold and the distribution preferences will terminate upon the Company’s conversion to a corporation. The table below sets forth a summary of the equity awards granted since June 1, 2017. Included in the summary table is the Grant Date, the Enterprise Valuation Threshold and the per unit fair value of a Common Unit at the Grant Date. electroCore, LLC – Profits Interests Grant Date Enterprise Valuation Threshold2 Number of Units Underlying Grants Enterprise Valuation Threshold per Common Unit at Grant Date 6/1/17 $81,100,000 10,000 $0.17 6/1/17 $81,100,000 200,000 $0.17 8/16/17 $142,760,000 200,000 $0.503 8/18/17 $142,760,000 10,970,335 $0.21 10/16/17 $227,230,000 235,000 $0.35 11/13/17 $227,230,000 25,000 $0.35 11/16/17 $227,230,000 50,000 $0.35 11/23/17 $227,230,000 6,723,754 $0.35 12/1/17 $227,230,000 150.000 $0.35 12/4/17 $227,230,000 10,000 $0.35 1/1/18 $294,370,000 18,919,665 $0.69 1/29/18 $294,370,000 90,000 $0.69 3/1/18 $294,370,000 150,000 $0.69 4/1/18 $303,450,000 75,000 $0.77 4/9/18 $303,450,000 50,000 $0.77 4/16/18 $303,450,000 60,000 $0.77 2 All Profits Interests are subject to an Enterprise Valuation Threshold that must be met upon a liquidity event, such as a change of control, dissolution, or sale of the company, before the participant is entitled to a distribution in respect of such Profit Interest. The holders of Profits Interests only participate in a distribution to the extent that the Enterprise Valuation Threshold of their Profits Interests is exceeded. 3 The Company made this grant above the Enterprise Valuation Threshold. The Enterprise Valuation Threshold per Unit at the date of this grant was $0.21. [***] CONFIDENTIAL TREATMENT REQUESTED BY ELECTROCORE, LLC United States Securities and Exchange Commission June 4, 2018 Page 4 dentons.com Company Methodology in Determining Fair Value As described beginning on page 89 of the Registration Statement, the Company regularly performs contemporaneous valuations of its Units, including its Common Units, to assist the Company’s Board of Managers (the “Board”) in determining the fair value of its Common Units for purposes of granting the Profits Interests as a form of equity based compensation. The Board has generally considered numerous objective and subjective factors it believes to be relevant as of the grant date, including (i) contemporaneous reports prepared by an independent third-party valuation specialist, (ii) valuations derived from the Company’s recent financing transactions, (iii) the Company’s stage of development, (iv) the Company’s operating and financial performance, and (v) general business and financial market conditions in the pharmaceutical and medical device sectors. As disclosed in the Registration Statement, the Company’s Common Unit valuations were prepared using the discounted cash flow (“DCF”) method, a form of the income approach, to estimate its equity values. In order to estimate equity value, the DCF method uses the estimated present value of future net cash flows for the expected life of the related assets or business, discounted at a rate of return that considers the relative risk of achieving those cash flows, the time value of money and the current stage of development of the business. The total fair value of equity on a marketable basis was then allocated between each class of equity, including Common Units, preferred units, Profits Interests, and warrants, applying a hybrid method of allocation. Under the hybrid method, a probability-weighted expected return method and an option pricing model were utilized. The probability weighted expected return method (“PWERM”) is based upon an analysis of future outcomes probability weighted. The assumed future outcomes include an IPO, merger or sale, dissolution, and/or going concern. When applying the method, the analyst must estimate future cash flows and the associated future values. Then the value is allocated to each class of equity, discounted to the present value, and finally assigned probabilities to future outcomes. This method is generally considered to be conceptually sound by valuation experts and explicitly considers the rights of each class at the date in which those rights will be considered. Furthermore, it is forward looking, not static, capturing the future value that is anticipated to be created in the future. However, the method can be complex and requires a number of assumptions. The Company utilized a PWERM for its initial IPO scenario since its financing requirements and associated changes in the capitalization table were fairly certain. [***] CONFIDENTIAL TREATMENT REQUESTED BY ELECTROCORE, LLC United States Securities and Exchange Commission June 4, 2018 Page 5 dentons.com The Option Pricing Method (“OPM”) treats the common and preferred equity of the Company as call options on the enterprise’s value. The OPM applies the Black-Scholes model to price the call options. The option’s exercise price is based on a comparison with the enterprise value of the Company rather than, as in the case of a “regular” call option, a comparison with a per-share stock price. Both the common and preferred equity have, at the time of a liquidity event, “payoff diagrams” that consider the relevant rights of each class of equity – including the level of seniority among the securities, dividend policy, conversion ratios, and cash allocations – upon liquidation of the enterprise. The method implicitly considers the effect of the liquidation preference as of the future liquidation date, not as of the valuation date. This method is often characterized as costly, complex, and difficult to formulate assumptions. However, over time, this method has gained widespread acceptance among valuation practitioners and auditors alike. The Company utilized an OPM to allocate value to the various tranches of equity for the strategic exit and second IPO attempt due to the unknown capital raises required to achieve exit over long holding periods. Factors Contributing to the Difference Between the Grant Date Estimated Fair Value and the Price Range In determining the estimated fair value of the Common Units for purposes of determining the fair value of Profits Interests granted, the Board and management consider the most recent contemporaneous independent third-party valuations of the Company’s Common Units and an also assessment of the objective and subjective factors described above. The additional factors considered when determining any changes in estimated fair value between the most recent contemporaneous valuation and the grant date include, when applicable, the prices paid in the Company’s recent financing transactions, the Company’s stage of development, the Company’s operating and financial performance, and general business and financial market conditions in the pharmaceutical and medical device sectors. Each of the Common Unit valuations since June 1, 2017 are discussed below. June 2017: Prior to June 30, 2017, the Company had independent third-party valuations of its Common Units performed on an annual basis rather than on a quarterly basis. On June 1, 2017, the most recent independent third party valuation of the Common Units was determined as of September 30, 2016 and indicated a fair value of the Common Units of $0.17 per unit. The Enterprise Valuation Threshold as of the valuation date was $81,100,000. August 2017: In August 2017, the Company sold Series B Preferred Units at a price of $0.70 per unit raising net proceeds of $35,800,000 million in the aggregate. The Company and its Board believe that the purchase price for the Series B Preferred Units of $0.70 provides evidence of a freely negotiated, arm’s-length transaction with knowledgeable buyers. The Series B Preferred Units retained preferences over the Company’s Series A Preferred Units and Common Units including the Profits Interests, pursuant to the Company’s limited liability company agreement, resulting in a difference in the purchase price of the Series B Preferred Units and fair value of the Common Units including Profits Interests. The Company had a third-party valuation performed in conjunction with the Series B Preferred Unit financing (the “Series B Financing”), which utilized the DCF methodology and indicated a fair value of the Common Units of $0.21 per unit. The Enterprise Valuation Threshold as of the valuation date was $142,760,000. The derived Enterprise Threshold Value was allocated be