UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM
REGISTRATION STATEMENT
Under
The Securities Act of 1933
______________________________
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For transition period from to
Commission File Number
______________________________
(Exact name of registrant as specified in its charter)
______________________________
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3841 | ||
(State or other jurisdiction of | (Primary Standard Industrial | (I.R.S. Employer |
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
______________________________
Erica J. Rogers
Chief Executive Officer
(Name, address, including zip code, and telephone number, including area code, of agent for service)
______________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| Accelerated Filer | ☐ | |
Non-accelerated Filer | ☐ |
| Smaller Reporting Company | |
Emerging Growth Company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act). Yes ☐ No
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
As of April 30, 2022, the number of outstanding shares of the registrant's common stock, par value $0.001 per share, was
TABLE OF CONTENTS
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Management's Discussion and Analysis of Financial Condition and Results of Operations | 22 | |
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CAUTIONARY NOTES REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology.
These forward-looking statements include, but are not limited to, statements about:
•our plans to conduct further clinical trials;
•our plans and expected timeline related to our products, or developing new products, to address additional indications or to obtain regulatory approvals or clearances or otherwise;
•the expected use of our products by physicians;
•our expectations regarding the number of procedures that will be performed with our products, the number of physicians we expect to train, and the number of our sales territories;
•our ability to obtain, maintain and expand regulatory clearances for our current products and any new products we create;
•the expected growth of our business and our organization;
•our expectations regarding government and third-party payer coverage and reimbursement;
•our ability to retain and recruit key personnel, including the continued expansion of our sales and marketing infrastructure;
•our ability to obtain an adequate supply of materials and components for our products from our third-party suppliers, most of whom are single-source suppliers;
•our ability to manufacture sufficient quantities of our products with sufficient quality;
•our ability to obtain and maintain intellectual property protection for our products and our business;
•our ability to expand our business into new geographic markets;
•our compliance with extensive Nasdaq requirements and government laws, rules and regulations both in the United States and internationally;
•our estimates of our expenses, ongoing losses, future revenue, capital requirements and our need for, or ability to obtain, additional financing;
•our ability to identify and develop new and planned products and/or acquire new products;
•our expectations regarding the continued impact of the COVID-19 pandemic on our business;
•developments and projections relating to our competitors or our industry; and
•our intended use of net proceeds from our public offerings.
We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or
development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.
These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
Part I. Financial Information
Item 1: Unaudited Condensed Financial Statements
Silk Road Medical, Inc.
Condensed Balance Sheets
(unaudited)
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(in thousands, except share and per share data) | March 31, |
| December 31, | ||
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Assets |
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Current assets: |
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Cash and cash equivalents | $ | |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Restricted cash |
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Other non-current assets |
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Total assets | $ | |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable | $ | |
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Accrued liabilities |
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Short-term debt |
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Total current liabilities |
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Long-term debt |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies (Note 7) |
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Stockholders' equity: |
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Preferred stock, $ |
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Shares authorized: |
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Shares issued and outstanding: |
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Common stock, $ |
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Shares authorized: |
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Shares issued and outstanding: |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' equity |
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Total liabilities and stockholders' equity | $ | |
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Silk Road Medical, Inc.
Condensed Statements of Operations and Comprehensive Loss
(unaudited)
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(in thousands, except share and per share data) | Three Months Ended | ||||
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Revenue | $ | |
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Cost of goods sold |
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Gross profit |
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Operating expenses: |
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Research and development |
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Selling, general and administrative |
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Total operating expenses |
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Loss from operations |
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Interest income |
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Interest expense |
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Other income (expense), net |
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Net loss |
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Other comprehensive loss: |
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Change in unrealized gain (loss) on investments, net |
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Net change in other comprehensive loss |
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Net loss and comprehensive loss | $ | ( |
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Net loss per share, basic and diluted | $ | ( |
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Weighted average common shares used to compute net loss per share, basic and diluted |
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Silk Road Medical, Inc.
Condensed Statements of Stockholders' Equity
(unaudited)
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(in thousands, except share data) | Common Stock |
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| Deficit |
| Income |
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Balances at December 31, 2021 | |
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Exercise of stock options | |
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Issuance of common stock upon release of restricted stock units | |
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Stock-based compensation | — |
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Net loss | — |
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Balances at March 31, 2022 | |
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(in thousands, except share data) | Common Stock |
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Balances at December 31, 2020 | |
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Exercise of stock options | |
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Issuance of common stock upon release of restricted stock units | |
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Stock-based compensation | — |
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Net loss | — |
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Unrealized loss on investments, net | — |
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Balances at March 31, 2021 | |
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Silk Road Medical, Inc.
Condensed Statements of Cash Flows
(unaudited)
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(in thousands) | Three Months Ended | ||||
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Cash flows from operating activities |
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Net loss | $ | ( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization expense |
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Stock-based compensation expense |
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Amortization of premiums on investments, net |
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Amortization of debt discount and debt issuance costs |
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Amortization of right-of-use asset |
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Loss on disposal of property and equipment |
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Change in provision for doubtful accounts receivable |
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Provision for excess and obsolete inventories |
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Changes in assets and liabilities: |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other current assets |
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Other assets |
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Accounts payable |
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Accrued liabilities |
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Other liabilities |
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Net cash used in operating activities |
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Cash flows from investing activities |
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Purchases of property and equipment |
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Proceeds from maturity of investments |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities |
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Proceeds from issuance of common stock |
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Net cash provided by financing activities |
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Net change in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period | $ | |
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Supplemental disclosure of cash flow information |
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Cash paid for interest | $ | |
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Noncash investing and financing activities: |
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Accounts payable and accrued liabilities for purchases of property and equipment | $ | |
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The Company
Silk Road Medical, Inc. (the “Company”) was incorporated in the state of Delaware on March 21, 2007. The Company has developed a technologically advanced, minimally-invasive solution for patients with carotid artery disease who are at risk for stroke. The Company's portfolio of TCAR products enable a new procedure, referred to as transcarotid artery revascularization, or TCAR, that combines the benefits of endovascular techniques and surgical principles. The Company manufactures and sells in the United States its portfolio of TCAR products which are designed to provide direct access to the carotid artery, effective reduction in stroke risk throughout the procedure, and long-term restraint of carotid plaque. The Company commercialized its products in the United States in late 2015.
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2021, and related disclosures, have been derived from the audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements. These unaudited condensed financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for the fair statement of the Company’s condensed financial information. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other interim period or for any other future year.
The accompanying interim unaudited condensed financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021 included in the Company's annual report on Form 10-K filed with the SEC on March 1, 2022.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements. Management uses judgment when making estimates related to provisions for accounts receivable and excess and obsolete inventories, the valuation of deferred tax assets, the reserves for sales returns, and stock-based compensation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately differ from these estimates and assumptions.
The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents are recorded at fair value, based on quoted market prices. As of March 31, 2022 and December 31, 2021, the Company’s cash equivalents are entirely comprised of investments in money market funds.
Short-term investments consist of debt securities classified as available-for-sale and have original maturities greater than 90 days, but less than one year as of the balance sheet date. Long-term investments have maturities greater than one year as of the balance sheet date. All investments are recorded at fair value based on the fair value hierarchy. Money market funds are classified within Level 1 of the fair value hierarchy, and commercial paper, corporate bonds/notes, United States Government securities, and asset-backed securities are classified within Level 2 of the fair value hierarchy. Unrealized gains and losses, deemed temporary in nature, are reported as a separate component of accumulated other comprehensive income (loss). Realized gains and losses are included in earnings and are derived based on the specific-identification method for determining the costs of investments sold and were insignificant for the three months ended March 31, 2022 and 2021. Amortization of premiums and accretion of discounts are reported as a component of interest income.
The Company is subject to risks related to public health crises such as the global pandemic associated with COVID-19. The COVID-19 outbreak has negatively impacted, and may continue to negatively impact the Company’s operations, its revenue and overall financial condition by significantly decreasing the number of TCAR procedures performed. The number of TCAR procedures performed, similar to other surgical procedures, has significantly decreased as health care organizations globally prioritized the treatment of patients with COVID-19. In the past governmental authorities have recommended, and in certain cases required, that elective, specialty and other procedures and appointments, be suspended or canceled to focus limited resources and personnel and hospital capacity toward the treatment of COVID-19 and to avoid exposing patients to COVID-19. These measures and challenges will likely continue for the duration of the pandemic, which is uncertain, and will continue to negatively impact the Company’s revenue while the pandemic continues. New virus variants, and increased infection rates continue to make the current COVID-related environment highly volatile and uncertain.
Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and accounts receivable to the extent of the amounts recorded on the balance sheet. Cash, cash equivalents, and investments are deposited in financial institutions which, at times, may be in excess of federally insured limits. Cash equivalents are invested in highly rated money market funds. The Company invests in a variety of financial instruments,
such as, but not limited to, commercial paper, corporate bonds/notes, United States Government securities, asset-backed securities and, by policy, limits the amount of credit exposure with any one financial institution or commercial issuer. The Company has not experienced any material losses on its deposits of cash and cash equivalents or investments during the three months ended March 31, 2022 and 2021.
The Company’s accounts receivable are due from a variety of health care organizations in the United States. At March 31, 2022 and December 31, 2021, no customer represented 10% or more of the Company’s accounts receivable. For the three months ended March 31, 2022 and 2021, there were no customers that represented 10% or more of revenue.
The Company provides for uncollectible amounts when specific credit problems are identified. In doing so, the Company analyzes historical bad debt trends, customer credit worthiness, current economic trends and changes in customer payment patterns when evaluating the adequacy of the allowance for expected credit losses on customer accounts.
The Company manufactures certain of its commercial products in-house. Certain of the Company’s product components and sub-assemblies continue to be manufactured by sole suppliers, the most significant of which is the ENROUTE Transcarotid Stent System, manufactured by Cordis Corporation, or Cordis. Disruption in component or sub-assembly supply from these manufacturers or from in-house production would have a negative impact on the Company’s financial position and results of operations.
The Company is subject to certain risks, including that its devices may not be approved or cleared for marketing by governmental authorities or be successfully marketed. There can be no assurance that the Company’s products will achieve widespread adoption in the marketplace, nor can there be any assurance that existing devices or any future devices can be developed or manufactured at an acceptable cost and with appropriate performance characteristics. The Company is also subject to risks common to companies in the medical device industry, including, but not limited to, new technological innovations, dependence upon government and third-party payers to provide adequate coverage and reimbursement, dependence on key personnel and suppliers, protection of proprietary technology, product liability claims, and compliance with government regulations.
In January and February 2021, the Company announced the voluntary recall of certain lots of its ENROUTE Transcarotid Stent System, manufactured by one of its third-party suppliers, Cordis. The decision to recall these lots was based on complaints received about tips detaching from the stent delivery system as well as internal testing that the Company conducted. The Company believes the root cause of the detachment was a single operator at Cordis, who, over a specific timeframe, produced lots in which a small number of units were not reliably manufactured to specification.
The Company accounts for its leasing arrangements in accordance with Accounting Standards Codification (“ASC”) 842, “Leases.” The Company considers if an arrangement is a lease at inception if it obtains the right to control the use of an identified asset under a leasing arrangement with an initial term greater than twelve months. The Company determines whether a contract conveys the right to control the use of an identified asset for a period of time if the contract contains both the right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset. The Company also evaluates the nature of each lease to determine whether it is an
The Company recognizes revenue in accordance with ASC Topic 606, "Revenue from Contracts with Customers." Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps:
(i) identify the contract(s) with a customer;
(ii) identify the performance obligations in the contract;
(iii) determine the transaction price;
(iv) allocate the transaction price to the performance obligations in the contract; and
(v) recognize revenue when (or as) the entity satisfies a performance obligation.
As of March 31, 2022 and December 31, 2021, the Company recorded $
The Company’s revenue is generated from the sale of its products to hospitals and medical centers in the United States through direct sales representatives. Revenue is recognized when obligations under the terms of a contract with customers are satisfied, which occurs with the transfer of control of the Company’s products to its customers, either upon shipment of the product or delivery of the product to the customer under the Company’s standard terms and conditions. The Company’s products are readily available for usage as soon as the customer possesses it. Upon receipt, the customer controls the economic benefits of the product, has significant risks and rewards, and the legal title. The Company has present right to payment; therefore, the transfer of control is deemed to happen at a point in time. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the goods.
For sales where the Company’s sales representative hand delivers product directly to the hospital or medical center from the sales representative’s trunk stock inventory, the Company recognizes revenue upon delivery, which represents the point in time when control transfers to the customer. Upon delivery there are legally-enforceable rights and obligations between the parties which can be identified, commercial substance exists and collectability is probable. For sales which are sent directly from the Company to hospitals and medical centers, the transfer of control occurs at the time of shipment or delivery of the product. There are no further performance obligations by the Company or the sales representative to the customer after delivery under either method of sale. As allowed under the practical expedient, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed.
The Company is entitled to the total consideration for the products ordered by customers as product pricing is fixed according to the terms of customer contracts and payment terms are short. Payment terms fall within the one-year guidance for the practical expedient which allows the Company to forgo adjustment of the promised amount of
consideration for the effects of a significant financing component. The Company excludes taxes assessed by governmental authorities on revenue-producing transactions from the measurement of the transaction price.
Costs associated with product sales include commissions and royalties. The Company applies the practical expedient and recognizes commissions and royalties as expense when incurred because the expense is incurred at a point in time and the amortization period is less than one year. Commissions are recorded as selling expense and royalties are recorded as cost of goods sold in the condensed statements of operations and comprehensive loss.
The Company accepts product returns at its discretion or if the product is defective as manufactured. The Company establishes estimated provisions for returns based on historical experience and considers other factors that it believes could significantly impact its expected returns, which provisions are classified within accrued liabilities on the condensed balance sheet. The Company elected to expense shipping and handling costs as incurred and includes them in the cost of goods sold. In those cases where the Company bills shipping and handling costs to customers, it will classify the amounts billed as a component of revenue.
Cost of Goods Sold
The Company manufactures certain of its portfolio of TCAR products at its California facility and purchases other products from third party manufacturers. Cost of goods sold consists primarily of costs related to materials, components and sub-assemblies, manufacturing overhead costs, direct labor, reserves for excess, obsolete and non-sellable inventories as well as distribution-related expenses. A significant portion of the Company’s cost of goods sold currently consists of manufacturing overhead costs. These overhead costs include the cost of quality assurance, material procurement, inventory control, facilities, equipment and operations supervision and management. Cost of goods sold also includes depreciation expense for production equipment and certain direct costs such as shipping costs and royalties. In May 2021, the Company entered into a lease for an additional facility in Minnesota and expects to begin commercial production in the second half of 2022. The Company is experiencing additional overhead expenses related to the start-up phase of its manufacturing capacity expansion, which were recorded as a period expense.
The Company accounts for stock-based compensation in accordance with Financial Accounting Standards Board (“FASB”) ASC 718, "Compensation-Stock Compensation." ASC 718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all share-based payments including stock options, restricted stock units and shares issued under its employee stock purchase plan. ASC 718 requires companies to estimate the fair value of all share-based payment option awards on the date of grant using an option pricing model. The fair value of stock options is recognized over the period during which an optionee is required to provide services in exchange for the option award, known as the requisite service period (usually the vesting period), on a straight-line basis. For performance-based stock options, the Company will assess the probability of performance conditions being achieved in each reporting period. The amount of stock-based compensation expense recognized in any one period related to performance-based stock options can vary based on the achievement or anticipated achievement of the performance conditions. The Company accounts for option forfeitures as they occur.
The Company accounts for stock-based compensation for restricted stock units at their fair value, based on the closing market price of the Company's common stock on the date of grant. These costs are recognized on a straight-line basis over the requisite service period, which is usually the vesting period.
The Company accounts for income taxes under the liability method, whereby deferred tax assets and liabilities are determined based on the difference between the condensed financial statements and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to affect taxable income. A
valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized. As the Company has historically incurred operating losses, it has established a full valuation allowance against its net deferred tax assets, and there is
Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period, without consideration for potential dilutive common shares. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, common stock options, and restricted stock units are considered to be potentially dilutive securities. Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential dilutive common shares would have been anti-dilutive.
Net loss per share was determined as follows (in thousands, except share and per share data):
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| Three Months Ended | ||||
| March 31, | ||||
| 2022 |
| 2021 | ||
Net loss | $ | ( |
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Weighted average common stock outstanding used to compute net loss per share, basic and diluted |
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Net loss, basic and diluted | $ | ( |
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The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding because such securities have an antidilutive impact due to the Company's net loss:
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Common stock options | |
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The Company operates and manages its business as
Recently Adopted Accounting Standards
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which creates an exception to the general recognition and measurement principle in ASC 805 by requiring companies to apply ASC 606 to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. The guidance additionally clarifies that companies should apply the definition of a performance obligation in ASC 606 when recognizing contract liabilities assumed in a business combination. The Company early adopted ASU 2021-08 as of January 1, 2022, on a prospective basis. The adoption of ASU 2021-08 did not have a material impact on the Company’s financial statement and related disclosures.
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
•Level 1 – quoted prices in active markets are identical assets and liabilities;
•Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities;
•Level 3 – unobservable inputs.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The Company’s cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Any corporate bonds/notes, commercial paper, asset-backed securities and U.S. government securities are classified as Level 2 as they are valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets.
The following tables sets forth by level within the fair value hierarchy the Company’s assets that are reported at fair value as of March 31, 2022 and December 31, 2021, using the inputs defined above (in thousands):
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| March 31, 2022 | ||||||||||
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Assets: |
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Money market funds | $ | |
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| $ | — |
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| December 31, 2021 | ||||||||||
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Assets: |
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Money market funds | $ | |
| $ | — |
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| $ | |
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