10-Q 1 cers-10q_20180930.htm 10-Q cers-10q_20180930.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:              to             

Commission File Number 000-21937

 

CERUS CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

68-0262011

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

2550 Stanwell Dr.

Concord, California

 

94520

(Address of principal executive offices)

 

(Zip Code)

 

(925) 288-6000

(Registrant’s telephone number, including area code)

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.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

Non-accelerated filer

  

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

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 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES      NO  

As of October 22, 2018, there were 135,689,199 shares of the registrant’s common stock outstanding.

 

 


CERUS CORPORATION

FORM 10-Q

For the Quarterly Period Ended September 30, 2018

TABLE OF CONTENTS

 

PART I

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

1

 

Unaudited Condensed Consolidated Balance Sheets – September 30, 2018 and December 31, 2017

1

 

Unaudited Condensed Consolidated Statements of Operations – Three and nine months ended September 30, 2018 and 2017

2

 

Unaudited Condensed Consolidated Statements of Comprehensive Loss – Three and nine months ended September 30, 2018 and 2017

3

 

Unaudited Condensed Consolidated Statements of Cash Flows – Nine months ended September 30, 2018 and 2017

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

31

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

66

Item 3.

Defaults Upon Senior Securities

66

Item 4.

Mine Safety Disclosures

66

Item 5.

Other Information

66

Item 6.

Exhibits

67

 

 

SIGNATURES

68

 

 

 

 


PART I: FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

CERUS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,327

 

 

$

13,683

 

Short-term investments

 

 

96,669

 

 

 

47,013

 

Accounts receivable

 

 

10,476

 

 

 

12,415

 

Inventories

 

 

13,322

 

 

 

14,457

 

Other current assets

 

 

7,360

 

 

 

2,330

 

Total current assets

 

 

150,154

 

 

 

89,898

 

Non-current assets:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

3,124

 

 

 

2,119

 

Goodwill

 

 

1,316

 

 

 

1,316

 

Intangible assets, net

 

 

385

 

 

 

536

 

Restricted cash

 

 

2,729

 

 

 

247

 

Other assets

 

 

3,949

 

 

 

4,128

 

Total assets

 

$

161,657

 

 

$

98,244

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

14,333

 

 

$

10,974

 

Accrued liabilities

 

 

16,764

 

 

 

11,712

 

Debt – current

 

 

5,714

 

 

 

 

Manufacturing and development obligations – current

 

 

5,858

 

 

 

 

Deferred product revenue – current

 

 

533

 

 

 

445

 

Total current liabilities

 

 

43,202

 

 

 

23,131

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Debt – non-current

 

 

24,138

 

 

 

29,798

 

Manufacturing and development obligations – non-current

 

 

 

 

 

5,766

 

Other non-current liabilities

 

 

2,516

 

 

 

609

 

Total liabilities

 

 

69,856

 

 

 

59,304

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock

 

 

136

 

 

 

115

 

Additional paid-in capital

 

 

854,653

 

 

 

760,225

 

Accumulated other comprehensive loss

 

 

(326

)

 

 

(97

)

Accumulated deficit

 

 

(762,662

)

 

 

(721,303

)

Total stockholders' equity

 

 

91,801

 

 

 

38,940

 

Total liabilities and stockholders' equity

 

$

161,657

 

 

$

98,244

 

 

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

 

1


CERUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

(in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Product revenue

 

$

15,399

 

 

$

10,797

 

 

$

44,383

 

 

$

27,328

 

Cost of product revenue

 

 

8,142

 

 

 

5,348

 

 

 

23,192

 

 

 

13,402

 

Gross profit on product revenue

 

 

7,257

 

 

 

5,449

 

 

 

21,191

 

 

 

13,926

 

Government contract revenue

 

 

3,928

 

 

 

2,285

 

 

 

11,430

 

 

 

5,380

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

10,825

 

 

 

7,886

 

 

 

30,143

 

 

 

25,927

 

Selling, general and administrative

 

 

13,964

 

 

 

12,230

 

 

 

42,008

 

 

 

40,058

 

Total operating expenses

 

 

24,789

 

 

 

20,116

 

 

 

72,151

 

 

 

65,985

 

Loss from operations

 

 

(13,604

)

 

 

(12,382

)

 

 

(39,530

)

 

 

(46,679

)

Non-operating (expense) income, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange gain (loss)

 

 

8

 

 

 

 

 

 

(22

)

 

 

(59

)

Interest expense

 

 

(1,053

)

 

 

(1,090

)

 

 

(2,926

)

 

 

(2,122

)

Other income, net

 

 

513

 

 

 

104

 

 

 

1,288

 

 

 

3,722

 

Total non-operating (expense) income, net

 

 

(532

)

 

 

(986

)

 

 

(1,660

)

 

 

1,541

 

Loss before income taxes

 

 

(14,136

)

 

 

(13,368

)

 

 

(41,190

)

 

 

(45,138

)

Provision for income taxes

 

 

56

 

 

 

50

 

 

 

169

 

 

 

3,961

 

Net loss

 

$

(14,192

)

 

$

(13,418

)

 

$

(41,359

)

 

$

(49,099

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.11

)

 

$

(0.12

)

 

$

(0.32

)

 

$

(0.46

)

Diluted

 

$

(0.11

)

 

$

(0.12

)

 

$

(0.32

)

 

$

(0.46

)

Weighted average shares outstanding used for calculating net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

134,326

 

 

 

109,846

 

 

 

130,199

 

 

 

106,159

 

Diluted

 

 

134,326

 

 

 

109,846

 

 

 

130,199

 

 

 

106,159

 

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

2


CERUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

UNAUDITED

(in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net loss

 

$

(14,192

)

 

$

(13,418

)

 

$

(41,359

)

 

$

(49,099

)

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on available-for-sale investments, net of taxes of zero for the three and nine months ended September 30, 2018 and 2017

 

 

91

 

 

 

(9

)

 

 

(229

)

 

 

(131

)

Comprehensive loss

 

$

(14,101

)

 

$

(13,427

)

 

$

(41,588

)

 

$

(49,230

)

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

3


CERUS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(in thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2018

 

 

2017

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(41,359

)

 

$

(49,099

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,109

 

 

 

1,359

 

Stock-based compensation

 

 

7,579

 

 

 

7,008

 

Non-cash interest expense

 

 

892

 

 

 

282

 

Loss on disposal of property and equipment

 

 

5

 

 

 

 

Deferred income taxes

 

 

2

 

 

 

19

 

Non-cash tax expense from other realized gain on available-for-sale securities

 

 

 

 

 

3,825

 

Gain on sale of investment in marketable equity securities

 

 

 

 

 

(3,466

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,939

 

 

 

(3,608

)

Inventories

 

 

1,043

 

 

 

(1,800

)

Other assets

 

 

(2,724

)

 

 

(379

)

Accounts payable

 

 

3,020

 

 

 

4,022

 

Accrued liabilities and other non-current liabilities

 

 

4,457

 

 

 

(1,477

)

Manufacturing and development obligations

 

 

(187

)

 

 

600

 

Deferred product revenue

 

 

73

 

 

 

514

 

Net cash used in operating activities

 

 

(24,151

)

 

 

(42,200

)

Investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(624

)

 

 

(354

)

Purchases of investments

 

 

(80,453

)

 

 

(50,183

)

Proceeds from maturities and sale of investments

 

 

30,002

 

 

 

55,566

 

Net cash (used in) provided by investing activities

 

 

(51,075

)

 

 

5,029

 

Financing activities

 

 

 

 

 

 

 

 

Net proceeds from equity incentives

 

 

7,150

 

 

 

2,421

 

Net proceeds from public offering

 

 

79,301

 

 

 

18,840

 

Proceeds from loans

 

 

 

 

 

30,000

 

Repayment of debt

 

 

(99

)

 

 

(19,593

)

Net cash provided by financing activities

 

 

86,352

 

 

 

31,668

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

11,126

 

 

 

(5,503

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

13,930

 

 

 

22,744

 

Cash, cash equivalents and restricted cash, end of period

 

$

25,056

 

 

$

17,241

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

 

4


CERUS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

 

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include those of Cerus Corporation and its subsidiary, Cerus Europe B.V. (together with Cerus Corporation, hereinafter “Cerus” or the “Company”) after elimination of all intercompany accounts and transactions. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring entries, considered necessary for a fair presentation have been made. Operating results for the three and nine months ended September 30, 2018, are not necessarily indicative of the results that may be expected for the year ending December 31, 2018, or for any future periods.

These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2017, which were included in the Company’s 2017 Annual Report on Form 10-K, filed with the SEC on March 8, 2018. The accompanying condensed consolidated balance sheet as of December 31, 2017, has been derived from the Company’s audited consolidated financial statements as of that date.

Use of Estimates

The preparation of financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to the nature and timing of satisfaction of performance obligations, the timing when the customer obtains control of products or services, the standalone selling price (“SSP”) of performance obligations, variable consideration, accounts receivable, inventory reserves, fair values of investments, stock-based compensation, intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, and accrued liabilities, among others. The Company bases its estimates on historical experience, future projections, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates under different assumptions or conditions.

Revenue

The Company adopted Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”, on January 1, 2018, using the modified retrospective method. Revenue is recognized in accordance with that core principle by applying the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company’s main source of revenue is product revenue from sales of the INTERCEPT Blood System for platelets and plasma (“platelet and plasma systems” or “disposable kits”), UVA illumination devices (“illuminators”), spare parts and storage solutions, and maintenance services of illuminators. The Company sells its platelet and plasma systems directly to blood banks, hospitals, universities, government agencies, as well as to distributors in certain regions. For all sales of the Company’s INTERCEPT Blood System products, the Company uses a binding purchase order or signed sales contract as evidence of a contract and satisfaction of its policy. Generally, the Company’s contracts with its customers do not provide for open return rights, except within a reasonable time after receipt of goods in the case of defective or non-conforming product. The contracts with customers can include various combinations of products, and to a lesser extent, services. The Company must determine whether products or services are capable of being distinct and accounted for as separate performance obligations, or are accounted for as a combined performance obligation. The Company must allocate the transaction price to each performance obligation on a relative SSP basis, and recognize the revenue when the performance obligation is satisfied. The Company determines the SSP by using the historical selling price of the products and services. If the amount of consideration in a contract is variable, the Company estimates the amount of variable consideration that should be included in the transaction price using the most likely amount method, to the extent it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Product revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which the Company expects to receive in exchange for those products or services. Product revenue from the sale of illuminators, disposable kits, spare parts and storage solutions are recognized upon the transfer of control of the products to the customer. Product revenue from maintenance services are recognized

5


ratably on a straight-line basis over the term of maintenance as customers simultaneously consume and receive benefits. Freight costs charged to customers are recorded as a component of revenue. Taxes that the Company invoices to its customers and remits to governments are recorded on a net basis, which excludes such tax from product revenue.

The Company receives reimbursement under its U.S. government contract with the Biomedical Advanced Research and Development Authority (“BARDA”) that supports research and development of defined projects. See “Note 10. Development and License Agreements—Agreement with BARDA” below. The contract generally provides for reimbursement of approved costs incurred under the terms of the contract. Revenue related to the cost reimbursement provisions under the Company’s U.S. government contract are recognized as the qualified direct and indirect costs on the projects are incurred. The Company invoices under its U.S. government contract using the provisional rates in the government contract and thus is subject to future audits at the discretion of government. These audits could result in an adjustment to government contract revenue previously reported, which adjustments potentially could be significant. The Company believes that revenue for periods not yet audited has been recorded in amounts that are expected to be realized upon final audit and settlement. Costs incurred related to services performed under the contract are included as a component of research and development or selling, general and administrative expenses in the Company’s consolidated statements of operations. The Company’s use of estimates in recording accrued liabilities for government contract activities (see “Use of Estimates” above) affects the revenue recorded from development funding and under the government contract.

 

Disaggregation of Product Revenue

Product revenue by geographical locations of customers during the three and nine months ended September 30, 2018 and 2017, were as follows (in thousands):

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Product revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe, Middle East and Africa

 

$

11,866

 

 

$

9,045

 

 

$

34,890

 

 

$

22,793

 

North America

 

 

3,117

 

 

 

1,524

 

 

 

8,653

 

 

 

3,872

 

Other

 

 

416

 

 

 

228

 

 

 

840

 

 

 

663

 

Total product revenue

 

$

15,399

 

 

$

10,797

 

 

$

44,383

 

 

$

27,328

 

 

Contract Balances

The Company invoices its customers based upon the payment terms in the contracts, which is generally from 30 to 60 days. Accounts receivable are recorded when the Company’s right to the consideration are estimated to be unconditional. The Company had no contract assets at September 30, 2018 and December 31, 2017.

Contract liabilities mainly consist of deferred product revenue related to uninstalled illuminators, unshipped products, and maintenance services. Maintenance services are generally billed upfront at the beginning of each annual service period and recognized ratably over the service period. The increase in the deferred product revenue balance for the nine months ended September 30, 2018 is primarily driven by performance obligations not satisfied but invoiced as of September 30, 2018, offset by $0.3 million of revenue recognized that were included in the deferred product revenue balance as of December 31, 2017.

The Company applies an optional exemption to not disclose the value of unsatisfied performance obligations for contracts that have an original expected duration of one year or less.

 

Research and Development Expenses

Research and development (“R&D”) expenses are charged to expense when incurred, including cost incurred pursuant to the terms of the Company’s U.S. government contract. Research and development expenses include salaries and related expenses for scientific and regulatory personnel, payments to consultants, supplies and chemicals used in in-house laboratories, costs of R&D facilities, depreciation of equipment and external contract research expenses, including clinical trials, preclinical safety studies, other laboratory studies, process development and product manufacturing for research use.

The Company’s use of estimates in recording accrued liabilities for R&D activities (see “Use of Estimates” above) affects the amounts of R&D expenses recorded from development funding and under its U.S. government contract. Actual results may differ from those estimates under different assumptions or conditions.

6


Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be classified as cash equivalents. These investments primarily consist of money market instruments, and are classified as available-for-sale.

Investments

Investments with original maturities of greater than three months primarily include corporate debt and U.S. government agency securities that are designated as available-for-sale and classified as short-term investments. Available-for-sale securities are carried at estimated fair value. The Company views its available-for-sale portfolio as available for use in its current operations. Unrealized gains and losses derived by changes in the estimated fair value of available-for-sale securities were recorded in “Unrealized losses on available-for-sale investments, net of taxes” on the Company’s unaudited condensed consolidated statements of comprehensive loss. Realized gains (losses) from the sale of available-for-sale investments, if any, were recorded in “Other income, net” on the Company’s unaudited condensed consolidated statements of operations. The costs of securities sold are based on the specific identification method, if applicable. The Company reported the amortization of any premium and accretion of any discount resulting from the purchase of debt securities as a component of interest income.

The Company also reviews its available-for-sale securities on a regular basis to evaluate whether any security has experienced an other-than-temporary decline in fair value. Other-than-temporary declines in market value, if any, are recorded in “Other income, net” on the Company’s unaudited condensed consolidated statements of operations.

Restricted Cash

As of September 30, 2018, the Company’s “Restricted cash” primarily consisted of a $2.5 million of letter of credit relating to the lease of the Company’s new office building. As of September 30, 2018 and December 31, 2017, the Company also had certain non-U.S. dollar denominated deposits recorded as “Restrict cash” related to compliance with certain foreign contractual requirements.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, available-for-sale securities and accounts receivable.

Pursuant to the Company’s investment policy, substantially all of the Company’s cash, cash equivalents and available-for-sale securities are maintained at major financial institutions of high credit standing. The Company monitors the financial credit worthiness of the issuers of its investments and limits the concentration in individual securities and types of investments that exist within its investment portfolio. Generally, all of the Company’s investments carry high credit quality ratings, which is in accordance with its investment policy. At September 30, 2018, the Company does not believe there is significant financial risk from non-performance by the issuers of the Company’s cash equivalents and short-term investments.

Concentrations of credit risk with respect to trade receivables exist. On a regular basis, including at the time of sale, the Company performs credit evaluations of its significant customers that it expects to sell to on credit terms. Generally, the Company does not require collateral from its customers to secure accounts receivable. To the extent that the Company determines specific invoices or customer accounts may be uncollectible, the Company establishes an allowance for doubtful accounts against the accounts receivable on its unaudited condensed consolidated balance sheets and records a charge on its unaudited condensed consolidated statements of operations as a component of selling, general and administrative expenses.

The Company had two and three customers that accounted for more than 10% of the Company’s outstanding trade receivables at September 30, 2018 and December 31, 2017, respectively. These customers cumulatively represented approximately 61% and 53% of the Company’s outstanding trade receivables at September 30, 2018 and December 31, 2017, respectively. To date, the Company has not experienced collection difficulties from these customers.

Inventories

At September 30, 2018 and December 31, 2017, inventory consisted of work-in-process and finished goods only. Finished goods include INTERCEPT disposable kits, illuminators, and certain replacement parts for the illuminators. Platelet and plasma systems’ disposable kits generally have 18 to 24 months shelf lives from the date of manufacture. Illuminators and replacement parts do not have regulated expiration dates. Work-in-process includes certain components that are manufactured over a protracted length of time before being sold to, and ultimately incorporated and assembled by Fresenius Kabi Deutschland GmbH or Fresenius, Inc. (with their affiliates, “Fresenius”) into the finished INTERCEPT disposable kits. The Company maintains an inventory balance based on its current sales projections, and at each reporting period, the Company evaluates whether its work-in-process inventory would be sold to Fresenius for production of finished units in order to sell to existing and prospective customers within the next twelve-month period. It

7


is not customary for the Company’s production cycle for inventory to exceed twelve months. Instead, the Company uses its best judgment to factor in lead times for the production of its work-in-process and finished units to meet the Company’s forecasted demands. If actual results differ from those estimates, work-in-process inventory could potentially accumulate for periods exceeding one year. At September 30, 2018 and December 31, 2017, the Company classified its work-in-process inventory as a current asset on its consolidated balance sheets based on its evaluation that the work-in-process inventory would be sold to Fresenius for finished disposable kit production within each respective subsequent twelve-month period.

Inventory is recorded at the lower of cost, determined on a first-in, first-out basis, or net realizable value. The Company uses significant judgment to analyze and determine if the composition of its inventory is obsolete, slow-moving or unsalable and frequently reviews such determinations. The Company writes down specifically identified unusable, obsolete, slow-moving, or known unsalable inventory that has no alternative use in the period that it is first recognized by using a number of factors including product expiration dates, open and unfulfilled orders, and sales forecasts. Any write-down of its inventory to net realizable value establishes a new cost basis and will be maintained even if certain circumstances suggest that the inventory is recoverable in subsequent periods. Costs associated with the write-down of inventory are recorded in “Cost of product revenue” on the Company’s consolidated statements of operations. At September 30, 2018 and December 31, 2017, the Company had $0.3 million and $0.1 million, respectively, recorded for potential obsolete, expiring or unsalable product.

Property and Equipment, net

Property and equipment is comprised of furniture, equipment, leasehold improvements, construction-in-progress, information technology hardware and software and is recorded at cost. At the time the property and equipment is ready for its intended use, it is depreciated on a straight-line basis over the estimated useful lives of the assets (generally three to five years). Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful lives of the improvements. As of September 30, 2018 and December 31, 2017, the Company capitalized construction-in-progress costs included in Property and Equipment, net, on the Company’s consolidated balance sheets, of $1.5 million and zero, respectively, related to leasehold improvements, of which $0.8 million was unpaid as of September 30, 2018.

Goodwill and Intangible Assets, net

Intangible assets, net, which include a license for the right to commercialize the INTERCEPT Blood System in Asia, are subject to ratable amortization over the original estimated useful life of ten years. Accumulated amortization of intangible assets as of September 30, 2018 and December 31, 2017, was $1.6 million and $1.5 million, respectively. The changes in intangible assets, net during the three and nine months ended September 30, 2018 and 2017, were results of amortization expense. Goodwill is not amortized but instead is subject to an impairment test performed on an annual basis, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Such impairment analysis is performed on August 31 of each fiscal year, or more frequently if indicators of impairment exist. The test for goodwill impairment may be assessed using qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than the carrying amount, the Company must then proceed with performing the quantitative goodwill impairment test. The Company may choose not to perform the qualitative assessment to test goodwill for impairment and proceed directly to the quantitative impairment test; however, the Company may revert to the qualitative assessment to test goodwill for impairment in any subsequent period. The quantitative goodwill impairment test compares the fair value of each reporting unit with its respective carrying amount, including goodwill. The Company has determined that it operates in one reporting unit and estimates the fair value of its one reporting unit using the enterprise approach under which it considers the quoted market capitalization of the Company as reported on the Nasdaq Global Market. The Company considers quoted market prices that are available in active markets to be the best evidence of fair value. The Company also considers other factors, which include future forecasted results, the economic environment and overall market conditions. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess, limited to the carrying amount of goodwill in the Company’s one reporting unit.

 

The Company performs an impairment test on its intangible assets if certain events or changes in circumstances occur which indicate that the carrying amounts of its intangible assets may not be recoverable. If the intangible assets are not recoverable, an impairment loss would be recognized by the Company based on the excess amount of the carrying value of the intangible assets over its fair value. During the three and nine months ended September 30, 2018 and 2017, there were no impairment charges recognized related to the acquired intangible assets.

Long-lived Assets

The Company evaluates its long-lived assets for impairment by continually monitoring events and changes in circumstances that could indicate carrying amounts of its long-lived assets may not be recoverable. When such events or changes in circumstances occur, the Company assesses recoverability by determining whether the carrying value of such assets will be recovered through the undiscounted expected future cash flows. If the expected undiscounted future cash flows are less than the carrying amount of these assets, the

8


Company then measures the amount of the impairment loss based on the excess of the carrying amount over the fair value of the assets.

Foreign Currency Remeasurement

The functional currency of the Company’s foreign subsidiary is the U.S. dollar. Monetary assets and liabilities denominated in foreign currencies are remeasured in U.S. dollars using the exchange rates at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are remeasured in U.S. dollars using historical exchange rates. Product revenues and expenses are remeasured using average exchange rates prevailing during the period. Remeasurements are recorded in the Company’s consolidated statements of operations.

Stock-Based Compensation

Stock-based compensation expense is measured at the grant-date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period, and is adjusted for estimated forfeitures. To the extent that stock options contain performance criteria for vesting, stock-based compensation is recognized once the performance criteria are probable of being achieved.

For stock-based awards issued to non-employees, the measurement date at which the fair value of the stock-based award is measured to be the earlier of (i) the date at which a commitment for performance by the grantee to earn the equity instrument is reached or (ii) the date at which the grantee’s performance is complete. The Company recognizes stock-based compensation expense for the fair value of the vested portion of the non-employee stock-based awards in its consolidated statements of operations.

See Note 8 for further information regarding the Company’s stock-based compensation expense.

Income Taxes

The provision for income taxes is accounted for using an asset and liability approach, under which deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company does not recognize tax positions that do not have a greater than 50% likelihood of being recognized upon review by a taxing authority having full knowledge of all relevant information. Use of a valuation allowance is not an appropriate substitute for derecognition of a tax position. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in its income tax expense. To date, the Company has not recognized any interest and penalties in its unaudited condensed consolidated statements of operations, nor has it accrued for or made payments for interest and penalties. Although the Company believes it more likely than not that a taxing authority would agree with its current tax positions, there can be no assurance that the tax positions the Company has taken will be substantiated by a taxing authority if reviewed. The Company’s U.S. federal tax returns for years 1998 through 2017 and California tax returns for years through 2017 remain subject to examination by the taxing jurisdictions due to unutilized net operating losses and research credits. The Company continues to carry a valuation allowance on substantially all of its net deferred tax assets.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted net loss per share gives effect to all potentially dilutive common shares outstanding for the period. The potentially dilutive securities include stock options, employee stock purchase plan rights and restricted stock units, which are calculated using the treasury stock method. For the three and nine months ended September 30, 2018 and 2017, all potentially dilutive securities outstanding have been excluded from the computation of dilutive weighted average shares outstanding because such securities have an antidilutive impact due to losses reported.

 

The table below presents potential shares that were excluded from the calculation of the weighted average number of shares outstanding used for the calculation of diluted net loss per share. These are excluded from the calculation due to their anti-dilutive effect for the three and nine months ended September 30, 2018 and 2017 (shares in thousands):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Weighted average number of anti-dilutive potential shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

17,882

 

 

 

17,629

 

 

 

18,137

 

 

 

17,424

 

Restricted stock units

 

 

1,989

 

 

 

1,313

 

 

 

1,865

 

 

 

1,211

 

Employee stock purchase plan rights

 

 

3

 

 

 

 

 

 

2

 

 

 

11

 

Total

 

 

19,874

 

 

 

18,942

 

 

 

20,004

 

 

 

18,646

 

9


 

Guarantee and Indemnification Arrangements

The Company recognizes the fair value for guarantee and indemnification arrangements issued or modified by the Company. In addition, the Company monitors the conditions that are subject to the guarantees and indemnifications in order to identify if a loss has occurred. If the Company determines it is probable that a loss has occurred, then any such estimable loss would be recognized under those guarantees and indemnifications. Some of the agreements that the Company is a party to contain provisions that indemnify the counter party from damages and costs resulting from claims that the Company’s technology infringes the intellectual property rights of a third party or claims that the sale or use of the Company’s products have caused personal injury or other damage or loss. The Company has not received any such requests for indemnification under these provisions and has not been required to make material payments pursuant to these provisions.

The Company generally provides for a one-year warranty on certain of its INTERCEPT blood-safety products covering defects in materials and workmanship. The Company accrues costs associated with warranty obligations when claims become known and are estimable. The Company has not experienced significant or systemic warranty claims nor is it aware of any existing current warranty claims. Accordingly, the Company had not accrued for any future warranty costs for its products at September 30, 2018 and December 31, 2017.

Fair Value of Financial Instruments

The Company applies the provisions of fair value relating to its financial assets and liabilities. The carrying amounts of accounts receivables, accounts payable, and other accrued liabilities approximate their fair value due to the relative short-term maturities. Based on the borrowing rates currently available to the Company for loans with similar terms, the Company believes the fair value of its debt approximates their carrying amounts. The Company measures and records certain financial assets and liabilities at fair value on a recurring basis, including its available-for-sale securities. The Company classifies instruments within Level 1 if quoted prices are available in active markets for identical assets, which include the Company’s cash accounts and money market funds. The Company classifies instruments in Level 2 if the instruments are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. These instruments include the Company’s corporate debt and U.S. government agency securities holdings. The available-for-sale securities are held by a custodian who obtains investment prices from a third party pricing provider that uses standard inputs (observable in the market) to models which vary by asset class. The Company classifies instruments in Level 3 if one or more significant inputs or significant value drivers are unobservable. The Company assesses any transfers among fair value measurement levels at the end of each reporting period.

See Note 2 for further information regarding the Company’s valuation of financial instruments.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The Company adopted the new accounting standard on January 1, 2018, using the modified retrospective method, and the adoption had no impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10), which requires all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, this ASU eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. The Company adopted this ASU on January 1, 2018, and the adoption had no impact on the Company’s consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The standard is effective for annual periods beginning

10


after December 15, 2018, and interim periods thereafter, with early application permitted. The Company early adopted this new accounting standard on July 1, 2018, and the adoption did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which, for operating leases, requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. This ASU will be effective for annual periods beginning after December 15, 2018, and interim periods thereafter, with early application permitted. Entities are required to adopt this ASU using a modified retrospective approach for all leases that exist at or commence after the beginning of the earliest comparative period presented. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which provides for certain practical expedient when implementing the new leases standard. Companies may apply the practical expedient either retrospectively or prospectively. The Company will adopt these ASUs on January 1, 2019, using the modified retrospective approach and will apply the practical expedient prospectively. The Company is currently assessing the future impact of these ASUs on its consolidated financial statements. To date the Company has completed a high level review of its lease model, determined the scope of work, and is in the process of performing an analysis of lease contracts. The Company anticipates that the Company’s operating lease commitments will be subject to the new standard. The Company will recognize right-of-use assets and lease liabilities on the Company’s consolidated balance sheets upon the adoption of these ASUs, which will increase the Company’s total assets and total liabilities. The Company will continue to monitor industry activities and any additional guidance provided by regulators, standards setters, or the accounting profession as an ongoing component of its assessment and implementation plans.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. The standard is effective for annual periods beginning after December 15, 2019, and interim periods thereafter, with early application permitted. The Company plans to adopt this ASU on January 1, 2020, using the modified retrospective transition method. The Company is currently assessing the future impact of this ASU on the Company’s consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The Company adopted this ASU on January 1, 2018, and the adoption did not have a material impact on the Company’s consolidated financial statements.

 

 

 

Note 2. Available-for-sale Securities and Fair Value on Financial Instruments

Available-for-sale Securities

The following is a summary of available-for-sale securities at September 30, 2018 (in thousands):

 

 

September 30, 2018

 

 

 

Amortized Cost

 

 

Gross

Unrealized Gain

 

 

Gross

Unrealized Loss

 

 

Fair Value

 

Money market funds

 

$

6,591

 

 

$

 

 

$

 

 

$

6,591

 

United States government agency securities

 

 

20,944

 

 

 

 

 

 

(41

)

 

 

20,903

 

Corporate debt securities

 

 

76,051

 

 

 

 

 

 

(285

)

 

 

75,766

 

Total available-for-sale securities

 

$

103,586

 

 

$

 

 

$

(326

)

 

$

103,260

 

 

The following is a summary of available-for-sale securities at December 31, 2017 (in thousands):

 

 

December 31, 2017

 

 

 

Amortized Cost

 

 

Gross

Unrealized Gain

 

 

Gross

Unrealized Loss

 

 

Fair Value

 

Money market funds

 

$

3,758

 

 

$

 

 

$

 

 

$

3,758

 

United States government agency securities

 

 

11,252

 

 

 

 

 

 

(24

)

 

 

11,228

 

Corporate debt securities

 

 

35,858

 

 

 

 

 

 

(73

)

 

 

35,785

 

Total available-for-sale securities

 

$

50,868

 

 

$

 

 

$

(97

)

 

$

50,771

 

 

Available-for-sale securities at September 30, 2018 and December 31, 2017, consisted of the following by contractual maturity (in thousands):

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

Amortized Cost

 

 

Fair Value

 

 

Amortized Cost

 

 

Fair Value

 

One year or less

 

$

75,555

 

 

$

75,361

 

 

$

38,836

 

 

$

38,781

 

Greater than one year and less than five years

 

 

28,031

 

 

 

27,899

 

 

 

12,032

 

 

 

11,990

 

Total available-for-sale securities

 

$

103,586

 

 

$

103,260

 

 

$

50,868

 

 

$

50,771

 

11


 

The following tables show all available-for-sale marketable securities in an unrealized loss position for which an other-than-temporary impairment has not been recognized and the related gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

 

 

September 30, 2018

 

 

Less than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

Fair Value

 

 

Unrealized Loss

 

 

Fair Value

 

 

Unrealized Loss

 

 

Fair Value

 

 

Unrealized Loss

 

United States government agency securities

$

17,908

 

 

$

(35

)

 

$

2,994

 

 

$

(6

)

 

$

20,902

 

 

$

(41

)

Corporate debt securities

 

72,740

 

 

 

(279

)

 

 

1,996

 

 

 

(6

)

 

 

74,736

 

 

 

(285

)

Total available-for-sale securities

$

90,648

 

 

$

(314

)

 

$

4,990

 

 

$

(12

)

 

$

95,638

 

 

$

(326

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

 

Less than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

Fair Value

 

 

Unrealized Loss

 

 

Fair Value

 

 

Unrealized Loss

 

 

Fair Value

 

 

Unrealized Loss

 

United States government agency securities

$

8,729

 

 

$

(24

)

 

$

 

 

$

 

 

$

8,729

 

 

$

(24

)

Corporate debt securities

 

35,785

 

 

 

(73

)

 

 

 

 

 

 

 

 

35,785

 

 

 

(73

)

Total available-for-sale securities

$

44,514

 

 

$

(97

)

 

$

 

 

$

 

 

$

44,514

 

 

$

(97

)

 

As of September 30, 2018, the Company considered the declines in market value of its marketable securities investment portfolio to be temporary in nature and did not consider any of its investments other-than-temporarily impaired. The Company typically invests in highly-rated securities, and its investment policy limits the amount of credit exposure to any one issuer. The policy generally requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss. Fair values were determined for each individual security in the investment portfolio. When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates, and the Company’s intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s cost basis. During the three and nine months ended September 30, 2018 and 2017, the Company did not recognize any other-than-temporary impairment loss. The Company has no current requirement or intent to sell the securities in an unrealized loss position. The Company expects to recover up to (or beyond) the initial cost of investment for securities held.

The Company recognized zero gross realized gains and less than five thousand dollars of gross realized losses from the sale of available-for-sale investments during the three and nine months ended September 30, 2018. The Company recognized zero and $3.5 million of gross realized gains from the sale of available-for-sale investments during the three and nine months ended September 30, 2017, respectively, which were reclassified out of accumulated other comprehensive income into “Other income, net” on the Company’s consolidated statements of operations. The Company did not record any gross realized losses from the sale or maturity of available-for-sale investments during the three and nine months ended September 30, 2017.

 

Fair Value Disclosures

The Company uses certain assumptions that market participants would use to determine the fair value of an asset or liability in pricing the asset or liability in an orderly transaction between market participants at the measurement date. The identification of market participant assumptions provides a basis for determining what inputs are to be used for pricing each asset or liability. A fair value hierarchy has been established which gives precedence to fair value measurements calculated using observable inputs over those using unobservable inputs. This hierarchy prioritized the inputs into three broad levels as follows:

Level 1: Quoted prices in active markets for identical instruments

Level 2: Other significant observable inputs (including quoted prices in active markets for similar instruments)

Level 3: Significant unobservable inputs (including assumptions in determining the fair value of certain investments)

Money market funds are highly liquid investments and are actively traded. The pricing information on these investment instruments are readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

12


To estimate the fair value of Level 2 debt securities as of September 30, 2018, the Company’s primary pricing service relies on inputs from multiple industry-recognized pricing sources to determine the price for each investment. Corporate debt and U.S. government agency securities are systematically priced by this service as of the close of business each business day. If the primary pricing service does not price a specific asset a secondary pricing service is utilized.

The fair values of the Company’s financial assets and liabilities were determined using the following inputs at September 30, 2018 (in thousands):

 

 

 

Balance sheet

 

 

 

 

 

Quoted

Prices in

Active

Markets for Identical

Assets

 

 

Significant

Other

Observable

Inputs

 

 

Significant Unobservable Inputs

 

 

 

classification

 

Total

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Money market funds

 

Cash and cash equivalents

 

$

6,591

 

 

$

6,591

 

 

$

 

 

$

 

United States government agency securities

 

Short-term investments

 

 

20,903

 

 

 

 

 

 

20,903

 

 

 

 

Corporate debt securities

 

Short-term investments

 

 

75,766

 

 

 

 

 

 

75,766

 

 

 

 

Total financial assets

 

 

 

$

103,260

 

 

$

6,591

 

 

$

96,669

 

 

$

 

 

The fair values of the Company’s financial assets and liabilities were determined using the following inputs at December 31, 2017 (in thousands):

 

 

Balance sheet

 

 

 

 

 

Quoted

Prices in

Active

Markets for Identical

Assets

 

 

Significant

Other

Observable

Inputs

 

 

Significant Unobservable Inputs

 

 

 

classification

 

Total

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Money market funds

 

Cash and cash equivalents

 

$

3,758

 

 

$

3,758

 

 

$

 

 

$

 

United States government agency securities

 

Short-term investments

 

 

11,228

 

 

 

 

 

 

11,228

 

 

 

 

Corporate debt securities

 

Short-term investments

 

 

35,785

 

 

 

 

 

 

35,785

 

 

 

 

Total financial assets

 

 

 

$

50,771

 

 

$

3,758

 

 

$

47,013

 

 

$

 

 

The Company did not have any transfers among fair value measurement levels during the three and nine months ended September 30, 2018.

 

 

Note 3. Inventories

Inventories at September 30, 2018 and December 31, 2017, consisted of the following (in thousands):

 

 

 

September 30,

2018

 

 

December 31,

2017

 

Work-in-process

 

$

3,685

 

 

$

4,299

 

Finished goods

 

 

9,637

 

 

 

10,158

 

Total inventories

 

$

13,322

 

 

$

14,457

 

 

 

Note 4. Accrued Liabilities

Accrued liabilities at September 30, 2018 and December 31, 2017, consisted of the following (in thousands):

 

 

 

September 30, 2018

 

 

December 31, 2017

 

Accrued compensation and related costs

 

$

8,509

 

 

$

7,372

 

Accrued professional services

 

 

3,806

 

 

 

1,811

 

Accrued development costs

 

 

1,293

 

 

 

794

 

Other accrued expenses

 

 

3,156

 

 

 

1,735

 

Total accrued liabilities

 

$

16,764

 

 

$

11,712

 

 

 

13


Note 5. Debt

Debt at September 30, 2018, consisted of the following (in thousands):

 

 

 

September 30, 2018

 

 

 

Principal

 

 

Unamortized Discount

 

 

Total

 

Loan and Security Agreement

 

$

30,000

 

 

$

(148

)

 

$

29,852

 

Less: debt – current

 

 

(5,714

)

 

 

 

 

 

(5,714

)

Debt – non-current

 

$

24,286

 

 

$

(148

)