2.	Revenue from contracts with customers:

Effective January 1, 2018, the Company adopted Topic 606. The Company elected to apply the standard and all related ASUs using the modified retrospective method beginning January 1, 2018. The Company applied this guidance only to those contracts that were not completed at the date of adoption. As a result of adoption, the cumulative impact to the Company’s retained earnings at January 1, 2018 was $0.1 million. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company expects the impact of the adoption of the new standard on its existing contracts to be immaterial to the Company’s net income on an ongoing basis, however additional disclosures have been added in accordance with the ASU.

The Company does not anticipate any significant changes in the timing or amount of revenue recognized for the Company’s product sales and related gross-to-net adjustments under ASC 606. The Company’s net product sales continue to be recognized when delivery has occurred, and its gross-to-net adjustments are estimated and recorded in the accounting period related to when sales occur in the manner fundamentally consistent with the Company’s prior accounting methodology.

Under the new standard, timing for recognition of certain contract revenue may be accelerated such that a portion of revenue will be estimated and recognized in revenue earlier than the previous accounting standards. During the three months ended March 31, 2018, the Company recorded milestone revenue for contracts that are not due until between years 2020-2023. This financing component is recorded as a cumulative effect adjustment and the receivables were discounted for time value of money.

The main types of revenue contracts are:

•

Product sales -Product sales amounts relate to sales of BELBUCA^® and BUNAVAIL^®. These sales are recognized as revenue when control is transferred to the wholesaler in an amount that reflects the consideration expected to be received.

•

Product royalty revenues- Product royalty revenue amounts are based on sales revenue of BELBUCA^® under the Company’s license agreement with Purdue Pharma, the PAINKYL^™ product under the Company’s license agreement with TTY and the BREAKYL^™ product under the Company’s license agreement with Meda. Product royalty revenues are recognized when control of the product is transferred to the license partner in an amount that reflects the consideration expected to be received. Supplemental sales-based product royalty revenue may also be earned upon the subsequent sale of the product at agreed upon contractual rates.

•

Contract revenue -Contract revenue amounts are related to milestone payments under the Company’s license agreements with its partners including any associated financing component.

The impact of adoption of ASC 606 on the Company’s condensed consolidated balance sheet and condensed consolidated statement of operations as of and for the three months ended March 31, 2018 follows (in thousands):


	Condensed Consolidated Balance Sheet
	March 31, 2018
	As reported			Balances without adoption of ASC 606			Effect of Adoption
Accounts receivable, net	$	8,123		$	7,798		$	325
Accumulated deficit	$	(315,630	)	$	(315,955	)	$	325

	Condensed Consolidated Statement of Operations
	Three months ended March 31, 2018
	As reported			Balances without adoption of ASC 606			Effect of Adoption
Total revenues	$	11,281		$	11,091		$	190
Net loss attributable to common stockholders	$	(10,709	)	$	(10,899	)	$	190

The cumulative effect of the changes made to the Company’s condensed consolidated balance sheet from the modified retrospective adoption of ASC 606 was as follows (in thousands):


	Balance at December 31, 2017			Adjustment due to implementation of ASC 606		Balance at January 1, 2018
Accounts receivable, net	$	8,852		$	135	$	8,987
Accumulated deficit	$	(305,056	)	$	135	$	(304,921	)

The beginning and ending balances of the Company’s accounts receivables with customers from contracts during the periods presented is as follows (in thousands):


	Balance at January 1, 2018		Three months ended March 31, 2018			Balance at March 31, 2018
Accounts receivable with customers	$	8,987	$	(864	)	$	8,123