2. Revenue from contracts with customers:

Effective January 1, 2018, the Company adopted Topic 606. The Company elected to apply the standard 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 $0.135 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 Topic 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 nine months ended September 30, 2018, the Company recorded financing revenue for two milestones that are not due until 2020 and 2023, respectively.

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 Topic 606 on the Company’s condensed consolidated balance sheet as of September 30, 2018 follows (in thousands):


	Condensed Consolidated Balance Sheet
	September 30, 2018
	As reported			Balances without adoption of Topic 606			Effect of Adoption
Accounts receivable, net	$	12,568		$	12,197		$	371
Accumulated deficit	$	(344,280	)	$	(344,651	)	$	371

The impact of adoption of Topic 606 on the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2018 follows (in thousands):


	Condensed Consolidated Statement of Operations Three months ended September 30, 2018								Condensed Consolidated Statement of Operations Nine months ended September 30, 2018
	As reported			Balances without adoption of Topic 606			Effect of Adoption		As reported			Balances without adoption of Topic 606			Effect of Adoption
Product sales	$	13,763		$	13,763		$	—	$	34,367		$	34,367		$	—
Product royalty revenues		370			393			—		2,197			2,195			—
Contract revenues		23			—			23		1,047			813			236

Total revenues	$	14,156		$	14,133		$	23	$	37,611		$	37,375		$	236

Net loss	$	(6,380	)	$	(6,403	)	$	23	$	(26,859	)	$	(27,096	)	$	236

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		Nine months ended September 30, 2018		Balance at September 30, 2018
Accounts receivable with customers	$	8,987	$	3,581	$	12,568