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Washington, D.C. 20549
The Securities Act of 1933
(Mark One)
For the quarterly period ended June 30, 2020
For transition period from               to
Commission File Number   001-38847     
(Exact name of registrant as specified in its charter)

(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
1213 Innsbruck Dr. Sunnyvale, CA 94089 (408) 720-9002
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Erica J. Rogers
Chief Executive Officer
1213 Innsbruck Dr. Sunnyvale, CA 94089 (408) 720-9002
(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.
Large accelerated filer Accelerated filer
Non-accelerated filerSmaller 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 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:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockSILKNasdaq Global Select Market
As of July 31, 2020, the number of outstanding shares of the registrant's common stock, par value $0.001 per share, was 33,679,635.



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 otherwise;
the expected use of our products by physicians;
our expectations regarding the number of procedures 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 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 development of a 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 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

(in thousands, except share and per share data)June 30,December 31,
Current assets:
Cash and cash equivalents$73,442  $39,181  
Short-term investments84,416  51,508  
Accounts receivable, net7,753  8,601  
Inventories11,621  10,322  
Prepaid expenses and other current assets3,863  2,878  
Total current assets181,095  112,490  
Long-term investments  18,224  
Property and equipment, net2,885  2,734  
Restricted cash310  310  
Other non-current assets3,233  3,644  
Total assets$187,523  $137,402  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$2,542  $1,898  
Accrued liabilities9,142  15,034  
Total current liabilities11,684  16,932  
Long-term debt45,066  44,879  
Other liabilities3,693  3,700  
Total liabilities60,443  65,511  
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, $0.001 par value
Shares authorized: 5,000,000 at June 30, 2020 and December 31, 2019
Shares issued and outstanding: none
Common stock, $0.001 par value
Shares authorized: 100,000,000 at June 30, 2020 and December 31, 2019
Shares issued and outstanding: 33,610,099 and 31,255,267 at June 30, 2020 and December 31, 2019, respectively
34  31  
Additional paid-in capital338,550  263,384  
Accumulated other comprehensive income316  2  
Accumulated deficit(211,820) (191,526) 
Total stockholders' equity127,080  71,891  
Total liabilities and stockholders' equity$187,523  $137,402  

The accompanying notes are an integral part of these condensed financial statements.

Silk Road Medical, Inc.
Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)Three Months Ended
June 30,
Six Months Ended
June 30,
Revenue$15,094  $14,928  $34,027  $27,694  
Cost of goods sold5,336  3,697  10,586  7,035  
Gross profit9,758  11,231  23,441  20,659  
Operating expenses:
Research and development3,393  3,113  6,522  5,820  
Selling, general and administrative15,758  14,135  35,450  28,001  
Total operating expenses19,151  17,248  41,972  33,821  
Loss from operations(9,393) (6,017) (18,531) (13,162) 
Interest income299  598  702  650  
Interest expense(1,203) (1,207) (2,406) (2,560) 
Other income (expense), net(56) (5,333) (59) (21,045) 
Net loss(10,353) (11,959) (20,294) (36,117) 
Other comprehensive loss:
Unrealized gain (loss) on investments, net(126)   314    
Net change in other comprehensive loss(126)   314    
Net loss and comprehensive loss$(10,479) $(11,959) $(19,980) $(36,117) 
Net loss per share, basic and diluted $(0.32) $(0.42) $(0.63) $(2.42) 
Weighted average common shares used to compute net loss per share, basic and diluted32,682,360  28,458,793  32,010,335  14,905,052  

The accompanying notes are an integral part of these condensed financial statements.

Silk Road Medical, Inc.
Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)

(in thousands, except share data)Common StockAdditional
Paid-in Capital
Accumulated DeficitAccumulated Other Comprehensive IncomeTotal
Balances at December 31, 2019
31,255,267  $31  $263,384  $(191,526) $2  $71,891  
Exercise of stock options
140,370  —  274  —  —  274  
Stock-based compensation
—  —  1,293  —  —  1,293  
Net loss
—  —  —  (9,941) —  (9,941) 
Unrealized gain on investments, net
—  —  —  —  440  440  
Balances at March 31, 2020
31,395,637  31  264,951  (201,467) 442  63,957  
Issuance of common stock in connection with public offering, net of underwriting discount, commissions and offering costs of $4,457
1,923,076  2  70,541  —  —  70,543  
Exercise of stock options265,467  1  603  —  —  604  
Issuance of common stock under employee stock purchase plan25,919  —  801  —  —  801  
Stock-based compensation—  —  1,654  —  —  1,654  
Net loss—  —  —  (10,353) —  (10,353) 
Unrealized loss on investments, net—  —  —  —  (126) (126) 
Balances at June 30, 2020
33,610,099  $34  $338,550  $(211,820) $316  $127,080  

The accompanying notes are an integral part of these condensed financial statements.

Silk Road Medical, Inc.
Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)
(in thousands, except share data)Redeemable Convertible
Preferred Stock
Common StockAdditional
Paid-in Capital
Accumulated DeficitAccumulated Other Comprehensive IncomeTotal
Balances at December 31, 201821,233,190  $105,235  1,135,310  $1  $4,557  $(139,111) $  $(134,553) 
Exercise of Series C preferred stock warrants4,915  30  —  —  —  —  —  —  
Exercise of stock options
—  —  251,305  —  375  —  —  375  
Stock-based compensation—  —  —  —  262  —  —  262  
Net loss and comprehensive loss
—  —  —  —  —  (24,158) —  (24,158) 
Balances at March 31, 2019
21,238,105  105,265  1,386,615  1  5,194  (163,269)   (158,074) 
Exercise of Series C preferred stock warrants287,446  1,754  —  —  —  —  —  —  
Exercise of common stock warrants—  —  3,764  —  31  —  —  31  
Issuance of common stock in IPO, net of underwriting discount, commissions and offering costs of $10,961
—  —  6,000,000  6  109,033  —  —  109,039  
Conversion of preferred stock to common stock issued upon the conversion of preferred stock into common stock in IPO(23,178,555) (144,140) 23,178,555  23  144,117  —  —  144,140  
Net exercise of Series C preferred stock warrants in connection with IPO1,653,004  37,121  —  —  —  —  —  —  
Net exercise of common stock warrants in connection with IPO—  —  2,204  —  —  —  —  —  
Exercise of stock options—  —  176,576  1  363  —  —  364  
Stock-based compensation—  —  —  —  836  —  —  836  
Net loss and comprehensive loss—  —  —  —  —  (11,959) —  (11,959) 
Balances at June 30, 2019
  $  30,747,714  $31  $259,574  $(175,228) $  $84,377  

The accompanying notes are an integral part of these condensed financial statements.

Silk Road Medical, Inc.
Condensed Statements of Cash Flows

(in thousands)Six Months Ended June 30,
Cash flows from operating activities
Net loss$(20,294) $(36,117) 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense368  350  
Stock-based compensation expense2,947  1,099  
Change in fair value of redeemable convertible preferred stock warrant liability  21,030  
Amortization of premiums (accretion of discounts) on investments, net57    
Amortization of debt discount and debt issuance costs23  22  
Amortization of right-of-use asset295  300  
Non-cash interest expense167  555  
Loss on disposal of property and equipment51    
Change in provision for doubtful accounts receivable(9) 123  
Provision for excess and obsolete inventories105  43  
Changes in assets and liabilities
Accounts receivable857  (1,622) 
Inventories(1,404) (3,262) 
Prepaid expenses and other current assets(986) (1,841) 
Other assets117  756  
Accounts payable262  (45) 
Accrued liabilities(5,925) 978  
Other liabilities(7) (372) 
Net cash used in operating activities(23,376) (18,003) 
Cash flows from investing activities
Purchases of property and equipment(479) (206) 
Purchases of investments(23,606)   
Proceeds from maturity of investments9,180    
Net cash used in investing activities(14,905) (206) 
Cash flows from financing activities
Proceeds from public offerings, net of underwriting discount, commissions and offering costs paid70,863  108,913  
Proceeds from issuance of common stock1,679  738  
Proceeds from exercise of redeemable convertible preferred stock warrants  1,784  
Proceeds from exercise of common stock warrants  31  
Net cash provided by financing activities72,542  111,466  
Net change in cash, cash equivalents and restricted cash34,261  93,257  
Cash, cash equivalents and restricted cash, beginning of period39,491  25,300  
Cash, cash equivalents and restricted cash, end of period$73,752  $118,557  
Supplemental disclosure of cash flow information
Cash paid for interest$2,216  $1,982  
Non-cash investing and financing activities:
Accounts payable and accrued liabilities for purchases of property and equipment$100  $7  
Offering costs in accounts payable and accrued liabilities$320  $358  
Right-of-use asset obtained in exchange for lease obligation$  $3,982  
Net exercise of convertible preferred stock warrants to preferred stock$  $37,121  
Conversion of convertible preferred stock to common stock upon initial public offering$  $144,140  

The accompanying notes are an integral part of these condensed financial statements.

Silk Road Medical, Inc.
Notes to Condensed Financial Statements

1.    Formation and Business of the Company
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 April 2016.
Reverse Stock Split
On March 13, 2019, the Company’s Board of Directors approved an amendment to the Company’s amended and restated certificate of incorporation to effect a 1-for-2.7 reverse stock split of the Company’s common stock and redeemable convertible preferred stock to be consummated prior to the effectiveness of the Company’s planned initial public offering, or IPO. The reverse stock split was effected on March 27, 2019. The par values of the common stock and redeemable convertible preferred stock were not adjusted as a result of the reverse stock split. All the common stock, redeemable convertible preferred stock, stock options and warrants, and related per share amounts in the condensed financial statements have been retroactively adjusted for all periods presented to give effect to the reverse stock split.
Public Offerings
In April 2019, the Company issued and sold 6,000,000 shares of its common stock in its IPO at a public offering price of $20.00 per share, for net proceeds of approximately $109,119,000 after deducting underwriting discounts and commissions of approximately $8,400,000 and expenses of approximately $2,481,000. Upon the closing of the IPO, all shares of redeemable convertible preferred stock then outstanding converted into shares of common stock and the Company's outstanding warrants to purchase shares of common and redeemable convertible preferred stock were exercised, or automatically net exercised absent a prior election. The exercises resulted in the reclassification of the fair value of the related redeemable convertible preferred stock warrant liability to additional paid-in capital.
In August 2019, the Company completed a secondary public offering of 4,200,000 shares of its common stock sold by certain selling stockholders, and the exercise in full of the underwriters' option to purchase 630,000 additional shares of its common stock from certain selling stockholders, at a public offering price of $39.50 per share. The Company did not receive any of the proceeds from the sale of the shares of its common stock by the selling stockholders.
In May 2020, the Company completed an underwritten public offering of 6,808,154 shares of its common stock, of which 1,923,076 shares were offered for sale by the Company and the remaining 4,885,078 shares were offered for sale by certain selling stockholders, at a public offering price of $39.00 per share. The Company received cash proceeds of approximately $70,543,000 after deducting underwriting discounts and commissions of approximately $3,750,000 and expenses of approximately $707,000. Also in May 2020, the underwriters fully exercised their option to purchase 1,021,223 additional shares of common stock from the selling stockholders. The Company did not receive any of the proceeds from the sale of the shares of its common stock by the selling stockholders.

Silk Road Medical, Inc.
Notes to Condensed Financial Statements

2.    Summary of Significant Accounting Policies
Basis of Preparation
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, 2019, 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 and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 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, 2019 included in the Company's annual report on Form 10-K filed with the SEC on March 2, 2020.
Adjustment to Prior Period Financial Statements
The Company has adjusted the accompanying Condensed Statement of Cash Flows for the six months ended June 30, 2019 to increase each of the accounts receivable, net, and accrued liabilities amounts by $601,000 for an immaterial prior period error in the classification of provisions for returns from customers.
Use of Estimates
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 provision for sales returns, stock-based compensation, and for periods prior to the Company's IPO, the valuation of common stock and redeemable convertible preferred stock warrants. 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 materially differ from these estimates and assumptions.
Due to the coronavirus (“COVID-19”) pandemic, there has been continued uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of June 30, 2020. The Company has also considered information available to it as of the date of issuance of these financial statements and is not aware of any specific events or circumstances that would require an update to its estimates or judgments, or a revision to the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information becomes available. Actual results could differ materially from these estimates.


Silk Road Medical, Inc.
Notes to Condensed Financial Statements
Fair Value of Financial Instruments
The Company has evaluated the estimated fair value of its financial instruments as of June 30, 2020 and December 31, 2019. The carrying amounts of certain of the Company’s financial instruments, which include cash equivalents, short-term investments, long-term investments, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their respective fair values because of the short-term nature of these instruments. Management believes that its long-term debt bears interest at the prevailing market rates for instruments with similar characteristics (Level 2 within the fair value hierarchy); accordingly, the carrying value of this instrument approximates its fair value. Prior to the Company's IPO, fair value accounting was applied to the redeemable convertible preferred stock warrant liability.
Cash, Cash Equivalents and Restricted Cash
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 considered available-for-sale marketable securities and are recorded at fair value, based on quoted market prices. As of June 30, 2020 and December 31, 2019, the Company’s cash equivalents are entirely comprised of investments in money market funds.
Restricted cash as of June 30, 2020 and December 31, 2019 consists of a letter of credit of $310,000 representing collateral for the Company's facility lease.
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 and United States treasury bills with an original maturity less than 90 days 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). The cost of available-for-sale investments sold is based on the specific-identification method. Realized gains and losses are included in earnings, and are derived for specific-identification method for determining the costs of investments sold. Amortization of premiums and accretion of discounts are reported as a component of interest income.

A decline in the fair value of any security below cost that is deemed other than temporary results in a charge to earnings and the corresponding establishment of a new cost basis for the investment.

Concentration of Credit Risk, and Other Risks and Uncertainties
The Company is subject to risks related to the public health crises such as the global pandemic associated with COVID-19, which has spread to most countries and all 50 states within the United States. 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 have prioritized the treatment of patients with COVID-19. For example, in the United States, governmental authorities have recommended, and in certain cases required, that elective, specialty and other procedures and appointments, be suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with COVID-19 and to focus limited resources and personnel capacity toward the treatment of COVID-19.

Silk Road Medical, Inc.
Notes to Condensed Financial Statements
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.

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, investments 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 and United States treasury bills. 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 and six months ended June 30, 2020 and 2019.

The Company’s accounts receivable are due from a variety of health care organizations in the United States. At June 30, 2020 and December 31, 2019, no customer represented 10% or more of the Company’s accounts receivable. For the three and six months ended June 30, 2020 and 2019, 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 doubtful 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 stent. 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.
Existing or future devices developed by the Company may require approvals or clearances from the FDA or international regulatory agencies. In addition, in order to continue the Company’s operations, compliance with various federal and state laws is required. If the Company were denied or delayed in receiving such approvals or clearances, it may be necessary to adjust operations to align with the Company’s currently approved portfolio of products. If clearance for the products in the current portfolio were withdrawn by the FDA, this would have a material adverse impact on the Company.
The Company adopted Accounting Standards Codification (“ASC”) 842, "Leases," on January 1, 2019 and used the modified retrospective method for all leases not substantially completed as of the date of adoption and the package of practical expedients available in the standard. 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

Silk Road Medical, Inc.
Notes to Condensed Financial Statements
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 operating or financing lease and recognizes the right-of-use asset and lease liabilities based on the present value of future minimum lease payments over the expected lease term. The Company’s leases do not generally contain an implicit interest rate and therefore the Company uses the incremental borrowing rate it would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of its lease payments. The Company’s considers renewal options in the determination of the lease term if the option to renew is reasonably certain. Variable lease costs represent payments that are dependent on usage, a rate or index. Variable lease costs, which consists primarily of taxes, insurance and common area maintenance costs, are expensed as incurred, as the Company has elected to account separately for contracts that contain lease and non-lease components, consistent with its historical practice. The Company does not have any finance leases.
Redeemable Convertible Preferred Stock Warrant Liability
Prior to its IPO, the Company accounted for its warrants for shares of redeemable convertible preferred stock as a liability based upon the characteristics and provisions of each instrument. Redeemable convertible preferred stock warrants classified as a liability were initially recorded at their fair value on the date of issuance and are subject to remeasurement at each subsequent balance sheet date. Any change in fair value as a result of a remeasurement was recognized as a component of other income (expense), net in the condensed statements of operations and comprehensive loss. The Company recorded adjustments to the estimated fair value of the redeemable convertible preferred stock warrants until they were exercised. Upon their exercise, the final fair value of the warrant liability was reclassified to stockholders’ equity. Subsequent to its IPO, the Company no longer recorded any related periodic fair value adjustments.
Redeemable Convertible Preferred Stock
Prior to its IPO, the Company recorded its redeemable convertible preferred stock at fair value on the dates of issuance, net of issuance costs, and classified the redeemable convertible preferred stock outside of stockholders’ equity on the condensed balance sheet as events triggering the liquidation preferences were not solely within the Company’s control. Upon the closing of the Company's IPO, all shares of convertible preferred stock then outstanding converted into an aggregate of 23,178,555 shares of common stock resulting in the reclassification of $144,140,000 from outside of stockholders’ equity to additional paid-in capital.
Revenue Recognition
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.

Silk Road Medical, Inc.
Notes to Condensed Financial Statements
As of June 30, 2020 and December 31, 2019, the Company recorded $179,000 and $128,000, respectively, of unbilled receivables, which are included in accounts receivable, net on the condensed balance sheet, as the Company has an unconditional right to payment as of the end of the applicable period.  
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 facility and purchases other products from third party manufacturers. Cost of goods sold consists primarily of costs related to materials, components and subassemblies, manufacturing overhead costs, direct labor, reserves for

Silk Road Medical, Inc.
Notes to Condensed Financial Statements
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.
Stock–Based Compensation
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 stock-based compensation for its employee stock purchase plan based on the estimated fair value of the options on the date of grant. The Company estimates the grant date fair value using an option pricing model for each purchase period. These costs are recognized on a straight-line basis over the offering period.
Income Taxes
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 no provision for income taxes.
The Company also follows the provisions of ASC 740-10, "Accounting for Uncertainty in Income Taxes." ASC 740-10 prescribes a comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of any uncertain tax positions that have been taken or expected to be taken on a tax return. No liability related to uncertain tax positions is recorded on the condensed financial statements. It is the Company's policy to include penalties and interest expense related to income taxes as part of the provision for income taxes.
Comprehensive Loss
Comprehensive loss consists of net loss and changes in unrealized gains and losses on investments classified as available-for-sale. For the three and six months ended June 30, 2020, the Company’s unrealized gains and losses on available-for-sale investments represent the only component of other comprehensive loss that are excluded from the reported net loss and that are presented in the condensed

Silk Road Medical, Inc.
Notes to Condensed Financial Statements
statements of operations and comprehensive loss. Accumulated other comprehensive income or loss is presented in the accompanying condensed balance sheet as a component of stockholders' equity. For the three and six months ended June 30, 2019, there was no difference between the Company's comprehensive loss and its net loss.
Net Loss per Share
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, redeemable convertible preferred stock and warrants, 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.
The Company allocates no loss to participating securities because they have no contractual obligation to share in the losses of the Company. The shares of the Company’s redeemable convertible preferred stock participate in any dividends declared by the Company and were therefore considered to be participating securities.
Net loss per share was determined as follows (in thousands, except share and per share data):
Three Months Ended
June 30,
Six Months Ended
June 30,
Net loss$(10,353) $(11,959) $(20,294) $(36,117) 
Weighted average common stock outstanding used to compute net loss per share, basic and diluted32,682,360  28,458,793  32,010,335  14,905,052  
Net loss, basic and diluted$(0.32) $(0.42) $(0.63) $(2.42) 

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:
June 30,
Common stock options4,632,866  4,683,811  
Restricted stock units39,089    
4,671,955  4,683,811  

Segment and Geographical Information
The Company operates and manages its business as one reportable and operating segment. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. All of the Company’s long-lived assets are based in the United States. Long-lived assets are comprised of property and equipment and the Company's right-of-use asset. All of the Company’s revenue was in the United States for the three and six months ended June 30, 2020 and 2019, based on the shipping location of the external customer.

Silk Road Medical, Inc.
Notes to Condensed Financial Statements

3.    Recent Accounting Pronouncements
Recently Adopted Accounting Standards
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement," which changed the disclosure requirements for fair value measurements by removing, adding and modifying certain disclosures. The Company adopted the new standard effective January 1, 2020. The adoption did not have a material impact on the Company's financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-15, "Cloud Computing Arrangements," which aligns the requirements for capitalizing implementation costs in a Cloud Computing Arrangement service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. The Company adopted the new standard effective January 1, 2020 on a prospective basis. The adoption did not have a material impact on the Company's financial statements and related disclosures.
Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Statements." This update provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The update replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. In October 2019, the FASB delayed the effective date of this standard for smaller reporting companies, as such ASU 2016-13 would originally be effective for the Company on January 1, 2023. As of June 30, 2020, the Company no longer qualifies as a smaller reporting company, accordingly ASU 2016-13 will now become effective for the Company on January 1, 2021. The Company is evaluating the impact of adopting this guidance to the Company's financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which enhances and simplifies various aspects of the income tax accounting guidance related to intra-period tax allocation, interim period accounting for enacted changes in tax law, and the year-to-date loss limitation in interim period tax accounting. ASU 2019-12 also amends other aspects of the guidance to reduce complexity in certain areas. ASU 2019-12 will become effective for the Company on January 1, 2021. Early adoption is permitted. The Company is evaluating the impact of adopting this guidance to the Company's financial statements and related disclosures.

4.    Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents, investments, and the Company's previously outstanding preferred stock warrants. 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 for identical assets or liabilities;
Level 2 – observable inputs other than quoted prices in active markets for identical assets and liabilities;
Level 3 – unobservable inputs.

Silk Road Medical, Inc.
Notes to Condensed Financial Statements
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. The 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 June 30, 2020 and December 31, 2019, using the inputs defined above (in thousands):

June 30, 2020
Level 1Level 2Level 3Total
Money market funds$72,924  $  $  $72,924  
U.S. treasury bills  9,993    9,993  
Commercial paper  11,965    11,965  
Corporate bonds/notes  10,742    10,742  
U.S. government securities  49,714    49,714  
Asset-backed securities  2,002    2,002  
$72,924  $84,416  $  $157,340  

December 31, 2019
Level 1Level 2Level 3Total
Money market funds$34,363  $  $  $34,363  
Commercial paper  9,919    9,919  
Corporate bonds/notes  10,176    10,176  
U.S. government securities  44,456    44,456  
Asset-backed securities  5,181    5,181