swav-10q_20190630.htm

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, 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.

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 ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of August 1, 2019, the registrant had 28,026,863 shares of common stock, $0.001 par value per share, outstanding.

	June 30, 2019			December 31, 2018
				(1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	41,924		$	39,643
Short-term investments		83,213			—
Accounts receivable, net		5,242			2,850
Inventory		8,291			5,131
Prepaid expenses and other current assets		1,953			1,112
Total current assets		140,623			48,736
Operating lease right-of-use assets		2,398			—
Property and equipment, net		3,244			2,619
Other assets		542			2,066
TOTAL ASSETS	$	146,807		$	53,421
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	2,216		$	1,487
Term notes, current portion		5,000			1,667
Accrued liabilities		7,378			6,217
Lease liability, current portion		806			—
Total current liabilities		15,400			9,371
Lease liability, noncurrent portion		1,732			—
Term notes, noncurrent portion		10,262			13,383
Convertible preferred stock warrant liability		—			313
Other liabilities		—			136
TOTAL LIABILITIES		27,394			23,203
Commitments and contingencies (Note 6)
Convertible preferred stock		—			152,806
STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred stock		—			—
Common stock	28				2
Additional paid-in capital		269,582			4,275
Accumulated other comprehensive income		75			—
Accumulated deficit		(150,272	)		(126,865	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		119,413			(122,588	)
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	146,807		$	53,421

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue:
Product revenue	$	10,012		$	2,279		$	17,282		$	3,601
Operating expenses:
Cost of product revenue		4,133			1,179			7,205			1,973
Research and development		6,926			5,530			14,410			11,046
Sales and marketing		6,961			4,372			12,831			7,810
General and administrative		3,245			1,392			6,247			2,768
Total operating expenses		21,265			12,473			40,693			23,597
Loss from operations		(11,253	)		(10,194	)		(23,411	)		(19,996	)
Interest expense		(250	)		(40	)		(495	)		(58	)
Change in fair value of warrant liability		—			10			(609	)		51
Other income, net		913			138			1,133			323
Net loss before taxes		(10,590	)		(10,086	)		(23,382	)		(19,680	)
Income tax provision		18			21			25			21
Net loss	$	(10,608	)	$	(10,107	)	$	(23,407	)	$	(19,701	)
Unrealized gain on available-for-sale securities		75			—			75			1
Total comprehensive loss	$	(10,533	)	$	(10,107	)	$	(23,332	)	$	(19,700	)
Net loss per share, basic and diluted	$	(0.38	)	$	(5.79	)	$	(1.25	)	$	(11.42	)
Shares used in computing net loss per share, basic and diluted		28,002,887			1,745,499			18,735,307			1,725,414

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

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

	Convertible Preferred Stock						Common Stock					Additional Paid-In			Accumulated Other Comprehensive		Accumulated			Total Stockholders' Equity
	Shares			Amount			Shares			Amount		Capital			Income		Deficit			(Deficit)
Balance — December 31, 2018		18,670,328		$	152,806			1,824,852		$	2	$	4,275		$	—	$	(126,865	)	$	(122,588	)
Exercise of common stock warrants for cash		—			—			50,331			—		110			—		—			110
Issuance of common stock upon net exercise of warrants		—			—			101,744			—		133			—		—			133
Conversion of preferred stock to common stock upon initial public offering		(18,670,328	)		(152,806	)		18,670,328		18			152,788			—		—			152,806
Conversion of Series A-1 warrants to common stock warrants upon initial public offering		—			—			—			—		789			—		—			789
Issuance of common stock in connection with initial public offering, net of issuance costs of $11.3 million		—			—			6,555,000		7			100,132			—		—			100,139
Issuance of common stock in connection with private placement		—			—			588,235		1			9,999			—		—			10,000
Exercise of stock options		—			—			80,515			—		169			—		—			169
Vesting of early exercised options		—			—			—			—		18			—		—			18
Stock-based compensation		—			—			—			—		412			—		—			412
Adjustment for fractional shares resulting from reverse stock split		—			—			(114	)		—		(3	)		—		—			(3	)
Net loss		—			—			—			—		—			—		(12,799	)		(12,799	)
Balance — March 31, 2019		—			—			27,870,891			28		268,822			—		(139,664	)		129,186
Issuance of common stock upon net exercise of warrants		—			—			79,208			—		—			—		—			—
Exercise of stock options		—			—			73,608			—		148			—		—			148
Vesting of early exercised options		—			—			—			—		9			—		—			9
Stock-based compensation		—			—			—			—		818			—		—			818
Offering costs related to the initial public offering		—			—			—			—		(215	)		—		—			(215	)
Unrealized gain on available-for-sale securities		—			—			—			—		—			75		—			75
Net loss		—			—			—			—		—			—		(10,608	)		(10,608	)
Balance — June 30, 2019		—		$	—			28,023,707		$	28	$	269,582		$	75	$	(150,272	)	$	119,413

	Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated Other Comprehensive			Accumulated			Total Stockholders' Equity
	Shares		Amount		Shares		Amount		Capital		Loss			Deficit			(Deficit)
Balance — December 31, 2017		17,510,045	$	137,469		1,627,032	$	2	$	2,470	$	(1	)	$	(85,763	)	$	(83,292	)
Exercise of Series A-1 warrants		52,169		312		—		—		—		—			—			—
Issuance of common stock warrants		—		—		—		—		104		—			—			104
Exercise of stock options		—		—		143,422		—		215		—			—			215
Unrealized gain on available-for-sale securities		—		—		—		—		—		1			—			1
Vesting of early exercised options		—		—		—		—		22		—			—			22
Stock-based compensation		—		—		—		—		273		—			—			273
Net loss		—		—		—		—		—		—			(9,594	)		(9,594	)
Balance — March 31, 2018		17,562,214		137,781		1,770,454		2		3,084		—			(95,357	)		(92,271	)
Exercise of Series A-1 warrants		17,506		105		—		—		—		—			—			—
Exercise of stock options		—		—		27,067		—		60		—			—			60
Vesting of early exercised options		—		—		—		—		20		—			—			20
Stock-based compensation		—		—		—		—		312		—			—			312
Net loss		—		—		—		—		—		—			(10,107	)		(10,107	)
Balance — June 30, 2018		17,579,720	$	137,886		1,797,521	$	2	$	3,476	$	—		$	(105,464	)	$	(101,986	)

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

	Six Months Ended June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(23,407	)	$	(19,701	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		516			283
Stock-based compensation		1,230			585
Amortization of right-of-use assets		496			—
Accretion of discount on available-for-sale securities		(354	)		—
Loss on write down of fixed assets		88			25
Change in fair value of warrant liability		609			(51	)
Amortization of debt issuance costs		212			17
Changes in operating assets and liabilities:
Accounts receivable		(2,392	)		(1,064	)
Inventory		(3,160	)		(2,092	)
Prepaid expenses and other current assets		(841	)		(81	)
Other assets		5			(60	)
Accounts payable		713			338
Accrued and other current liabilities		1,848			44
Lease liabilities		(496	)		—
Other liabilities		—			(9	)
Net cash used in operating activities		(24,933	)		(21,766	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale securities		(82,784	)		—
Proceeds from maturities of available-for-sale securities		—			1,807
Purchase of property and equipment		(1,191	)		(821	)
Net cash (used in) provided by investing activities		(83,975	)		986
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock upon initial public offering, net of issuance costs paid		100,762			—
Proceeds from issuance of common stock in private placement		10,000			—
Proceeds from term loans		—			9,988
Proceeds from stock option exercises		317			375
Proceeds from warrant exercises		110			101
Net cash provided by financing activities		111,189			10,464
Net increase (decrease) in cash, cash equivalents and restricted cash		2,281			(10,316	)
Cash, cash equivalents and restricted cash at beginning of period		40,093			51,923
Cash, cash equivalents and restricted cash equivalents at end of period	$	42,374		$	41,607
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	276		$	18
Income tax paid	$	8		$	4
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued on conversion of convertible preferred stock	$	152,806		$	—
Issuance of Series A-1 convertible preferred stock on net exercise of warrants	$	—		$	316
Common stock issued upon net exercise of warrants	$	133		$	—
Common stock warrants issued on conversion of preferred stock warrants and the reclassification of the warrant liability	$	789		$	—
Offering costs included in accrued liabilities	$	215		$	—
Right-of-use asset obtained in exchange for lease liability	$	73		$	—
Property and equipment purchases included in accounts payable and accrued liabilities	$	93		$	6
Issuance of common stock warrants in connection with debt financing	$	—		$	104

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

ShockWave Medical, Inc. (the “Company”) was incorporated on June 17, 2009. The Company is primarily engaged in the development of Intravascular Lithotripsy (“IVL”) technology for the treatment of calcified plaque in patients with peripheral vascular, coronary vascular and heart valve disease. Built on a balloon catheter platform, the IVL technology uses lithotripsy to disrupt both superficial and deep vascular calcium, while minimizing soft tissue injury, and an integrated angioplasty balloon to dilate blockages at low pressures, restoring blood flow.

In 2016, the Company began commercial and manufacturing operations, and began selling catheters based on the IVL technology. The Company’s headquarters are in Santa Clara, California. The Company is located and operates primarily in the United States and has a subsidiary in Germany.

On March 11, 2019, the Company completed an initial public offering (“IPO”) of its common stock. As part of the IPO, the Company issued and sold 6,555,000 shares of its common stock, which included 855,000 shares sold pursuant to the exercise of the underwriters’ over-allotment option, at a public offering price of $17.00 per share. The Company received net proceeds of approximately $99.9 million from the IPO, after deducting underwriters’ discounts and commissions of $7.1 million and offering costs of $4.4 million, of which $1.5 million was incurred as of December 31, 2018. Prior to the completion of the IPO, all shares of Series A, A-1, B, C and D convertible preferred stock then outstanding were converted into 18,670,259 shares of common stock on a one-to-one basis.

In addition, on the completion of the IPO, all the Company’s outstanding preferred stock warrants were converted into 54,903 common stock warrants, which resulted in the reclassification of the convertible preferred stock warrant liability to additional paid-in capital. Furthermore, 101,744 shares of common stock were issued upon net exercise of warrants at the time of the IPO.

Concurrent with the IPO, the Company issued 588,235 shares of its common stock in a private placement for net proceeds of $10.0 million.

In February 2019, the Company’s board of directors approved an amended and restated certificate of incorporation to effect a reverse split of shares of the Company’s common stock and convertible preferred stock on a 12.2-for-one basis (the “Reverse Stock Split”). The par values of the common stock and convertible preferred stock were not adjusted as a result of the Reverse Stock Split. All references to common stock, convertible preferred stock, warrants to purchase common stock, warrants to purchase convertible preferred stock, options to purchase common stock, early exercised options, share data, per share data and related information contained in the financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented. The number of shares of the Company’s common stock contained in the financial statements includes fractional shares resulting from the Reverse Stock Split, aggregating to 45 whole shares of common stock and 69 whole shares of preferred stock as of December 31, 2018, which fractional shares were settled in cash in fiscal 2019.

The Company has incurred significant losses and has negative cash flows from operations. As of June 30, 2019, the Company had an accumulated deficit of $150.3 million. Management expects to continue to incur additional substantial losses for the foreseeable future.

As of June 30, 2019, the Company had cash, cash equivalents and short-term investments of $125.1 million, which are available to fund future operations. The Company believes that its cash, cash equivalents and short-term investments as of June 30, 2019, together with available borrowings under a revolving line of credit, will be sufficient for the Company to continue as a going concern for at least 12 months from the date the unaudited condensed consolidated financial statements are filed with the Securities and Exchange Commission (“SEC”). The Company’s future capital requirements will depend on many factors, including its growth rate, the timing and extent of its spending to support research and development activities and the timing and cost of establishing additional sales and marketing capabilities.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of SEC regarding interim financial reporting.

The interim condensed consolidated financial statements are unaudited. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2018 included herein was derived from the audited financial statements as of that date. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements included in the prospectus dated March 6, 2019 (“Prospectus”) that forms a part of the Company's Registration Statements on Form S-1 (File No. 333-229590), as filed with the SEC pursuant to Rule 424(b)(4) promulgated under the Securities Act of 1933, as amended.

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts.

Restricted cash as of June 30, 2019 and December 31, 2018 relates to a letter of credit established for a lease entered into in May 2018 and is recorded as other assets on the condensed consolidated balance sheets.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows:

Delaware	27-0494101
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5403 Betsy Ross Drive Santa Clara, California	95054
(Address of principal executive offices)	(Zip Code)

		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss	4
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
Signatures		29

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

	June 30, 2019		December 31, 2018
	(in thousands)
Cash and cash equivalents	$	41,924	$	39,643
Restricted cash		450