Correction to Previously Issued Consolidated Financial Statements

12 Months Ended

Dec. 31, 2018

Accounting Changes and Error Corrections [Abstract]

Correction to Previously Issued Consolidated Financial Statements

Correction of Previously Issued Consolidated Financial Statements

Subsequent to the issuance of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, management determined adjustments were needed to correct the presentation of certain immaterial accounting errors in the Company’s previously reported consolidated financial statements for the years ended December 31, 2017 and 2016. Accordingly, the accompanying consolidated financial statements as of and for the years ended December 31, 2017 and 2016, and the related notes hereto (including the Company’s quarterly results disclosed in Note 15, Quarterly Results), have been revised to correct these immaterial accounting errors (the “Revision”). A summary of these immaterial accounting errors, and their impact on the accompanying consolidated financial statements are, as follows:

(1) The Company pays wholesalers certain fees associated with the sale of the Company's product. The payment of these fees had been historically classified by the Company as cost of revenues and accrued expenses prior to the adoption of ASC 606, Revenue from Contracts with Customers ("ASC 606"). As disclosed in Note 7, Revenues, Recognition and Allowances, the Company adopted ASC 606 on January 1, 2018 using the modified retrospective method, at which time the Company began classifying the payment of wholesaler fees as a reduction of revenue and accounts receivable. Upon further analysis, however, management determined that these fees should have always been classified as a reduction of revenue and accounts receivable, rather than as costs of revenues and accrued expenses, because the services provided by the Company’s wholesalers cannot generally be provided by third parties and the underlying fees are not specifically identifiable from other services.  

As a result, the accompanying Consolidated Statement of Operations, Consolidated Balance Sheet and Consolidated Statements of Cash Flows for the years ended December 31, 2017 and 2016 have been revised to correct the presentation of wholesaler fees as a reduction of revenue rather than as cost of revenues. The correction of this immaterial error resulted in a reduction in previously reported revenue and cost of revenue of approximately $7.0 million and $3.9 million, respectively, for the years ended December 31, 2017 and 2016. In addition, the correction of this error resulted in a reduction in previously reported accounts receivable and decrease in previously reported accrued expenses of approximately $7.0 million, respectively, as of December 31, 2017.

(2) Prior to the adoption of ASC 606, the Company classified Medicaid, Medicare and other rebates (the "Rebates") as a reduction of accounts receivable, whereas subsequent to adoption of ASC 606 the Company began classifying the Rebates as accrued expenses. Upon further analysis, management determined that the Rebates should have always been classified as accrued expenses because their terms require cash settlement and are payable to third parties that are other than the Company's customer. The correction of this immaterial error resulted in an increase in previously reported accounts receivable and increase in previously reported accrued expenses of $1.6 million, respectively, as of December 31, 2017. 

The following tables summarize the effects of the Revision on the accompanying consolidated financial statements of the Company (in thousands):

	Consolidated Statements of Operations
	Year Ended December 31, 2017							Year Ended December 31, 2016
	As Previously							As Previously
	Reported		Adjustment			As Revised		Reported		Adjustment			As Revised
Revenue, net	$	67,251	$	(7,049)	(1)	$	60,202	$	66,881	$	(3,869)	(1)	$	63,012
Cost of revenues	39,879		(7,049)		(1)	32,830		32,194		(3,869)		(1)	28,325
Total costs and expenses	79,048		(7,049)		(1)	71,999		64,339		(3,869)		(1)	60,470

	Consolidated Balance Sheet
	December 31, 2017
	As Previously
	Reported		Adjustment			As Revised
Accounts receivable, net	$	18,143	$	(5,401)	(1),(2)	$	12,742
Total current assets	64,532		(5,401)		(1),(2)	59,131
Total assets	189,986		(5,401)		(1),(2)	184,585
Accrued expenses	13,502		(5,401)		(1),(2)	8,101
Total current liabilities	24,097		(5,401)		(1),(2)	18,696
Total liabilities	145,233		(5,401)		(1),(2)	139,832
Total liabilities and stockholders' equity	189,986		(5,401)		(1),(2)	184,585

	Consolidated Statement of Cash Flows							Consolidated Statement of Cash Flows
	Twelve Months Ended December 31, 2017							Twelve Months Ended December 31, 2016
	As Previously							As Previously
	Reported		Adjustment			As Revised		Reported		Adjustment			As Revised
Cash flows from operating activities
Accounts receivable	$	1,894	$	4,070	(1),(2)	$	5,964	$	(8,008)	$	72	(1),(2)	$	(7,936)
Accounts payable and accrued expenses	5,711		(4,070)		(1),(2)	1,641		2,897		(72)		(1),(2)	2,825