QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Large accelerated filer | o | x | |||||||||
Non-accelerated filer | o | Smaller reporting company | |||||||||
Emerging growth company |
Page No. | ||||||||
March 31, 2023 | December 31, 2022 | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Accounts receivable, net | |||||||||||
Inventories, net - current | |||||||||||
Prepaid expenses | |||||||||||
Other current assets | |||||||||||
Total current assets | |||||||||||
Non-current inventories, net | |||||||||||
Property and equipment, net | |||||||||||
Operating lease right-of-use assets | |||||||||||
Intangible assets, net | |||||||||||
Other non-current assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and Stockholders’ Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued liabilities and other current liabilities | |||||||||||
Deferred revenue, current | |||||||||||
Operating lease liabilities, current | |||||||||||
Finance lease liabilities, current | |||||||||||
Total current liabilities | |||||||||||
Operating leases liabilities, net of current portion | |||||||||||
Finance lease liabilities, net of current portion | |||||||||||
Other non-current liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 15) | |||||||||||
Stockholders’ Equity | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in-capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Total stockholders’ equity | |||||||||||
Total liabilities and stockholders’ equity | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Revenue | |||||||||||
Product revenue | $ | $ | |||||||||
Grant and other revenue | |||||||||||
Total revenue | |||||||||||
Operating costs and expenses: | |||||||||||
Cost of product revenue | |||||||||||
Sales and marketing | |||||||||||
Research and development | |||||||||||
General and administrative | |||||||||||
Restructuring expense | |||||||||||
Total operating costs and expenses | |||||||||||
(Loss) income from operations | ( | ||||||||||
Interest expense | ( | ( | |||||||||
Other income, net | |||||||||||
Net (loss) income before income taxes | ( | ||||||||||
Income tax (benefit) expense | |||||||||||
Net (loss) income | $ | ( | $ | ||||||||
Net (loss) income per share – basic | $ | ( | $ | ||||||||
Weighted-average number of shares used in computation of net (loss) income per share – basic | |||||||||||
Net (loss) income per share – diluted | $ | ( | $ | ||||||||
Weighted-average number of shares used in computation of net (loss) income per share – diluted |
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||
Balance at December 31, 2022 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Exercise of common stock options, including ESPP activity, | — | ||||||||||||||||||||||||||||
Issuance of common stock upon vesting of restricted stock units | — | — | — | — | |||||||||||||||||||||||||
Tax withholding on exercise of stock options and issuance of shares from restricted stock units | ( | — | ( | — | ( | ||||||||||||||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
Other | — | — | ( | — | ( | ||||||||||||||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
Balance at March 31, 2023 | $ | $ | $ | ( | $ |
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Exercise of common stock options | — | — | |||||||||||||||||||||||||||
Issuance of common stock upon vesting of restricted stock units | — | — | — | — | |||||||||||||||||||||||||
Tax withholding on exercise of stock options and restricted stock units | ( | — | ( | — | ( | ||||||||||||||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||
Balance at March 31, 2022 | $ | $ | $ | ( | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities | |||||||||||
Net (loss) income | $ | ( | $ | ||||||||
Adjustments to reconcile net (loss) income to net cash, cash equivalents and restricted cash (used in) provided by operations | |||||||||||
Depreciation and amortization | |||||||||||
Allowance for doubtful accounts provision | ( | ||||||||||
Stock-based compensation expense | |||||||||||
Non-cash lease expense | |||||||||||
Interest on finance leases | |||||||||||
Non-cash interest expense | |||||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | |||||||||||
Inventories | ( | ( | |||||||||
Prepaid expenses and other current assets | |||||||||||
Other non-current assets | ( | ||||||||||
Accounts payable, accrued liabilities and other current liabilities | ( | ||||||||||
Deferred revenue | ( | ||||||||||
Operating lease liabilities | ( | ( | |||||||||
Net cash, cash equivalents and restricted cash (used in) provided by operating activities | ( | ||||||||||
Cash flows from investing activities | |||||||||||
Purchase of property and equipment | ( | ( | |||||||||
Expenditures for software development | ( | ( | |||||||||
Net cash, cash equivalents and restricted cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities | |||||||||||
Proceeds from exercise of common stock options | |||||||||||
Tax withholding on exercise of stock options | ( | ( | |||||||||
Proceeds from employee stock purchase plan activity | |||||||||||
Payments for finance leases | ( | ( | |||||||||
Net cash, cash equivalents and restricted cash used in financing activities | ( | ( | |||||||||
Net change in cash, cash equivalents and restricted cash | ( | ||||||||||
Cash, cash equivalents and restricted cash, beginning balance | |||||||||||
Cash, cash equivalents and restricted cash, ending balance | $ | $ | |||||||||
Reconciliation of cash, cash equivalents, and restricted cash | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash, current | |||||||||||
Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
Supplemental disclosure for cash flow information | |||||||||||
Cash paid for taxes | $ | $ |
Cash paid for interest | $ | $ | |||||||||
Supplemental disclosure for non-cash investing and financing matters | |||||||||||
Right-of-use assets obtained in exchange for lease obligations | $ | $ | |||||||||
Prepaid rent reclassified to right-of-use assets | $ | $ | |||||||||
Purchase of property and equipment included in accounts payable | $ | $ | |||||||||
Software development costs included in accounts payable | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Private sector customers | $ | $ | |||||||||
Public sector entities | |||||||||||
Total product revenue | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Product revenue | $ | $ | |||||||||
Cost of product revenue | |||||||||||
Product gross (loss) profit | $ | ( | $ | ||||||||
Product gross (loss) profit margin | ( | % | % |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Balance at beginning of period | $ | $ | |||||||||
Unearned revenue from cash received during the period, excluding amounts recognized as revenue during the period | |||||||||||
Revenue recognized related to contract liability balance at the beginning of the period | ( | ||||||||||
Balance at end of period | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Raw materials | $ | $ | |||||||||
Work-in-process | |||||||||||
Finished goods | |||||||||||
Reserve | ( | ( | |||||||||
Total inventories | $ | $ | |||||||||
Non-current inventories | $ | ( | $ | ( | |||||||
Total inventories, current | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Prepaid expense | $ | $ | |||||||||
Prepaid inventory | |||||||||||
Total prepaid expenses | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Construction in progress | $ | $ | |||||||||
Machinery and equipment | |||||||||||
Leasehold improvements | |||||||||||
Furniture and fixtures | |||||||||||
Property and equipment | |||||||||||
Accumulated depreciation and amortization | ( | ( | |||||||||
Total property and equipment, net | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Capitalized software | $ | $ | |||||||||
Accumulated amortization | ( | ( | |||||||||
Capitalized software, net | |||||||||||
In-process software development | |||||||||||
Total intangible assets | $ | $ |
2023 (excluding the three months ended March 31, 2023) | $ | ||||
2024 | |||||
2025 | |||||
2026 | |||||
Total amortization expense | $ |
Balance Sheet Location | March 31, 2023 | December 31, 2022 | ||||||||||||||||||
Assets | ||||||||||||||||||||
Right-of-use assets operating leases | Operating lease right-of-use assets | $ | $ | |||||||||||||||||
Right-of-use assets finance leases | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||
Operating lease liabilities (current) | Operating lease liabilities, current | |||||||||||||||||||
Finance lease liabilities (current) | Finance lease liabilities, current | |||||||||||||||||||
Operating lease liabilities (non-current) | Operating lease liabilities, net of current portion | |||||||||||||||||||
Finance lease liabilities (non-current) | Finance lease liabilities, net of current portion |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Operating lease cost | $ | $ | |||||||||
Finance lease cost: | |||||||||||
Amortization of right-of-use assets | |||||||||||
Interest on lease liabilities | |||||||||||
Total lease cost | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Accrued purchases(1) | $ | $ | |||||||||
Accrued payroll and benefits | |||||||||||
Accrued expenses | |||||||||||
Accrued sales tax | |||||||||||
Product warranty reserve (See Note 15. Commitments and Contingencies) | |||||||||||
Accrued restructuring | |||||||||||
Accrued purchase commitment loss (2) | |||||||||||
Total accrued liabilities and other current liabilities | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Cost of product revenues | $ | $ | |||||||||
Sales and marketing | |||||||||||
Research and development | |||||||||||
General and administrative | |||||||||||
Restructuring | |||||||||||
Total stock-based compensation expense | $ | $ |
Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | |||||||||||||||
Outstanding at January 1, 2023 | $ | ||||||||||||||||
Granted | |||||||||||||||||
Exercised | ( | ||||||||||||||||
Forfeited | ( | ||||||||||||||||
Expired | ( | ||||||||||||||||
Outstanding at March 31, 2023 | $ | ||||||||||||||||
Exercisable at March 31, 2023 | $ | ||||||||||||||||
Vested and expected to vest at March 31, 2023 | $ |
2023 | |||||
Expected volatility | |||||
Expected term (years) | |||||
Expected dividend yield | |||||
Risk-free interest rate | |||||
Grant date fair value | $ |
Underlying Shares | Weighted-average Grant Date Fair Value | Aggregate Fair Value | |||||||||||||||
Outstanding, January 1, 2023 | $ | $ | |||||||||||||||
Granted | |||||||||||||||||
Vested | ( | ( | |||||||||||||||
Forfeited | ( | ( | |||||||||||||||
Outstanding, March 31, 2023 | $ | $ |
Underlying Shares | Weighted-average Grant Date Fair Value | Aggregate Fair Value | |||||||||||||||
Outstanding, January 1, 2023 | $ | $ | $ | ||||||||||||||
Granted | |||||||||||||||||
Vested | |||||||||||||||||
Forfeited | |||||||||||||||||
Outstanding, March 31, 2023 | $ | $ | $ |
Underlying Shares | Weighted-average Grant Date Fair Value | Aggregate Fair Value | |||||||||||||||
Outstanding, January 1, 2023 | $ | $ | |||||||||||||||
Granted | |||||||||||||||||
Vested | |||||||||||||||||
Forfeited | ( | ( | |||||||||||||||
Outstanding, March 31, 2023 | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Numerator: | |||||||||||
Net (loss) income | $ | ( | $ | ||||||||
Denominator: | |||||||||||
Basic weighted-average common shares outstanding | |||||||||||
Dilutive potential common stock issuable: | |||||||||||
Common stock warrants | |||||||||||
Stock options | |||||||||||
Restricted stock units | |||||||||||
Diluted weighted-average shares outstanding | |||||||||||
Net (loss) income per share | |||||||||||
Basic | $ | ( | $ | ||||||||
Diluted | $ | ( | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Stock options | |||||||||||
Restricted stock units | |||||||||||
Employee stock purchase plan – shares projected to be issued | |||||||||||
Total |
Amount | |||||
Balance, December 31, 2022 | $ | ||||
Provision for warranties | |||||
Settlements | ( | ||||
Balance, March 31, 2023 | $ |
Amount | |||||
Accrued restructuring as of December 31, 2022 | $ | ||||
Restructuring charges incurred during the period | |||||
Cash payments | ( | ||||
Non-cash settlements and other adjustments | ( | ||||
Accrued restructuring as of March 31, 2023 | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
(dollars in thousands) | (unaudited) | ||||||||||
Revenue: | |||||||||||
Product revenue | $ | 24,494 | $ | 177,454 | |||||||
Grant and other revenue | 271 | 1,956 | |||||||||
Total revenue | 24,765 | 179,410 | |||||||||
Operating costs and expenses: | |||||||||||
Cost of product revenue | 39,823 | 86,697 | |||||||||
Sales and marketing | 11,248 | 34,168 | |||||||||
Research and development | 44,733 | 28,787 | |||||||||
General and administrative | 16,938 | 26,910 | |||||||||
Restructuring expense | 7,873 | — | |||||||||
Total operating costs and expenses | 120,615 | 176,562 | |||||||||
(Loss) Income from operations | (95,850) | 2,848 | |||||||||
Interest expense | (220) | (51) | |||||||||
Other income, net | 1,872 | 6 | |||||||||
Net (loss) income before income taxes | (94,198) | 2,803 | |||||||||
Income tax (benefit) expense | — | — | |||||||||
Net (loss) income | $ | (94,198) | $ | 2,803 | |||||||
Net (loss) income per share attributable to common stockholders – diluted | $ | (0.62) | $ | 0.02 |
Three Months Ended March 31, | |||||||||||||||||||||||
2023 | 2022 | $ Change | % Change | ||||||||||||||||||||
(dollars in thousands) | (unaudited) | ||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||
Product revenue | $ | 24,494 | $ | 177,454 | $ | (152,960) | (86)% | ||||||||||||||||
Grant and other revenue | 271 | 1,956 | (1,685) | (86%) | |||||||||||||||||||
Total revenue | 24,765 | 179,410 | (154,645) | (86%) | |||||||||||||||||||
Operating costs and expenses: | |||||||||||||||||||||||
Cost of product revenue | 39,823 | 86,697 | (46,874) | (54)% | |||||||||||||||||||
Sales and marketing | 11,248 | 34,168 | (22,920) | (67%) | |||||||||||||||||||
Research and development | 44,733 | 28,787 | 15,946 | 55% | |||||||||||||||||||
General and administrative | 16,938 | 26,910 | (9,972) | (37%) | |||||||||||||||||||
Restructuring expense | 7,873 | — | 7,873 | n.m | |||||||||||||||||||
Total operating costs and expenses | 120,615 | 176,562 | (55,947) | (32%) | |||||||||||||||||||
(Loss) Income from operations | (95,850) | 2,848 | (98,698) | (3,466%) | |||||||||||||||||||
Interest expense | (220) | (51) | (169) | 331% | |||||||||||||||||||
Other income, net | 1,872 | 6 | 1,866 | 31,100% | |||||||||||||||||||
Net (loss) income before income taxes | (94,198) | 2,803 | (97,001) | (3,461) | % | ||||||||||||||||||
Income tax (benefit) expense | — | — | — | n.m | |||||||||||||||||||
Net (loss) income | $ | (94,198) | $ | 2,803 | $ | (97,001) | (3,461) | % | |||||||||||||||
Net (loss) income per share – diluted | $ | (0.62) | $ | 0.02 | $ | (0.64) | (3,504) | % |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
(dollars in thousands) | (unaudited) | ||||||||||
Net cash, cash equivalents and restricted cash (used in) provided by operating activities | $ | (53,883) | $ | 31,521 | |||||||
Net cash, cash equivalents and restricted cash used in investing activities | (8,318) | (14,055) | |||||||||
Net cash, cash equivalents and restricted cash used in financing activities | (1,128) | (873) | |||||||||
Net change in cash, cash equivalents and restricted cash | $ | (63,329) | $ | 16,593 |
Exhibit Number | Description | Form | File No. | Exhibit | Filing Date | ||||||||||||
Employment Agreement, dated February 28, 2023, by and between Aasim Javed and the Company. | 8-K/A | 001-40824 | 10.1 | March 6, 2023 | |||||||||||||
Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||||||||||||
Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||||||||||||
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||||||||||||
101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | ||||||||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||||||||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||||||||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||||||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||||||||||||||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101 |
Cue Health Inc. | ||||||||
Date: May 10, 2023 | By: | /s/ Ayub Khattak | ||||||
Ayub Khattak | ||||||||
President and Chief Executive Officer | ||||||||
(Principal Executive Officer) | ||||||||
Date: May 10, 2023 | By: | /s/ Aasim Javed | ||||||
Aasim Javed | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer) | ||||||||
Date: May 10, 2023 | By: | /s/ Randall Pollard | ||||||
Randall Pollard | ||||||||
Chief Accounting Officer and Controller | ||||||||
(Principal Accounting Officer) |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 151,567,650 | 150,406,014 |
Common stock, shares outstanding (in shares) | 151,567,650 | 150,406,014 |
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited) (Parenthetical) |
3 Months Ended |
---|---|
Mar. 31, 2023
shares
| |
Statement of Stockholders' Equity [Abstract] | |
Exercise of common stock options, including ESPP activity (in shares) | 473,080 |
BUSINESS AND BASIS OF ACCOUNTING |
3 Months Ended |
---|---|
Mar. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BUSINESS AND BASIS OF ACCOUNTING | BUSINESS AND BASIS OF ACCOUNTING Organization and Description of Business Cue Health Inc. (the “Company”) was originally formed in the State of California on January 26, 2010, prior to being incorporated in the State of Delaware on December 14, 2017. The Company is a healthcare technology company committed to revolutionizing the healthcare experience by providing individuals with a convenient and connected diagnostic platform that bridges the physical and virtual care continuum. The Company’s proprietary platform, the Cue Health Monitoring System, comprised of the Cue Reader and Cue Test Kit, enables lab-quality diagnostics-led care at home, at work or at the point of care. This platform is designed to empower stakeholders across the healthcare ecosystem, including individuals, enterprises, healthcare providers and payors, and public health agencies with paradigm-shifting access to diagnostic and health data to inform care decisions. The Company’s headquarters are located in San Diego, California. Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited annual financial statements and notes thereto for the year ended December 31, 2022. The unaudited interim condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results for the fiscal year ending December 31, 2023 or any future interim period. The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting and, in the opinion of management, include all adjustments necessary for the fair statement of the Company’s financial position for the periods presented. All such adjustments are of a normal, recurring nature. Certain disclosures have been condensed or omitted from the interim condensed consolidated financial statements. The preparation of the accompanying financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses as well as the related disclosure of contingent assets and liabilities. Use of Estimates The preparation of the accompanying unaudited interim condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. Significant estimates and assumptions made in the accompanying financial statements include, but are not limited to revenue recognition, net accounts receivable, equity-based compensation expense, product warranty reserve, the usage and recoverability of its inventories and long-lived assets and net deferred tax assets (and related valuation allowance). The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates. Segment Reporting Operating segments are identified as components of an enterprise about which discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. In addition, the guidance for segment reporting indicates certain quantitative materiality thresholds. The Company views its operations and manages its business in one operating segment which is consistent with how the Chief Executive Officer, who is the chief operating decision-maker, reviews the business, makes investment and resource allocation decisions, and assesses operating performance. The majority of revenue to date is from customers located in the United States and the majority of long-lived assets are located in the United States. Revenues to customers located outside of the United States were not material and $3.5 million for the three months ended March 31, 2023 and 2022, respectively. Long-lived assets, which consist of property and equipment, located outside of the United States were $4.4 million and $4.7 million as of March 31, 2023 and December 31, 2022, respectively. COVID-19 Impact COVID-19 was declared a global pandemic by the World Health Organization in March 2020 and adversely impacted global commercial activity but served as a catalyst to accelerating the Company’s product pipeline. The Company began selling and recording product revenues for its Cue COVID-19 test in August 2020 after obtaining an EUA from the FDA in June 2020. Currently, the majority of the Company’s product revenues are derived from the Cue COVID-19 test. Given the unpredictable nature of the COVID-19 pandemic, the development and potential size of the COVID-19 diagnostic testing market is highly uncertain. The FDA issued various EUAs and approvals for COVID-19 vaccines. The widely administered use of an efficacious vaccine or new therapeutic treatment for COVID-19 may reduce the demand for the Cue COVID-19 test and, as a result, the COVID-19 diagnostic testing market may not develop or grow substantially. Given the rapid development of events surrounding the pandemic, there is uncertainty to the Company’s future results and performance.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended |
---|---|
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES There have been no material changes to the Company's significant accounting policies from its Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Recent Accounting Pronouncements In September 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments. The standard provides guidance for estimating credit losses on certain types of financial instruments, including trade receivables, by introducing an approach based on expected losses. The expected loss approach will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Company adopted this standard effective January 1, 2023 under the modified retrospective method whereas comparative period information is not restated. The adoption of this standard did not have a significant impact on the Company’s condensed consolidated financial statements, therefore no cumulative effect or catch up adjustment to the opening balance of retained earnings was recorded.
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REVENUE |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE | REVENUE Product Revenue Disaggregation of the product revenue by type of customer for the three months ended March 31, 2023 and 2022, respectively:
Product revenue for the three months ended March 31, 2023 includes an immaterial amount of service revenue generated from telemedicine and proctoring services provided to customers. Revenue generated from proctoring is recognized over the term of the contracts with customers. The following table sets forth the Company’s product gross (loss) profit and product gross (loss) profit margin for the three months ended March 31, 2023 and 2022:
During the three months ended March 31, 2023, a contract manufacturer vendor drew on a cash collateralized letter of credit in the amount of $12.0 million (the “disputed payment charge”) that was recorded in cost of product revenue. The Company disputes the validity of the payment and is pursuing recovery. Contract Assets and Liabilities Contract assets primarily relate to the Company’s conditional right to consideration for performance obligations satisfied through direct-to-consumer sales but not billed at the reporting date. Net contract assets were not material and $0.3 million as of March 31, 2023 and December 31, 2022, respectively, and were recorded in other current assets on the balance sheets. Contract liabilities are recorded when cash is received prior to recording revenue. Contract liabilities are recorded in deferred revenue on the balance sheets. The activity related to contract liabilities for the three months ended March 31, 2023 and 2022 is as follows:
Grant and Other Revenue Grant and other revenue primarily relates to a cost reimbursement agreement with the Biomedical Advanced Research and Development Authority (“BARDA”). The Company generated $0.1 million and $2.0 million of revenue related to the agreement with BARDA during the three months ended March 31, 2023 and 2022, respectively. Accounts Receivable Under ASU 2016-13, the Company is required to remeasure expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The allowance for doubtful accounts represents the Company’s estimate of expected credit losses relating to these factors. Amounts are written off against the allowances for doubtful accounts when the Company determines that a customer account is uncollectible. As of March 31, 2023 and December 31, 2022, the Company’s allowance for doubtful accounts was $2.0 million and $2.3 million, respectively.
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INVENTORIES |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORIES | INVENTORIES As of March 31, 2023 and December 31, 2022, the Company’s inventories consisted of the following:
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PREPAID EXPENSES |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PREPAID EXPENSES | PREPAID EXPENSES As of March 31, 2023 and December 31, 2022, the Company’s prepaid expenses consisted of the following:
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PROPERTY AND EQUIPMENT, NET |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT, NET | PROPERTY AND EQUIPMENT, NET As of March 31, 2023 and December 31, 2022, the Company’s property and equipment, net consisted of the following:
Depreciation and amortization expense related to property and equipment was $10.6 million and $10.0 million for the three months ended March 31, 2023 and 2022, respectively. The carrying value of assets under finance leases within property and equipment as of March 31, 2023 and December 31, 2022 was $6.6 million and $7.3 million, respectively. As of March 31, 2023, the carrying value of manufacturing equipment not yet placed into service was $23.8 million. The cost of this equipment is substantially complete and is included in construction in progress. Depreciation expense related to these assets will commence when they are placed into service and will be depreciated over their estimated useful lives.
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INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS | INTANGIBLE ASSETS As of March 31, 2023 and December 31, 2022, the Company’s intangible assets consisted of the following:
During the development stage, the Company capitalizes certain eligible costs associated with the software development, in accordance with ASC 350-40, Internal-Use Software. The capitalized costs primarily consist of direct labor and third-party contractor fees. In-process software development consists of software costs incurred in the development of internal-use software not yet implemented. The software is expected to be implemented no later than one year from the commencement date of development. Once the software is implemented and ready for its intended use, the Company will begin amortizing the capitalized costs on a straight-line basis over the software's estimated useful life. Amortization expense related to intangible assets placed in service was $1.6 million and $0.6 million for the three months ended March 31, 2023 and 2022, respectively. Estimated amortization expense for each of the years ending December 31 is as follows:
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LEASES |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES | LEASES The Company leases real estate and manufacturing and laboratory equipment which are used in the Company’s manufacturing, research and development, and administrative activities. The Company identifies a contract that contains a lease as one which conveys a right, either explicitly or implicitly, to control the use of an identified asset in exchange for consideration. These arrangements are classified as finance leases and operating leases. Finance leases consist of laboratory and manufacturing equipment with remaining terms ranging from under 1 year to 2 years. The Company’s operating leases relate to the Company’s manufacturing facilities and office space and have remaining terms from under 1 year to 9 years. There were no new material leases entered into during the three months ended March 31, 2023. The right-of-use assets and lease liabilities recognized on the Company’s balance sheet as of March 31, 2023 and December 31, 2022 were as follows:
The components of lease expense for the three months ended March 31, 2023 and 2022 were as follows:
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LEASES | LEASES The Company leases real estate and manufacturing and laboratory equipment which are used in the Company’s manufacturing, research and development, and administrative activities. The Company identifies a contract that contains a lease as one which conveys a right, either explicitly or implicitly, to control the use of an identified asset in exchange for consideration. These arrangements are classified as finance leases and operating leases. Finance leases consist of laboratory and manufacturing equipment with remaining terms ranging from under 1 year to 2 years. The Company’s operating leases relate to the Company’s manufacturing facilities and office space and have remaining terms from under 1 year to 9 years. There were no new material leases entered into during the three months ended March 31, 2023. The right-of-use assets and lease liabilities recognized on the Company’s balance sheet as of March 31, 2023 and December 31, 2022 were as follows:
The components of lease expense for the three months ended March 31, 2023 and 2022 were as follows:
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ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES | ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES Accrued liabilities and other current liabilities consisted of the following:
(1) Accrued purchases primarily reflects receipts of goods and services for which we had not yet been invoiced. As we are invoiced for these goods and services, this balance will reduce and accounts payable will increase. (2) Accrued purchase commitment loss reflects accrued loss on purchase obligations for inventory expected to be reserved.
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Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Secured Revolving Facility Agreement On June 30, 2022, the Company entered into a loan and security agreement (the “2022 Revolving Facility Agreement”) among the Company, the lenders from time to time party thereto and East West Bank, as collateral agent and administrative agent (“Agent”). The 2022 Revolving Facility Agreement provides for a $100.0 million secured revolving credit facility, with a $20.0 million letter of credit subfacility. As of March 31, 2023, there were no revolving loans outstanding and $1.0 million aggregate face amount of letters of credit outstanding under the 2022 Revolving Facility Agreement, which reduces the availability to borrow under the revolving credit facility to $99.0 million. The Company recorded $0.6 million in deferred financings costs in connection with the 2022 Revolving Facility Agreement. This balance is amortized over two years and is classified in other non-current assets since no funds were drawn on the 2022 Revolving Facility Agreement. The revolving loans are available subject to the Company maintaining an asset coverage ratio of not less than 1.20 to 1.00, measured as (x) the sum of specified cash and cash equivalents subject to liens in favor of Agent plus 80% of eligible accounts receivable less the amount of the Company’s outstanding sales tax liability to (y) the principal amount of the outstanding obligations under the 2022 Revolving Facility Agreement. The revolving commitments terminate and the principal amount of outstanding revolving loans, together with accrued and unpaid interest, is due and payable on June 30, 2024. The revolving loans accrue interest at the greater of the prime rate and 3.50%. Interest on the revolving loans is payable monthly in arrears. The Company may borrow, prepay and reborrow revolving loans, without premium or penalty. The Company is required to pay a prepayment fee of 1.0% if the revolving commitments are terminated prior to the maturity date. The Company is also obligated to pay other customary fees for a loan facility of this size and type. The Company’s obligations under the 2022 Revolving Facility Agreement are secured by substantially all of the Company’s assets, and will be guaranteed by, and secured by substantially all of the assets of, its future domestic subsidiaries. As of the closing date, there were no guarantors. The 2022 Revolving Facility Agreement requires the Company to maintain a current ratio of not less than 1.20 to 1.00, measured quarterly. The 2022 Revolving Facility Agreement also requires the Company to maintain at least six months remaining liquidity, determined as set forth in the 2022 Revolving Facility Agreement. Additionally, the 2022 Revolving Facility Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its subsidiaries to, among other things, dispose of assets, effect certain mergers, incur debt, grant liens, pay dividends and distributions on their capital stock, make investments and acquisitions, and enter into transactions with affiliates, in each case subject to customary exceptions for a loan facility of this size and type. The Company was in compliance with its covenants as of March 31, 2023. The events of default under the 2022 Revolving Facility Agreement include, among others, payment defaults, material misrepresentations, breaches of covenants, cross defaults with certain other material indebtedness, bankruptcy and insolvency events, the occurrence of a material adverse effect, a change of control and judgment defaults. The occurrence of an event of default could result in the acceleration of the Company’s obligations under the 2022 Revolving Facility Agreement, the termination of the lenders’ commitments, a 2% increase in the applicable rate of interest and the exercise by Agent and the lenders of other rights and remedies provided for under the 2022 Revolving Facility Agreement or applicable law.
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CAPITAL STOCK |
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Mar. 31, 2023 | |
Equity [Abstract] | |
CAPITAL STOCK | CAPITAL STOCK Common Stock Warrants As of March 31, 2023, the Company had an outstanding warrant to purchase 75,744 shares of common stock at a purchase price of $0.40 per share. The warrant was issued on August 22, 2017 and expires on August 22, 2027. All shares subject to the warrant were vested as of December 31, 2022.
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STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Stock Incentive Plans 2021 Stock Incentive Plan In September 2021, the Company adopted the 2021 Stock Incentive Plan (“2021 Plan”) under which employees, officers and directors, as well as consultants and advisors to the Company are eligible to be granted awards (incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards). The 2021 Plan initially authorized the issuance of a maximum of 22,399,691 shares of common stock. The number of shares of common stock available for issuance under the 2021 Plan were and will be increased on the first day of each fiscal year beginning with the 2022 fiscal year, in an amount equal to the least of (i) 5% of the number of shares of the Company's common stock outstanding on the first day of such fiscal year and (ii) the number of shares of the Company's common stock determined by the Company's board of directors. 2021 Employee Stock Purchase Plan In September 2021, the Company adopted the 2021 Employee Stock Purchase Plan (“2021 ESPP”) under which employees of the Company can purchase shares of the Company’s common stock commencing on such time and such dates as the board of directors of the Company determine. The 2021 ESPP initially allowed for the sale of 2,834,754 shares of common stock. The number of shares of the Company's common stock to be sold under the 2021 ESPP were and will be increased on the first day of each fiscal year beginning with the 2022 fiscal year, in an amount equal to the least of (i) 8,504,263 shares, (ii) 1% of the number of shares of the Company's common stock outstanding on the first day of such fiscal year and (ii) a number of shares of the Company's common stock determined by the Company's board of directors. The price at which stock is purchased under the 2021 ESPP is equal to 85% of the fair market value of the Company’s common stock on the lesser of either (i) the first business day of the Plan Period or (ii) the Exercise Date. Stock-Based Compensation Stock-based compensation expense related to awards issued under the Company's incentive compensation plans for the three months ended March 31, 2023 and 2022, was as follows:
In total, $0.6 million of stock-based compensation expense was capitalized to inventory during the manufacturing process during the three months ended March 31, 2023. An immaterial amount remained in inventory as of March 31, 2023. Stock Options A summary of stock option activity and related information for the three months ended March 31, 2023 was as follows:
As of March 31, 2023, there was approximately $11.3 million of unamortized compensation cost related to unvested stock option awards, which is expected to be recognized over a remaining weighted-average vesting period of 2.6 years, on a straight-line basis. The estimated fair value of each stock option award granted to employees was determined on the date of grant using the BSM option pricing model with the following assumptions for stock option grants for the three months ended March 31, 2023.
During the three months ended March 31, 2023, the Company modified certain stock options previously granted to non-employees. The modification included changes to the exercise price of 622,323 unvested options. As a result of these modifications, the Company will recognize an additional $0.4 million in stock-based compensation expense over the remaining vesting period of the affected options. Restricted Stock Units Under the 2014 and 2021 Plans, RSUs are generally subject to a 4-year vesting period, with 25% of the shares vesting one year from the vesting commencement date and quarterly thereafter over the remaining vesting term, but may be subject to other vesting conditions such as performance or market based conditions. Compensation expense is recognized ratably over the requisite service period. A summary of RSU activity and related information for the three months ended March 31, 2023 was as follows:
As of March 31, 2023, there was approximately $123.5 million of total unrecognized compensation cost related to outstanding RSUs, which is expected to be recognized over a remaining weighted-average vesting period of 2.9 years, on a straight-line basis. Market-Based Performance-Vesting RSUs In September 2021, the Company issued 3,335,300 RSUs that vest based on the satisfaction of both a continued employment condition and the achievement of certain market-based performance goals. Market-based performance-vesting RSUs vest upon the achievement of certain stock price performance over a performance period. There are seven stock price targets which can be achieved over the performance period and are based on an average closing price of the Company’s common stock. Market-based performance-vesting RSU activity for the three months ended March 31, 2023 was as follows:
Operational-Based Performance-Vesting RSUs In September 2021, the Company issued 1,597,272 operational-based performance-vesting RSUs that vest based on the satisfaction of both a continued employment condition and the achievement of certain performance goals including meeting certain annual revenue targets and product development milestones. The grant date fair value of operational-based performance-vesting RSUs was estimated based on the fair value of the Company’s common stock on the date of grant. Compensation costs are recorded when achievement of the performance goals is determined to be probable. Operations-based performance-vesting RSU activity for the three months ended March 31, 2023 was as follows:
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INCOME (LOSS) PER SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME (LOSS) PER SHARE | INCOME (LOSS) PER SHARE Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average common shares outstanding during the period. Diluted net income (loss) per share is computed based on the weighted-average common shares outstanding plus the effect of dilutive potential common shares outstanding during the period calculated using the treasury stock method and the if-converted method. Dilutive potential common shares include stock options, non-vested shares, redeemable convertible preferred shares, convertible notes, restricted stock and similar equity instruments granted by the Company. Some restricted stock units vest upon certain performance and market conditions and as they vest, the shares will be included in outstanding common shares. Potential common share equivalents have been excluded where their inclusion would be anti-dilutive. The following table reconciles net (loss) income and the weighted-average shares used in computing basic and diluted earnings per share:
In periods of net losses, potentially dilutive securities are not included in the calculation of diluted net income (loss) per share because to do so would be anti-dilutive. Outstanding anti-dilutive securities not included in the diluted net income (loss) per share attributable to common stockholders calculations were as follows (in common stock equivalent shares):
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INCOME TAXES |
3 Months Ended |
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Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company’s effective income tax rate for each of the three months ended March 31, 2023 and 2022 was 0%. The effective tax rate for the three months ended March 31, 2023 and 2022, differs from the statutory rate primarily due to the Company maintaining a full valuation allowance against its net deferred tax assets.
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COMMITMENTS AND CONTINGENCIES |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Product Liability The Company’s business exposes it to liability risks from its potential medical diagnostic products. Product liability claims could result in the payment of significant amounts of money and divert management’s attention from running the business. The Company may not be able to maintain insurance on acceptable terms, or the insurance may not provide adequate protection in the case of a product liability claim. To the extent that product liability insurance, if available, does not cover potential claims, the Company would be required to self-insure the risks associated with such claims. The Company believes it carries reasonably adequate insurance for product liability. Product Warranty Reserve The Company provides its customers with the right to receive a replacement of defective or nonconforming Cue Readers for a period of up to twelve months from the date of shipment. Subject to certain limitations, the Company currently provides customers with the right to receive a replacement Cue Cartridge for tests that do not produce a valid result, for a period of up to ninety days from the date the test is performed. All warranties are classified as current liabilities within the accrued liabilities and other current liabilities on the balance sheet. Provisions for estimated expenses related to product warranty are made at the time products are sold. These estimates are determined based on historical information that includes test failure rates, replacement frequency, and the overall replacement cost. The Company evaluates the reserve on a quarterly basis and makes adjustments when appropriate. Changes to test failure rates and overall replacement rates could have a material impact on our estimated liability. The following table provides a reconciliation of the change in estimated warranty liabilities:
Cost Reduction Plan On January 5, 2023, the Company announced that it was implementing a new cost reduction plan (the “CRP”). Management, with the oversight and guidance of the Company’s board of directors, determined to implement the CRP following a review of the Company’s business, operating expenses and the macroeconomic environment. The CRP is intended to reduce the Company’s cost structure and improve its operational efficiency. The CRP includes a reduction in the Company’s employee base. Cash expenditures in connection with the CRP consist of payments for salary, benefits, and unused paid time off for the affected employees. The CRP will also consist of a severance package that includes a cash severance payment and payments to cover the employer premiums and administration fees for continuation of healthcare coverage for a limited period. The severance package, in some cases, will also include an acceleration of the vesting of certain outstanding restricted stock units and stock options to affected employees. Each affected employee’s eligibility for the severance benefits is contingent upon such employee’s execution (and no revocation) of a separation agreement, which includes a general release of claims against the Company. The Company expects payments relating to the CRP to be completed by the end of the second quarter of 2023. In connection with the CRP, the Company recorded a $7.9 million restructuring charge related to one-time termination benefits during the three months ended March 31, 2023. The following table summarizes the total amount incurred and accrued related to these restructuring activities:
On April 28, 2023, the Company announced a further cost reduction plan, which will include a reduction in the Company’s employee base. In connection with this cost reduction plan, the Company estimates that it will record an aggregate restructuring charge related to one-time termination benefits in the range of approximately $5.0 million to $7.0 million during the three months ended June 30, 2023. The substantial majority of these charges will result in cash expenditures. The Company expects payments relating to the further cost reduction plan to be completed by the end of the fourth quarter of 2023. Standby Letters of Credit The 2022 Revolving Facility Agreement provides for a $100.0 million secured revolving credit facility, with a $20.0 million letter of credit subfacility. As of March 31, 2023, there were no revolving loans outstanding and $1.0 million aggregate face amount of letters of credit outstanding under the 2022 Revolving Facility Agreement, which reduces the availability to borrow under the revolving credit facility to $99.0 million. Restricted Cash In November 2021, $0.8 million of cash was restricted in relation to a customs surety on international imports which remains restricted as of March 31, 2023. Purchase Commitments Purchase commitments are comprised of the Company’s commitments for goods and services in the normal course of business. These purchase commitments relate to goods and services which have not yet been delivered or performed and therefore have not been reflected in our condensed consolidated balance sheets and condensed consolidated statements of operations. These commitments typically become due after the delivery and completion of such goods or services. TrustedMedRx Acquisition On March 22, 2023, CHP HC, LLC, a wholly-owned subsidiary of the Company, entered into a definitive agreement to acquire TrustedMedRx, LLC, a privately-held pharmacy. The acquisition was completed on May 4, 2023, and is expected to enhance the Company's presence in the retail pharmacy market and expand its product and service offerings. The total purchase price for the acquisition is approximately $0.7 million, which will be funded through the Company's existing cash resources.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of PresentationThe accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited annual financial statements and notes thereto for the year ended December 31, 2022. The unaudited interim condensed consolidated balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results for the fiscal year ending December 31, 2023 or any future interim period. The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting and, in the opinion of management, include all adjustments necessary for the fair statement of the Company’s financial position for the periods presented. All such adjustments are of a normal, recurring nature. Certain disclosures have been condensed or omitted from the interim condensed consolidated financial statements. The preparation of the accompanying financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, income and expenses as well as the related disclosure of contingent assets and liabilities. |
Use of Estimates | Use of Estimates The preparation of the accompanying unaudited interim condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. Significant estimates and assumptions made in the accompanying financial statements include, but are not limited to revenue recognition, net accounts receivable, equity-based compensation expense, product warranty reserve, the usage and recoverability of its inventories and long-lived assets and net deferred tax assets (and related valuation allowance). The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates.
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Segment Reporting | Segment ReportingOperating segments are identified as components of an enterprise about which discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. In addition, the guidance for segment reporting indicates certain quantitative materiality thresholds. The Company views its operations and manages its business in one operating segment which is consistent with how the Chief Executive Officer, who is the chief operating decision-maker, reviews the business, makes investment and resource allocation decisions, and assesses operating performance. The majority of revenue to date is from customers located in the United States and the majority of long-lived assets are located in the United States. |
Recent Accounting Pronouncements | Recent Accounting PronouncementsIn September 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments. The standard provides guidance for estimating credit losses on certain types of financial instruments, including trade receivables, by introducing an approach based on expected losses. The expected loss approach will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The Company adopted this standard effective January 1, 2023 under the modified retrospective method whereas comparative period information is not restated. The adoption of this standard did not have a significant impact on the Company’s condensed consolidated financial statements, therefore no cumulative effect or catch up adjustment to the opening balance of retained earnings was recorded. |
REVENUE (Tables) |
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Schedule of Disaggregation of Revenue | Disaggregation of the product revenue by type of customer for the three months ended March 31, 2023 and 2022, respectively:
The following table sets forth the Company’s product gross (loss) profit and product gross (loss) profit margin for the three months ended March 31, 2023 and 2022:
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Schedule of Contract Liabilities | The activity related to contract liabilities for the three months ended March 31, 2023 and 2022 is as follows:
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INVENTORIES (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventories | As of March 31, 2023 and December 31, 2022, the Company’s inventories consisted of the following:
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PREPAID EXPENSES (Tables) |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Prepaid Expenses | As of March 31, 2023 and December 31, 2022, the Company’s prepaid expenses consisted of the following:
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PROPERTY AND EQUIPMENT, NET (Tables) |
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Schedule of Property and Equipment, Net | As of March 31, 2023 and December 31, 2022, the Company’s property and equipment, net consisted of the following:
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INTANGIBLE ASSETS (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets | As of March 31, 2023 and December 31, 2022, the Company’s intangible assets consisted of the following:
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Schedule of Estimated Amortization Expense | Estimated amortization expense for each of the years ending December 31 is as follows:
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LEASES (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Lease Assets and Liabilities | The right-of-use assets and lease liabilities recognized on the Company’s balance sheet as of March 31, 2023 and December 31, 2022 were as follows:
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Schedule of Lease Cost | The components of lease expense for the three months ended March 31, 2023 and 2022 were as follows:
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ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES (Tables) |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Liabilities and Other Current Liabilities | Accrued liabilities and other current liabilities consisted of the following:
(1) Accrued purchases primarily reflects receipts of goods and services for which we had not yet been invoiced. As we are invoiced for these goods and services, this balance will reduce and accounts payable will increase. (2) Accrued purchase commitment loss reflects accrued loss on purchase obligations for inventory expected to be reserved.
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STOCK-BASED COMPENSATION (Tables) |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock-Based Compensation Expense Related to Awards Issued | Stock-based compensation expense related to awards issued under the Company's incentive compensation plans for the three months ended March 31, 2023 and 2022, was as follows:
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Schedule of Stock Option Activity and Related Information | A summary of stock option activity and related information for the three months ended March 31, 2023 was as follows:
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Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The estimated fair value of each stock option award granted to employees was determined on the date of grant using the BSM option pricing model with the following assumptions for stock option grants for the three months ended March 31, 2023.
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Schedule of Share-based Payment Arrangement, Restricted Stock Unit, Activity | A summary of RSU activity and related information for the three months ended March 31, 2023 was as follows:
Market-based performance-vesting RSU activity for the three months ended March 31, 2023 was as follows:
Operations-based performance-vesting RSU activity for the three months ended March 31, 2023 was as follows:
|
INCOME (LOSS) PER SHARE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Income (Loss) Per Share, Basic and Diluted | The following table reconciles net (loss) income and the weighted-average shares used in computing basic and diluted earnings per share:
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Schedule of Antidilutive Securities Excluded from Computation of Net Income (Loss) Per Share | Outstanding anti-dilutive securities not included in the diluted net income (loss) per share attributable to common stockholders calculations were as follows (in common stock equivalent shares):
|
COMMITMENTS AND CONTINGENCIES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Schedule of Product Warranty Liability | The following table provides a reconciliation of the change in estimated warranty liabilities:
|
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Summary of Total Amount Incurred and Accrued Related to Restructuring Activities | The following table summarizes the total amount incurred and accrued related to these restructuring activities:
|
BUSINESS AND BASIS OF ACCOUNTING (Details) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023
USD ($)
segment
|
Mar. 31, 2022
USD ($)
|
Dec. 31, 2022
USD ($)
|
|
Class of Stock [Line Items] | |||
Number of operating segments | segment | 1 | ||
Non-US | |||
Class of Stock [Line Items] | |||
Revenue | $ 0.0 | $ 3.5 | |
Long-lived assets | $ 4.4 | $ 4.7 |
REVENUE - Schedule of Product Revenue By Customer Type (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 24,765 | $ 179,410 |
Product revenue | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 24,494 | 177,454 |
Product revenue | Private sector customers | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 24,013 | 175,844 |
Product revenue | Public sector entities | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 481 | $ 1,610 |
REVENUE - Schedule of Product Revenue Gross (Loss) Profit and Gross (Loss) Profit Margin (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Disaggregation of Revenue [Line Items] | ||
Product revenue | $ 24,765 | $ 179,410 |
Product revenue | ||
Disaggregation of Revenue [Line Items] | ||
Product revenue | 24,494 | 177,454 |
Cost of product revenue | 39,823 | 86,697 |
Product gross (loss) profit | $ (15,329) | $ 90,757 |
Product gross (loss) profit margin | (63.00%) | 51.00% |
REVENUE - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Disaggregation of Revenue [Line Items] | |||
Inventory write-down | $ 12,000 | ||
Net contract assets | 0 | $ 300 | |
Revenue | 24,765 | $ 179,410 | |
Accounts receivable, allowance for doubtful accounts | 2,000 | $ 2,300 | |
Grant and other revenue | |||
Disaggregation of Revenue [Line Items] | |||
Revenue | 271 | 1,956 | |
Grant and other revenue | Biomedical Advanced Research And Development Authority (BARDA) | |||
Disaggregation of Revenue [Line Items] | |||
Revenue | $ 100 | $ 2,000 |
REVENUE - Schedule of Contract Liabilities (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Contract With Customer, Liability Rollforward [Roll Forward] | ||
Balance at beginning of period | $ 1,566 | $ 92,448 |
Unearned revenue from cash received during the period, excluding amounts recognized as revenue during the period | 556 | 2,464 |
Revenue recognized related to contract liability balance at the beginning of the period | (1,368) | 0 |
Balance at end of period | $ 754 | $ 94,912 |
INVENTORIES - Schedule of Inventories (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 80,939 | $ 80,968 |
Work-in-process | 12,647 | 14,305 |
Finished goods | 45,061 | 37,867 |
Reserve | (28,923) | (25,494) |
Total inventories | 109,724 | 107,646 |
Non-current inventories | (27,718) | (25,436) |
Total inventories, current | $ 82,006 | $ 82,210 |
PREPAID EXPENSES - Schedule of Prepaid Expenses (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid expense | $ 7,892 | $ 11,523 |
Prepaid inventory | 3,725 | 4,205 |
Total prepaid expenses | $ 11,617 | $ 15,728 |
PROPERTY AND EQUIPMENT, NET - Schedule of Property and Equipment, Net (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 277,710 | $ 272,230 |
Accumulated depreciation and amortization | (93,513) | (82,955) |
Total property and equipment, net | 184,197 | 189,275 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 36,101 | 32,412 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 216,355 | 214,702 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 23,343 | 23,233 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 1,911 | $ 1,883 |
PROPERTY AND EQUIPMENT, NET - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Property, Plant and Equipment [Line Items] | |||
Depreciation | $ 10,600 | $ 10,000 | |
Carrying value of finance leases | 6,624 | $ 7,264 | |
Manufacturing Equipment | |||
Property, Plant and Equipment [Line Items] | |||
Construction in progress | $ 23,800 |
INTANGIBLE ASSETS - Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Capitalized software | $ 18,658 | $ 19,052 |
Accumulated amortization | (7,229) | (5,724) |
Capitalized software, net | 11,429 | 13,328 |
Total intangible assets | 19,774 | 16,867 |
In-process software development | ||
Finite-Lived Intangible Assets [Line Items] | ||
In-process software development | $ 8,345 | $ 3,539 |
INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of intangible assets | $ 1.6 | $ 0.6 |
INTANGIBLE ASSETS - Schedule of Estimated Amortization Expense (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Total intangible assets | $ 19,774 | $ 16,867 |
Software | ||
Finite-Lived Intangible Assets [Line Items] | ||
2023 (excluding the three months ended March 31, 2023) | 4,409 | |
2024 | 5,073 | |
2025 | 1,937 | |
2026 | 10 | |
Total intangible assets | $ 11,429 |
LEASES - Narrative (Details) |
Mar. 31, 2023 |
---|---|
Minimum | |
Lessee, Lease, Description [Line Items] | |
Finance lease, remaining lease term (in years) | 1 year |
Operating lease, remaining lease term (in years) | 1 year |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Finance lease, remaining lease term (in years) | 2 years |
Operating lease, remaining lease term (in years) | 9 years |
LEASES - Schedule of Lease Assets and Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Assets | ||
Operating lease right-of-use assets | $ 84,542 | $ 85,321 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Property and equipment, net | Property and equipment, net |
Right-of-use assets finance leases | $ 6,624 | $ 7,264 |
Liabilities | ||
Operating lease liabilities (current) | 7,739 | 7,739 |
Finance lease liabilities (current) | 2,148 | 2,362 |
Operating lease liabilities (non-current) | 42,826 | 44,045 |
Finance lease liabilities (non-current) | $ 417 | $ 849 |
LEASES - Schedule of Lease Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Leases [Abstract] | ||
Operating lease cost | $ 2,988 | $ 2,762 |
Finance lease cost: | ||
Amortization of right-of-use assets | 640 | 639 |
Interest on lease liabilities | 24 | 51 |
Total lease cost | $ 3,652 | $ 3,452 |
ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued purchases | $ 2,517 | $ 4,488 |
Accrued payroll and benefits | 14,211 | 26,350 |
Accrued expenses | 7,894 | 5,553 |
Accrued sales tax | 385 | 1,361 |
Product warranty reserve | 6,584 | 6,660 |
Accrued restructuring | 365 | 0 |
Accrued purchase commitment loss | 8,217 | 7,966 |
Total accrued liabilities and other current liabilities | $ 40,173 | $ 52,378 |
CAPITAL STOCK (Details) - Common Stock Warrants |
Mar. 31, 2023
$ / shares
shares
|
---|---|
Class of Stock [Line Items] | |
Warrants outstanding (in shares) | shares | 75,744 |
Exercise price of warrant (in dollars per share) | $ / shares | $ 0.40 |
STOCK-BASED COMPENSATION - Valuation Assumptions (Details) - Stock options |
3 Months Ended |
---|---|
Mar. 31, 2023
$ / shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected volatility | 85.00% |
Expected term (years) | 6 years 6 months |
Expected dividend yield | 0.00% |
Risk-free interest rate | 4.30% |
Grant date fair value (in dollars per share) | $ 1.58 |
INCOME (LOSS) PER SHARE - Schedule of Net Income (Loss) Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Numerator: | ||
Net (loss) income | $ (94,198) | $ 2,803 |
Denominator: | ||
Basic weighted-average common shares outstanding (in shares) | 151,083,716 | 146,526,370 |
Dilutive potential common stock issuable: | ||
Diluted weighted-average shares outstanding (in shares) | 151,083,716 | 153,036,804 |
Net (loss) income per share | ||
Basic (in dollars per share) | $ (0.62) | $ 0.02 |
Diluted (in dollars per share) | $ (0.62) | $ 0.02 |
Stock options | ||
Dilutive potential common stock issuable: | ||
Stock options and restricted stock units (in shares) | 0 | 5,813,101 |
Restricted stock units | ||
Dilutive potential common stock issuable: | ||
Stock options and restricted stock units (in shares) | 0 | 624,938 |
Common Stock | ||
Dilutive potential common stock issuable: | ||
Stock warrants (in shares) | 0 | 72,395 |
INCOME TAXES (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Income Tax Disclosure [Abstract] | ||
Effective income tax rate | 0.00% | 0.00% |
COMMITMENTS AND CONTINGENCIES - Schedule of Product Warranty Liability (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Movement in Standard Product Warranty Accrual [Roll Forward] | |
Balance, December 31, 2022 | $ 6,660 |
Provision for warranties | 3,322 |
Settlements | (3,398) |
Balance, March 31, 2023 | $ 6,584 |
COMMITMENTS AND CONTINGENCIES - Restructuring Activities (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Restructuring Reserve [Roll Forward] | |
Accrued restructuring as of December 31, 2022 | $ 0 |
Restructuring charges incurred during the period | 7,873 |
Cash payments | (7,247) |
Non-cash settlements and other adjustments | (261) |
Accrued restructuring as of March 31, 2023 | $ 365 |
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