British Virgin Islands | Not applicable | |
State or Other Jurisdiction of Incorporation or Organization | I.R.S. Employer Identification No. | |
Building B15 and 25 Coyol Free Zone Alajuela Costa Rica | Not applicable | |
Address of Principal Executive Offices | Zip Code |
+506 2434 2400 | ||||
Registrant’s Telephone Number, Including Area Code | ||||
Not applicable | ||||
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report | ||||
Large accelerated filer ¨ | Accelerated filer ¨ | |
Non-accelerated filer x | Smaller reporting company ¨ | |
Emerging growth company x |
Page | ||
September 30, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash | $ | 65,577 | $ | 10,864 | |||
Accounts receivable, net of allowance for doubtful accounts of $1,488 and $1,512 | 18,248 | 13,108 | |||||
Inventory | 15,365 | 13,173 | |||||
Prepaid expenses and other current assets | 5,597 | 2,237 | |||||
Total current assets | 104,787 | 39,382 | |||||
Long-term assets: | |||||||
Property and equipment, net of accumulated depreciation of $4,637 and $3,179 | 12,892 | 13,500 | |||||
Goodwill | 465 | 465 | |||||
Intangible assets, net of accumulated amortization of $1,038 and $573 | 2,970 | 3,401 | |||||
Restricted cash | 75 | 75 | |||||
Other non-current assets | 283 | 272 | |||||
Total assets | $ | 121,472 | $ | 57,095 | |||
Liabilities and shareholders’ equity (deficit) | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 5,492 | $ | 9,131 | |||
Accrued liabilities | 5,861 | 2,326 | |||||
Notes payable related party, including accrued interest | — | 4,921 | |||||
Note payable, Madryn, net of debt discount and issuance costs | — | 19,167 | |||||
Madryn put option | — | 20,302 | |||||
Madryn call option | — | 360 | |||||
Other liabilities, short term | 3,498 | 1,228 | |||||
Total current liabilities | 14,851 | 57,435 | |||||
Long-term liabilities: | |||||||
Note payable, Madryn, net of debt discount and issuance costs | 21,486 | — | |||||
Madryn put option | 4,717 | — | |||||
Other liabilities, long term | 3,431 | 4,673 | |||||
Total liabilities | 44,485 | 62,108 | |||||
Commitments and contingencies (Note 7) | |||||||
Shareholders’ equity (deficit): | |||||||
Ordinary shares - $1.00 par value (class A and B), zero and 21,206,630 shares authorized at September 30, 2018 and December 31, 2017, respectively; zero and 13,427,536 shares issued at September 30, 2018 and December 31, 2017, respectively; zero and 12,206,326 shares outstanding at September 30, 2018 and December 31, 2017, respectively | — | 13,427 | |||||
Ordinary shares - no par value (class C, D, E, F, G and G-1), zero and 2,316,169 shares authorized at September 30, 2018 and December 31, 2017, respectively; zero and 2,316,169 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively | — | 27,840 | |||||
Common shares - zero par value, unlimited amount and 84,050,000 shares authorized at September 30, 2018 and December 31, 2017, respectively; 20,539,095 and zero shares issued at September 30, 2018 and December 31, 2017, respectively; 20,131,025 and zero shares outstanding at September 30, 2018 and December 31, 2017, respectively | 144,612 | — | |||||
Additional paid-in-capital | 12,891 | 27,986 | |||||
Treasury shares, at cost, 408,070 and 1,221,210 shares held at September 30, 2018 and December 31, 2017, respectively | (2,854 | ) | (6,465 | ) | |||
Accumulated deficit | (78,461 | ) | (67,877 | ) | |||
Accumulated other comprehensive income | 799 | 76 | |||||
Total shareholders’ equity (deficit) | 76,987 | (5,013 | ) | ||||
Total liabilities and shareholders’ equity (deficit) | $ | 121,472 | $ | 57,095 | |||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenue | $ | 16,286 | $ | 7,324 | $ | 44,811 | $ | 22,870 | ||||||||
Cost of revenue | 6,173 | 3,720 | 18,566 | 11,731 | ||||||||||||
Gross profit | 10,113 | 3,604 | 26,245 | 11,139 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales, general and administrative | 12,985 | 8,139 | 32,462 | 22,114 | ||||||||||||
Research and development | 3,174 | 1,436 | 9,026 | 4,420 | ||||||||||||
Total operating expenses | 16,159 | 9,575 | 41,488 | 26,534 | ||||||||||||
Loss from operations | (6,046 | ) | (5,971 | ) | (15,243 | ) | (15,395 | ) | ||||||||
Interest income | 5 | 3 | 9 | 9 | ||||||||||||
Interest expense | (2,204 | ) | (6,691 | ) | (6,548 | ) | (8,632 | ) | ||||||||
Change in fair value of derivative instruments | 11,420 | 2,095 | 15,945 | (2,104 | ) | |||||||||||
Change in fair value of contingent consideration | (694 | ) | — | (1,446 | ) | — | ||||||||||
Initial public offering expenses | — | — | — | (1,585 | ) | |||||||||||
Other income (expense), net | (1,274 | ) | (79 | ) | (3,238 | ) | (21 | ) | ||||||||
Income (loss) before income taxes | 1,207 | (10,643 | ) | (10,521 | ) | (27,728 | ) | |||||||||
Benefit (provision) for income taxes | 99 | (31 | ) | (63 | ) | (36 | ) | |||||||||
Net income (loss) | $ | 1,306 | $ | (10,674 | ) | $ | (10,584 | ) | $ | (27,764 | ) | |||||
Basic net income (loss) per share | $ | 0.07 | $ | (1.21 | ) | $ | (0.66 | ) | $ | (3.15 | ) | |||||
Diluted net income (loss) per share | $ | 0.06 | $ | (1.21 | ) | $ | (0.66 | ) | $ | (3.15 | ) | |||||
Weighted average outstanding shares used for basic net income (loss) per share | 19,152,995 | 8,824,807 | 16,146,675 | 8,824,807 | ||||||||||||
Weighted average outstanding shares used for diluted net income (loss) per share | 20,123,297 | 8,824,807 | 16,146,675 | 8,824,807 | ||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income (loss) | $ | 1,306 | $ | (10,674 | ) | $ | (10,584 | ) | $ | (27,764 | ) | ||||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation gain (loss) | 200 | (49 | ) | 723 | (37 | ) | |||||||||
Other comprehensive gain (loss) | 200 | (49 | ) | 723 | (37 | ) | |||||||||
Comprehensive income (loss) | $ | 1,506 | $ | (10,723 | ) | $ | (9,861 | ) | $ | (27,801 | ) | ||||
Common Shares | Ordinary Shares | Treasury Shares | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||
Balance at January 1, 2018 | — | $ | — | 15,743,705 | $ | 41,267 | (1,221,210 | ) | $ | (6,465 | ) | $ | 27,986 | $ | (67,877 | ) | $ | 76 | $ | (5,013 | ) | ||||||||||||||||
Issuance of ordinary shares | — | — | 100,615 | 1,610 | — | — | — | — | — | 1,610 | |||||||||||||||||||||||||||
Stock option exercises | — | — | 106,248 | 106 | — | — | 330 | — | — | 436 | |||||||||||||||||||||||||||
Share-based compensation | — | — | 42,025 | 42 | — | — | 701 | — | — | 743 | |||||||||||||||||||||||||||
Foreign currency translation gain (loss) | — | — | — | — | — | — | — | — | (6 | ) | (6 | ) | |||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (6,530 | ) | — | (6,530 | ) | |||||||||||||||||||||||||
Balances at March 31, 2018 | — | — | 15,992,593 | 43,025 | (1,221,210 | ) | (6,465 | ) | 29,017 | (74,407 | ) | 70 | (8,760 | ) | |||||||||||||||||||||||
Issuance of ordinary shares | — | — | 910,559 | 14,570 | — | — | (78 | ) | — | — | 14,492 | ||||||||||||||||||||||||||
Stock option exercises | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Share-based compensation | — | — | 55,232 | 55 | — | — | 1,415 | — | — | 1,470 | |||||||||||||||||||||||||||
Foreign currency translation gain (loss) | — | — | — | — | — | — | — | — | 529 | 529 | |||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (5,360 | ) | — | (5,360 | ) | |||||||||||||||||||||||||
Balances at June 30, 2018 | — | — | 16,958,384 | 57,650 | (1,221,210 | ) | (6,465 | ) | 30,354 | (79,767 | ) | 599 | 2,371 | ||||||||||||||||||||||||
Issuance of common shares, IPO | 4,272,568 | 70,055 | — | — | — | — | — | — | — | 70,055 | |||||||||||||||||||||||||||
Stock option exercises | 19,343 | 180 | — | — | — | — | — | — | — | 180 | |||||||||||||||||||||||||||
Warrant exercises | 31,474 | 121 | — | — | — | — | — | — | — | 121 | |||||||||||||||||||||||||||
Share-based compensation | — | — | 70,466 | 71 | — | — | 2,683 | — | — | 2,754 | |||||||||||||||||||||||||||
Retirement of treasury shares | — | — | (813,140 | ) | (813 | ) | 813,140 | 3,611 | (2,798 | ) | — | — | — | ||||||||||||||||||||||||
Conversion of ordinary shares to common shares | 16,215,710 | 74,256 | (16,215,710 | ) | (56,908 | ) | — | — | (17,348 | ) | — | — | — | ||||||||||||||||||||||||
Foreign currency translation gain (loss) | — | — | — | — | — | — | — | — | 200 | 200 | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 1,306 | — | 1,306 | |||||||||||||||||||||||||||
Balances at September 30, 2018 | 20,539,095 | $ | 144,612 | — | $ | — | (408,070 | ) | $ | (2,854 | ) | $ | 12,891 | $ | (78,461 | ) | $ | 799 | $ | 76,987 | |||||||||||||||||
Ordinary Shares | Treasury Shares | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||
Balance at January 1, 2017 | 7,118,753 | $ | 7,118 | (813,140 | ) | $ | (3,611 | ) | $ | 3,038 | $ | (32,980 | ) | $ | — | $ | (26,435 | ) | ||||||||||||
Issuance of ordinary shares | 1,317,964 | 14,723 | — | — | — | — | — | 14,723 | ||||||||||||||||||||||
Share-based compensation | 61,184 | 61 | — | — | 1,061 | — | — | 1,122 | ||||||||||||||||||||||
Foreign currency translation gain (loss) | — | — | — | — | — | — | (8 | ) | (8 | ) | ||||||||||||||||||||
Net loss | — | — | — | — | — | (4,999 | ) | — | (4,999 | ) | ||||||||||||||||||||
Balances at March 31, 2017 | 8,497,901 | 21,902 | (813,140 | ) | (3,611 | ) | 4,099 | (37,979 | ) | (8 | ) | (15,597 | ) | |||||||||||||||||
Issuance of ordinary shares | 317,696 | 3,591 | — | — | — | — | — | 3,591 | ||||||||||||||||||||||
Cumulative change in accounting principle (adoption of ASU 2017-11) | — | — | — | — | 958 | — | — | 958 | ||||||||||||||||||||||
Share-based compensation | 37,254 | 37 | — | — | 663 | — | — | 700 | ||||||||||||||||||||||
Foreign currency translation gain (loss) | — | — | — | — | — | — | 20 | 20 | ||||||||||||||||||||||
Net loss | — | — | — | — | — | (12,091 | ) | — | (12,091 | ) | ||||||||||||||||||||
Balances at June 30, 2017 | 8,852,851 | 25,530 | (813,140 | ) | (3,611 | ) | 5,720 | (50,070 | ) | 12 | (22,419 | ) | ||||||||||||||||||
Issuance of ordinary shares | 394,795 | 5,527 | — | — | — | — | — | 5,527 | ||||||||||||||||||||||
Extinguishment of warrants with related party | 207,716 | 208 | — | — | 2,192 | — | — | 2,400 | ||||||||||||||||||||||
Share-based compensation | 42,026 | 42 | — | — | 526 | — | — | 568 | ||||||||||||||||||||||
Repurchase of shares | — | — | (408,070 | ) | (2,854 | ) | — | — | — | (2,854 | ) | |||||||||||||||||||
Conversion of related party convertible notes payable | 5,869,417 | 5,869 | — | — | 18,383 | — | — | 24,252 | ||||||||||||||||||||||
Foreign currency translation gain (loss) | — | — | — | — | — | — | (49 | ) | (49 | ) | ||||||||||||||||||||
Net loss | — | — | — | — | — | (10,674 | ) | — | (10,674 | ) | ||||||||||||||||||||
Balances at September 30, 2017 | 15,366,805 | $ | 37,176 | (1,221,210 | ) | $ | (6,465 | ) | $ | 26,821 | $ | (60,744 | ) | $ | (37 | ) | $ | (3,249 | ) | |||||||||||
Nine Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (10,584 | ) | $ | (27,764 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 2,041 | 1,351 | ||||||
Provision for doubtful accounts | 25 | 650 | ||||||
Share-based compensation | 4,966 | 2,390 | ||||||
Loss from disposal of property and equipment | 76 | — | ||||||
Write off of deferred offering costs | — | 1,585 | ||||||
Unrealized foreign currency (gain) loss, net | 2,102 | — | ||||||
Change in fair value of derivative instruments | (15,945 | ) | 2,104 | |||||
Change in fair value of contingent consideration | 1,446 | — | ||||||
Non-cash interest expense and amortization of debt discount | 2,482 | 6,367 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (5,867 | ) | (784 | ) | ||||
Inventory | (3,346 | ) | (3,486 | ) | ||||
Prepaid expenses and other current assets | (3,811 | ) | (3,133 | ) | ||||
Other assets | (13 | ) | (546 | ) | ||||
Accounts payable | (2,460 | ) | (6,107 | ) | ||||
Accrued liabilities | 3,674 | 2,582 | ||||||
Other liabilities | (191 | ) | 963 | |||||
Net cash used in operating activities | (25,405 | ) | (23,828 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (1,259 | ) | (1,388 | ) | ||||
Cost incurred for intangible assets | (41 | ) | — | |||||
Increase in restricted cash | — | 96 | ||||||
Net cash used in investing activities | (1,300 | ) | (1,292 | ) | ||||
Cash flows from financing activities: | ||||||||
Borrowings on short-term notes payable | — | 1,000 | ||||||
Borrowings under Madryn credit agreement, net of issuance costs | — | 28,650 | ||||||
Repayments on short term notes payable | — | (1,200 | ) | |||||
Repayments on related-party notes payable | (5,083 | ) | — | |||||
Repayments under Perceptive credit agreement | — | (15,000 | ) | |||||
Payments of deferred offering costs | — | (914 | ) | |||||
Repayments on capital leases | (226 | ) | (138 | ) | ||||
Proceeds from issuance of ordinary shares, net of issuance costs | 16,104 | 23,841 | ||||||
Proceeds from issuance of common shares, net of underwriters’ discount | 71,523 | — | ||||||
Deferred equity issuance costs, IPO | (1,468 | ) | — | |||||
Cash used to repurchase warrants | — | (2,400 | ) | |||||
Proceeds from stock option exercises | 616 | — | ||||||
Proceeds from warrant exercises | 121 | — | ||||||
Shares repurchased | — | (4,507 | ) | |||||
Net cash provided by financing activities | 81,587 | 29,332 | ||||||
Effect of exchange rate changes on cash | (169 | ) | (20 | ) | ||||
Net increase in cash | 54,713 | 4,192 | ||||||
Cash at beginning of period | 10,864 | 479 | ||||||
Cash at end of period | $ | 65,577 | $ | 4,671 | ||||
Supplemental disclosures: | ||||||||
Cash paid for interest | $ | 3,975 | $ | 1,567 | ||||
Cash paid for income taxes | $ | 89 | $ | 70 |
Nine Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
Supplemental disclosures of non-cash investing and financing activities: | ||||||||
Unpaid balance for property and equipment | $ | 645 | $ | 754 | ||||
Assets acquired under capital leases | $ | 50 | $ | 52 | ||||
Extinguishment of warrants with related party | $ | — | $ | 958 | ||||
Conversion of related party convertible notes payable into ordinary shares | $ | — | $ | 24,252 | ||||
• | the Company amended and restated its Memorandum of Association and Articles of Association, or the Articles, to automatically convert all outstanding classes of the Company’s stock into common shares of a single class of no par value. An unlimited number of common shares was authorized. |
• | The Board of Directors determined no further awards would be issued from the 2015 Equity Plan and approved the 2018 Equity Incentive Plan, or the 2018 Plan, with an initial reserve of 1,500,000 of the Company’s common shares for issuance; |
• | The Board of Directors adopted the 2018 Employee Share Purchase Plan, or the ESPP, with an initial reserve of 100,000of the Company’s common shares for issuance. |
Subsidiary | Incorporation/Acquisition Date |
Establishment Labs, S.A. (Costa Rica) | January 18, 2004 |
Motiva USA, LLC (USA) | February 20, 2014 |
JAMM Technologies, Inc. (USA) | October 27, 2015 |
Establishment Labs Produtos par Saude Ltda (Brazil) | January 4, 2016 |
European Distribution Center Motiva BVBA (Belgium) | March 4, 2016 |
Motiva Implants France SAS (France) | September 12, 2016 |
JEN-Vault AG (Switzerland) | November 22, 2016 |
Motiva Nordica AB (Sweden) | November 2, 2017 |
Motiva Implants UK Limited | July 31, 2018 |
Motiva Italy S.R.L | July 31, 2018 |
September 30, 2018 | December 31, 2017 | |||||||
(in thousands) | ||||||||
Raw materials | $ | 3,333 | $ | 1,978 | ||||
Work in process | 60 | 1,132 | ||||||
Finished goods | 11,972 | 10,063 | ||||||
$ | 15,365 | $ | 13,173 | |||||
September 30, 2018 | December 31, 2017 | |||||||
(in thousands) | ||||||||
Machinery and equipment | $ | 6,907 | $ | 5,473 | ||||
Vehicles | 399 | 353 | ||||||
Furniture and fixtures | 2,182 | 2,110 | ||||||
Leasehold improvements | 8,041 | 8,743 | ||||||
Total | 17,529 | 16,679 | ||||||
Less: Accumulated depreciation and amortization | (4,637 | ) | (3,179 | ) | ||||
$ | 12,892 | $ | 13,500 | |||||
Balance as of January 1, 2018 | Additions | Accumulated Impairment Losses | Balance as of September 30, 2018 | ||||||||||||
(in thousands) | |||||||||||||||
Goodwill | $ | 465 | $ | — | $ | — | $ | 465 | |||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Estimated Useful Lives | ||||||||||
(in thousands) | (in years) | ||||||||||||
Patents and license rights | $ | 1,669 | $ | (511 | ) | $ | 1,158 | 7-12 | |||||
Customer relationships | 1,304 | (282 | ) | 1,022 | 10 | ||||||||
510(k) authorization | 567 | (109 | ) | 458 | 15 | ||||||||
Developed technology | 62 | (33 | ) | 29 | 10 | ||||||||
Capitalized software development costs | 98 | (86 | ) | 12 | 2 | ||||||||
Other | 17 | (17 | ) | — | 2-3 | ||||||||
Capitalized patents and license rights not yet amortized | 291 | — | 291 | ||||||||||
$ | 4,008 | $ | (1,038 | ) | $ | 2,970 | |||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Estimated Useful Lives | ||||||||||
(in thousands) | (in years) | ||||||||||||
Patents and license rights | $ | 1,635 | $ | (361 | ) | $ | 1,274 | 7-12 | |||||
Customer relationships | 1,304 | (40 | ) | 1,264 | 10 | ||||||||
510(k) authorization | 567 | (80 | ) | 487 | 15 | ||||||||
Developed technology | 62 | (28 | ) | 34 | 10 | ||||||||
Capitalized software development costs | 98 | (49 | ) | 49 | 2 | ||||||||
Other | 17 | (15 | ) | 2 | 2-3 | ||||||||
Capitalized patents and license rights not yet amortized | 291 | — | 291 | ||||||||||
$ | 3,974 | $ | (573 | ) | $ | 3,401 | |||||||
Year Ending December 31, | (in thousands) | |||
2018 (remaining) | $ | 177 | ||
2019 | 551 | |||
2020 | 551 | |||
2021 | 511 | |||
2022 | 215 | |||
Thereafter | 674 | |||
Total | $ | 2,679 | ||
▪ | Level I Unadjusted quoted prices in active markets for identical assets or liabilities; |
▪ | Level II Inputs other than quoted prices included within Level I that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and |
▪ | Level III Unobservable inputs that are supported by little or no market activity for the related assets or liabilities. |
Fair Value Measurements at September 30, 2018 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(in thousands) | |||||||||||||||
Liabilities | |||||||||||||||
Madryn put option liability | $ | 4,717 | $ | — | $ | — | $ | 4,717 | |||||||
Madryn call option liability | — | — | — | — | |||||||||||
Acquisition-related contingent consideration | 2,410 | — | — | 2,410 | |||||||||||
$ | 7,127 | $ | — | $ | — | $ | 7,127 | ||||||||
Fair Value Measurements at December 31, 2017 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
(in thousands) | |||||||||||||||
Liabilities | |||||||||||||||
Madryn put option liability | $ | 20,302 | $ | — | $ | — | $ | 20,302 | |||||||
Madryn call option liability | 360 | — | — | 360 | |||||||||||
Acquisition-related contingent consideration | 964 | — | — | 964 | |||||||||||
$ | 21,626 | $ | — | $ | — | $ | 21,626 | ||||||||
September 30, 2018 | December 31, 2017 | ||
Interest rate volatility | 17.6% | 21.0% | |
Market yield rate | 13.0% | 12.5% | |
Term (in years) | 4.75 | 5.5 | |
Dividend yield | —% | —% | |
September 30, 2018 | December 31, 2017 | ||
Interest rate volatility | 17.6% | 21.0% | |
Market yield rate | 13.0% | 12.5% | |
Term (in years) | 4.75 | 5.5 | |
Dividend yield | —% | —% | |
Warrant Liability | Acquisition-related Contingent Consideration | Put Option Liability (Madryn) | Call Option Liability (Madryn) | ||||||||||||
Balance at December 31, 2016 | $ | 3,983 | $ | — | $ | — | $ | — | |||||||
Issuance of financial instruments | — | — | — | — | |||||||||||
Change in fair value | 4,035 | — | — | — | |||||||||||
Repurchase of warrants | (7,060 | ) | — | — | — | ||||||||||
De-recognition during period | (958 | ) | — | — | — | ||||||||||
Balance at September 30, 2017 | $ | — | $ | — | $ | — | $ | — | |||||||
Balance at December 31, 2017 | $ | — | $ | 964 | $ | 20,302 | $ | 360 | |||||||
Change in fair value | — | 1,446 | (15,585 | ) | (360 | ) | |||||||||
Balance at September 30, 2018 | $ | — | $ | 2,410 | $ | 4,717 | $ | — | |||||||
September 30, 2018 | December 31, 2017 | |||||||
(in thousands) | ||||||||
Principal | $ | — | $ | 4,218 | ||||
Accrued interest | — | 703 | ||||||
Total principal and accrued interest at end of period | $ | — | $ | 4,921 | ||||
September 30, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Principal | $ | 40,000 | $ | 40,000 | |||
Accrued interest | — | — | |||||
Total principal and accrued interest at end of period | 40,000 | 40,000 | |||||
Net unamortized debt discount and issuance costs | (18,514 | ) | (20,833 | ) | |||
Net carrying value of Madryn debt | $ | 21,486 | $ | 19,167 | |||
Years Ending December 31, | Operating Leases | |||
(in thousands) | ||||
2018 (remaining) | $ | 249 | ||
2019 | 938 | |||
2020 | 884 | |||
2021 | 823 | |||
2022 | 851 | |||
Thereafter | 4,038 | |||
$ | 7,783 | |||
Years Ending December 31, | Capital Leases | |||
(in thousands) | ||||
2018 (remaining) | $ | 87 | ||
2019 | 333 | |||
2020 | 243 | |||
2021 | 139 | |||
2022 | 37 | |||
Thereafter | — | |||
839 | ||||
Interest included in the above payments | (94 | ) | ||
Amount payable without interest | 745 | |||
Short-term minimum capital lease payments (included in accrued liabilities) | 323 | |||
Long-term minimum capital lease payments | $ | 422 | ||
September 30, 2018 | December 31, 2017 | ||||
Warrants to purchase shares | 113,526 | 145,000 | |||
Options to purchase shares | 1,460,863 | 863,932 | |||
Remaining shares available under the 2015 Equity Incentive Plan | — | 91,181 | |||
Remaining shares available under the 2018 Equity Incentive Plan | 1,047,148 | — | |||
Shares issuable on vesting of restricted stock awards | 394,984 | 585,056 | |||
Remaining shares available under the 2018 ESPP | 100,000 | — | |||
Total | 3,116,521 | 1,685,169 | |||
Warrant Holder | Issue Date | In Connection With | Warrant to Purchase | Shares | Exercise Price | Expiration Date | |||||||||
Rockport | 3/3/2017 | Loan agreement | Common | 113,526 | $ | 3.80 | 8/28/2022 | ||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(in thousands) | ||||||||||||||||
Sales, general and administrative | $ | 1,409 | $ | 230 | $ | 1,995 | $ | 865 | ||||||||
Research and development | 1,345 | 338 | 2,971 | 1,525 | ||||||||||||
Total | $ | 2,754 | $ | 568 | $ | 4,966 | $ | 2,390 | ||||||||
Number of Options Outstanding | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | ||||||||||
Balances at December 31, 2017 | 863,932 | $ | 5.36 | 7.6 | $ | 4,199 | |||||||
Granted (weighted-average fair value of $10.27 per share) | 778,628 | 16.15 | |||||||||||
Exercised | (125,596 | ) | 4.91 | ||||||||||
Forfeited/canceled | (56,101 | ) | 7.54 | ||||||||||
Balances at September 30, 2018 | 1,460,863 | $ | 11.09 | 8.96 | $ | 19,247 | |||||||
▪ | Fair Value of Common Shares. Following the IPO, the closing price of the Company’s publicly-traded common stock on the date of grant and at quarter-end is used as the fair value of the shares. Prior to the IPO, the fair value of ordinary shares was estimated on a periodic basis by the Company’s Board of Directors, with the assistance of an independent third-party valuation firm. The Board of Directors intended all options granted to be exercisable at a price per share not less than the estimated per share fair value of the shares underlying those options on the date of grant. |
▪ | Risk-Free Interest Rate. The Company bases the risk-free interest rate used in the Black-Scholes valuation model on the implied yield available on U.S. Treasury zero-coupon issues with a term equivalent to that of the term of the options for each option group on the measurement date. |
▪ | Term. For employee stock options, the expected term represents the period that the Company’s share-based awards are expected to be outstanding. Because of the limitations on the sale or transfer of the Company’s shares as a privately held company, the Company does not believe its historical exercise pattern is indicative of the pattern it will experience as a publicly traded company. The Company has |
▪ | Volatility. The Company determines the price volatility based on the historical volatilities of industry peers as it does not have sufficient trading history for its shares. Industry peers consist of several public companies in the medical device industry with comparable characteristics, including revenue growth, operating model and working capital requirements. The Company intends to continue to consistently apply this process using the same or a similar peer group of public companies until a sufficient amount of historical information regarding the volatility of its own shares becomes available, or unless circumstances change such that the identified peer companies are no longer similar, in which case other suitable peer companies whose common share prices are publicly available would be utilized in the calculation. The volatility is calculated based on the term on the measurement date. |
▪ | Dividend Yield. The expected dividend assumption is based on the Company’s current expectations about its anticipated dividend policy. The Company has no expectation that it will declare dividends on its common shares, and therefore has used an expected dividend yield of zero. |
Nine Months Ended September 30, | ||
2018 | ||
Volatility | 56.0% - 57.0% | |
Risk-free interest rate | 2.7% - 2.9% | |
Term (in years) | 6.25 | |
Dividend yield | 0% | |
Nine Months Ended September 30, | ||||
2018 | 2017 | |||
Volatility | 58.0% - 59.0% | 43.0% | ||
Risk-free interest rate | 2.8% - 3.1% | 2.3% | ||
Term (in years) | 10.0 | 9.5 - 9.8 | ||
Dividend yield | 0.0% | 0.0% | ||
Restricted Stock Awards | Weighted- Average Grant Date Fair Value | ||||||
Outstanding unvested at December 31, 2017 | 585,056 | $ | 7.57 | ||||
Granted | 90,301 | 13.27 | |||||
Vested | (163,871 | ) | 7.00 | ||||
Forfeited/canceled | (116,502 | ) | 9.60 | ||||
Outstanding unvested at September 30, 2018 | 394,984 | $ | 8.51 | ||||
Restricted Stock Units | Weighted- Average Grant Date Fair Value | ||||||
Outstanding unvested at December 31, 2017 | — | $ | — | ||||
Granted | 3,852 | 25.35 | |||||
Vested | (3,852 | ) | 25.35 | ||||
Forfeited/canceled | — | — | |||||
Outstanding unvested at September 30, 2018 | — | $ | — | ||||
Purchase Price: | (in thousands) | |||
Cash consideration | $ | 1,000 | ||
Fair market value of Class A ordinary shares issued | 344 | |||
Contingent consideration | 964 | |||
Cash paid for inventory | 704 | |||
Total purchase price | $ | 3,012 | ||
Allocation of Purchase Price: | (in thousands) | |||
Inventory | $ | 1,498 | ||
Customer relationships | 1,280 | |||
Covenant not to compete | 24 | |||
Goodwill | 210 | |||
Total purchase price allocated | $ | 3,012 | ||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands, except share and per share data) | |||||||||||||||
Numerator: | |||||||||||||||
Net income (loss) | $ | 1,306 | $ | (10,674 | ) | $ | (10,584 | ) | $ | (27,764 | ) | ||||
Denominator: | |||||||||||||||
Weighted average common shares used for basic earnings per share | 19,152,995 | 8,824,807 | 16,146,675 | 8,824,807 | |||||||||||
Weighted average common shares used for diluted earnings per share | 20,123,297 | 8,824,807 | 16,146,675 | 8,824,807 | |||||||||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | 0.07 | $ | (1.21 | ) | $ | (0.66 | ) | $ | (3.15 | ) | ||||
Diluted | $ | 0.06 | $ | (1.21 | ) | $ | (0.66 | ) | $ | (3.15 | ) | ||||
Nine Months Ended September 30, | ||||||
2018 | 2017 | |||||
Options to purchase common shares | 1,460,863 | 786,503 | ||||
Shares issuable on vesting of restricted stock awards | 394,984 | 617,767 | ||||
Warrants to purchase common shares | 113,526 | 145,000 | ||||
Total | 1,969,373 | 1,549,270 | ||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(unaudited) (in thousands) | |||||||||||||||
Revenue | $ | 16,286 | $ | 7,324 | $ | 44,811 | $ | 22,870 | |||||||
Cost of revenue | 6,173 | 3,720 | 18,566 | 11,731 | |||||||||||
Gross profit | 10,113 | 3,604 | 26,245 | 11,139 | |||||||||||
Operating expenses: | |||||||||||||||
Sales, general and administrative | 12,985 | 8,139 | 32,462 | 22,114 | |||||||||||
Research and development | 3,174 | 1,436 | 9,026 | 4,420 | |||||||||||
Total operating expenses | 16,159 | 9,575 | 41,488 | 26,534 | |||||||||||
Loss from operations | (6,046 | ) | (5,971 | ) | (15,243 | ) | (15,395 | ) | |||||||
Interest expense | (2,204 | ) | (6,691 | ) | (6,548 | ) | (8,632 | ) | |||||||
Change in fair value of derivative instruments | 11,420 | 2,095 | 15,945 | (2,104 | ) | ||||||||||
Other income (expense), net | (1,963 | ) | (76 | ) | (4,675 | ) | (1,597 | ) | |||||||
Income (loss) before income taxes | 1,207 | (10,643 | ) | (10,521 | ) | (27,728 | ) | ||||||||
Provision for income taxes | 99 | (31 | ) | (63 | ) | (36 | ) | ||||||||
Net income (loss) | $ | 1,306 | $ | (10,674 | ) | $ | (10,584 | ) | $ | (27,764 | ) | ||||
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Revenue | $ | 16,286 | $ | 7,324 | |||
Cost of revenue | 6,173 | 3,720 | |||||
Gross profit | $ | 10,113 | $ | 3,604 | |||
Gross margin | 62.1 | % | 49.2 | % | |||
Three Months Ended September 30, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Operating expenses: | |||||||
Sales, general and administrative | $ | 12,985 | $ | 8,139 | |||
Research and development | 3,174 | 1,436 | |||||
Total operating expenses | $ | 16,159 | $ | 9,575 | |||
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
(unaudited) (in thousands) | |||||||
Revenue | $ | 44,811 | $ | 22,870 | |||
Cost of revenue | 18,566 | 11,731 | |||||
Gross profit | $ | 26,245 | $ | 11,139 | |||
Gross margin | 58.6 | % | 48.7 | % | |||
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
(unaudited) (in thousands) | |||||||
Operating expenses: | |||||||
Sales, general and administrative | $ | 32,462 | $ | 22,114 | |||
Research and development | 9,026 | 4,420 | |||||
Total operating expenses | $ | 41,488 | $ | 26,534 | |||
▪ | the degree and rate of market adoption of our products; |
▪ | the cost and timing of our regulatory activities, especially the PMA clinical trial to obtain regulatory approval for our Motiva Implants in the United States; |
▪ | the emergence of new competing technologies and products; |
▪ | the costs of R&D activities we undertake to develop and expand our products; |
▪ | the costs of commercialization activities, including sales, marketing and manufacturing; |
▪ | the level of working capital required to support our growth; and |
▪ | our need for additional personnel, information technology or other operating infrastructure to support our growth and operations as a public company. |
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Net cash provided by (used in): | |||||||
Operating activities | $ | (25,405 | ) | $ | (23,828 | ) | |
Investing activities | (1,300 | ) | (1,292 | ) | |||
Financing activities | 81,587 | 29,332 | |||||
Effect of exchange rate changes on cash | (169 | ) | (20 | ) | |||
Net increase in cash | $ | 54,713 | $ | 4,192 | |||
• | the outcomes of current and future clinical studies of Motiva Implants, including our ongoing PMA clinical trial, to demonstrate our products’ value in improving safety outcomes and/or patient satisfaction; |
• | acceptance of Motiva Implants as safe and effective by patients, caregivers and the medical community; |
• | an acceptable safety profile of Motiva Implants in the global market; |
• | whether key thought leaders in the medical community accept that such clinical studies are sufficiently meaningful to influence their or their patients’ choices of product; |
• | maintenance of our existing regulatory approvals and expansion of the geographies in which we have regulatory approvals; |
• | commercially viable processes at a scale sufficient to meet anticipated demand at an adequate cost of manufacturing, and that are compliant with ISO 13485 Quality Management System requirements and/or good manufacturing practice, or GMP, requirements, as set forth in the FDA’s Quality System Regulation, Brazilian and other international regulations; |
• | our success in educating physicians and patients about the benefits, administration and use of Motiva Implants, Motiva branded surgeries and value proposition of our MotivaImagine Centers; |
• | the successful implementation of our MotivaImagine Centers with plastic surgery clinics; |
• | the availability, perceived advantages, relative cost, relative safety and relative efficacy of alternative and competing treatments; |
• | the willingness of patients to pay out-of-pocket for breast augmentation and reconstruction procedures in the absence of coverage and reimbursement for such procedures; |
• | the success of our internal sales and marketing organization and the sales forces of our distributors; and |
• | continued demand for breast augmentation and reconstruction procedures using silicone implants, which may be adversely affected by events involving either our products or those of our competitors, including FDA warnings to patients regarding Breast Implant-Associated Anaplasic Large Cell Lymphoma, or BIA-ALCL. |
• | implement and execute our business strategy; |
• | expand and improve the productivity of our direct sales force, distributors and marketing programs to grow sales of our existing and proposed products; |
• | increase awareness of our brands and build loyalty among plastic surgeons and patients; |
• | manage expanding operations; |
• | respond effectively to competitive pressures and developments; |
• | enhance our existing products and develop new products; |
• | obtain regulatory clearance or approval to enhance our existing products and commercialize new products; |
• | respond to changing regulations associated with medical devices across all geographies; |
• | perform clinical trials with respect to our existing products and any new products; |
• | attract, retain and motivate qualified personnel in various areas of our business; and |
• | obtain and maintain coverage and adequate levels of reimbursement for our products. |
• | clinical studies may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical studies or abandon product development programs; |
• | the number of patients required for clinical studies may be larger than we anticipate, enrollment in these clinical studies may be insufficient or slower than we anticipate, or patients may drop out of these clinical studies at a higher rate than we anticipate; |
• | the cost of clinical studies may be greater than we anticipate; |
• | third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; |
• | we might suspend or terminate clinical studies of our planned products for various reasons, including a finding that our planned products have unanticipated serious side effects or other unexpected characteristics, or that the study subjects are being exposed to unacceptable health risks; |
• | regulators may not approve our proposed clinical development plans; |
• | regulators or independent institutional review boards, or IRBs, may not authorize us or our investigators to commence a clinical study or conduct a clinical study at a prospective study site; |
• | regulators or IRBs may require that we, or our investigators, suspend or terminate clinical studies for various reasons, including noncompliance with regulatory requirements; |
• | regulators in countries where Motiva Implants are currently marketed may require that we suspend commercial distribution if there is noncompliance with regulatory requirements or safety concerns; |
• | regulators in countries where Motiva Implants are currently marketed may suspend commercial distribution of silicone breast implants due to safety or other concerns generally applicable to the product category; |
• | the supply or quality of our planned products or other materials necessary to conduct clinical studies of our planned products may be insufficient or inadequate; and/or |
• | the enactment of new regulatory requirements in Europe under the new Medical Device Regulation may make approval times longer and standards more difficult to pass. |
• | be delayed in obtaining marketing approvals for Motiva Implants or our planned products; |
• | not obtain marketing approval at all; |
• | obtain approval for indications that are not as broad as intended; |
• | have a product removed from the market after obtaining marketing approval; |
• | be subject to additional post-marketing testing requirements; and/or |
• | be subject to restrictions on how the product is distributed or used. |
• | a product candidate may not be deemed to be safe and effective; |
• | FDA officials may not find the data from clinical and preclinical studies sufficient; |
• | the FDA may not approve our or our suppliers’ processes or facilities; or |
• | the FDA may change its approval policies or adopt new regulations. |
• | decreased demand for any planned products we may develop; |
• | injury to our reputation and significant negative media attention; |
• | withdrawal of patients from clinical studies or cancellation of studies; |
• | significant costs to defend the related litigation and distraction to our management team; |
• | substantial monetary awards to plaintiffs; |
• | loss of revenue; and |
• | the inability to commercialize any products that we may develop. |
• | failure to complete sterilization on time or in compliance with the required regulatory standards; |
• | transportation and import and export risk, particularly given the global nature of our supply and distribution chains; |
• | delays in analytical results or failure of analytical techniques that we depend on for quality control and release of products; |
• | natural or other disasters, labor disputes, financial distress, lack of raw material supply, issues with facilities and equipment or other forms of disruption to business operations affecting our manufacturer or its suppliers; |
• | latent defects that may become apparent after products have been released and that may result in a recall of such products; |
• | contamination of our raw materials or manufactured products; and |
• | inclusion of vendors of raw materials not in compliance with ISO-13485 requirements. |
• | compliance with the free zone regime regulations under which the manufacturing sites operate; |
• | different regulatory requirements for device approvals in international markets; |
• | multiple, conflicting and changing laws and regulations such as tariffs and tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; |
• | potential failure by us or our distributors to obtain and/or maintain regulatory approvals for the sale or use of our products in various countries; |
• | difficulties in managing global operations; |
• | logistics and regulations associated with shipping products, including infrastructure conditions and transportation delays; |
• | limits on our ability to penetrate international markets if our distributors do not execute successfully; |
• | governmental price controls, differing reimbursement regimes and other market regulations; |
• | financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable, and exposure to currency exchange rate fluctuations; |
• | reduced protection for intellectual property rights, or lack of them in certain jurisdictions, forcing more reliance on our trade secrets, if available; |
• | economic weakness, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; |
• | the March 2017 Article 50 notice of withdrawal that formally began the process of a British exit from the EU, including with respect to its effect on the value of the British pound relative to other currencies; |
• | failure to comply with the Foreign Corrupt Practices Act, including its books and records provisions and its anti-bribery provisions, by maintaining accurate information and control over sales activities and distributors’ activities; |
• | unexpected changes in tariffs, trade barriers and regulatory requirements; |
• | compliance with tax, employment, immigration and labor laws; |
• | taxes, including withholding of payroll taxes; |
• | currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; |
• | workforce uncertainty in countries where labor unrest is more common than in the United States; |
• | production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and |
• | business and shipping interruptions resulting from natural or other disasters including earthquakes, volcanic activity, hurricanes, floods and fires. |
• | managing our clinical trials effectively, which we anticipate being conducted at numerous clinical sites; |
• | identifying, recruiting, maintaining, motivating and integrating additional employees with the expertise and experience we will require, in multiple countries; |
• | managing our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors and other third parties; |
• | managing additional relationships with various distributors, suppliers, and other third parties; |
• | improving our managerial, development, operational and finance reporting systems and procedures; and |
• | expanding our facilities. |
• | failure to complete sterilization on time or in compliance with the required regulatory standards; |
• | transportation and import and export risk, particularly given the global nature of our supply and distribution chains; |
• | delays in analytical results or failure of analytical techniques that we depend on for quality control and release of products; |
• | natural or other disasters, labor disputes, financial distress, lack of raw material supply, issues with facilities and equipment or other forms of disruption to business operations affecting our manufacturer or its suppliers; |
• | latent defects that may become apparent after products have been released and that may result in a recall of such products; |
• | contamination of our raw materials or manufactured products; and |
• | inclusion of vendors of raw materials not in compliance with ISO-13485 requirements. |
• | it may not be able, or willing, to manufacture silicone raw materials with our agreed-upon specifications; |
• | it may not be able, or willing, to manufacture our needed raw materials in compliance with regulatory requirements, or our its manufacturing facilities may not be able to maintain compliance with regulatory requirements; |
• | it may not be able to supply sufficient quantities of each raw material quickly enough for us to respond to rapid increases in demand; |
• | it may unintentionally convey information to our competitors that is helpful in understanding our proprietary compositions and other trade secrets of our manufacturing processes; |
• | we may be subject to price fluctuations if we fail to meet certain minimum order requirements, or if our existing contract expires or is renegotiated; |
• | it may lose access to critical services and components, resulting in interruption in manufacture or shipment of medical-grade silicone; |
• | its facilities may be affected by earthquakes, wild fires, mud slides or other natural disasters, which could delay or impede production of our raw materials; |
• | we may be required to obtain regulatory approvals related to any change in our supply chain; |
• | NuSil may wish to discontinue supply of products to us due to its existing relationships with our competitors; |
• | NuSil may claim ownership of the intellectual property associated with our ProgressiveGel family of silicone gel rheologies; and |
• | NuSil or its parent entity may encounter financial or other hardships unrelated to our demand for products, which could negatively impact their ability to fulfill our orders and support our regulatory approvals. |
• | warning letters; |
• | civil or criminal penalties and fines; |
• | injunctions; |
• | suspension or withdrawal of regulatory approval; |
• | suspension of any ongoing clinical studies; |
• | voluntary or mandatory product recalls and publicity requirements; |
• | refusal to accept or approve applications for marketing approval of new devices or supplements to approved applications filed by us; |
• | restrictions on operations, including costly new manufacturing requirements; or |
• | seizure or detention of our products or import bans. |
• | the federal Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal health care programs, such as the Medicare and Medicaid programs; |
• | the federal physician self-referral law, commonly known as the Stark Law, which prohibits, among other things, physicians who have a financial relationship, including an investment, ownership or compensation relationship with an entity, from referring Medicare and Medicaid patients to that entity for designated health services, unless an exception applies. Similarly, entities may not bill Medicare, Medicaid or any other party for services furnished pursuant to a prohibited referral. Unlike the federal Anti-Kickback Statute, the Stark Law is a strict liability statute, meaning that all of the requirements of a Stark Law exception must be met in order to be compliant with the law; |
• | the federal civil and criminal false claims and civil monetary penalties laws, including the federal False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal government; |
• | HIPAA, which prohibits, executing a scheme to defraud any health care benefit program or making false statements relating to health care matters; |
• | the federal transparency requirements under the PPACA which requires certain manufacturers of drugs, devices, biologics and medical supplies to annual report to the HHS information related to physician payments and other transfers of value made to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; |
• | HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic health care transactions and protects the security and privacy of protected health information; |
• | state law equivalents of each of the above federal laws, such as anti-kickback, transparency and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, as well as state post-marketing compliance laws; and |
• | state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. |
• | our ability to successfully commercialize, and realize revenues from sales of, Motiva Implants, MotivaImagine Centers and Motiva branded surgeries; |
▪ | the success of competitive products or technologies; |
▪ | results of clinical studies of Motiva Implants or planned products or those of our competitors; |
• | regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products; |
• | introductions and announcements of new products by us, our commercialization partners, or our competitors, and the timing of these introductions or announcements; |
• | actions taken by regulatory agencies with respect to our products, clinical studies, manufacturing processes or sales and marketing terms; |
• | variations in our financial results or those of companies that are perceived to be similar to us; |
• | the success of our efforts to acquire or in-license additional products or planned products; |
• | developments concerning our collaborations, including but not limited to those with our sources of manufacturing supply and our commercialization partners; |
• | developments concerning our ability to bring our manufacturing processes to scale in a cost-effective manner; |
• | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
• | developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our products; |
• | our ability or inability to raise additional capital and the terms on which we raise it; |
• | the recruitment or departure of key personnel; |
• | changes in the structure of health care payment systems; |
• | negative shifts in the economy effecting the number of aesthetic breast procedures; |
• | market conditions in the pharmaceutical and biotechnology sectors; |
• | actual or anticipated changes in earnings estimates or changes in securities analyst recommendations regarding our common shares, other comparable companies or our industry generally; |
• | trading volume of our common shares; |
• | sales of our common shares by us or our shareholders; |
• | general economic, industry and market conditions; and |
• | the other risks described in this “Risk Factors” section. |
• | our Board of Directors will be divided into three classes with staggered three-year terms which may delay or prevent a change of our management or a change in control; |
• | our Board of Directors will have the right to elect directors to fill a vacancy created by the expansion of our Board of Directors or the resignation, death or removal of a director, which will prevent shareholders from being able to fill vacancies on our Board of Directors; |
• | our shareholders will not be able to act by written consent, as a result, a holder, or holders, controlling a majority of our shares would not be able to take certain actions other than at annual shareholders’ meetings or special shareholders’ meetings; |
• | our amended and restated memorandum and articles of association do not allow cumulative voting in the election of directors, which limits the ability of minority shareholders to elect director candidates; |
• | amendments of our amended and restated memorandum and articles of association will require the approval of shareholders holding 66 2/3% of our outstanding voting shares (unless amended by the Board of Directors); |
• | our shareholders will be required to provide advance notice and additional disclosures in order to nominate individuals for election to our Board of Directors or to propose matters that can be acted upon at a shareholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and |
• | our Board of Directors will be able to issue, without shareholder approval, preferred shares with voting or other rights or preferences that could impede the success of any attempt to acquire us. |
Exhibits | Description | Incorporation by Reference | |
10.1 | Incorporated by reference from Registrant’s Current Report on Form 8-K filed October 10, 2018. | ||
10.2 | Incorporated by reference from Registrant’s Current Report on Form 8-K filed November 1, 2005. | ||
10.3 | Incorporated by reference from Registrant’s Current Report on Form 8-K filed November 1, 2005. | ||
31.1 | |||
31.2 | |||
32.1* | |||
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema Document | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
ESTABLISHMENT LABS HOLDINGS INC. | |||
By: | /s/ Juan José Chacón Quirós | ||
Date: | November 13, 2018 | By: | Juan José Chacón Quirós |
Title: | Chief Executive Officer and Director | ||
(Principal Executive Officer) | |||
Date: | November 13, 2018 | By: | /s/ Renee Gaeta |
Name: | Renee Gaeta | ||
Title: | Chief Financial Officer | ||
(Principal Financial Officer and Chief Accounting Officer) |
Date: | November 13, 2018 | /s/ Juan José Chacón Quirós |
Juan José Chacón Quirós | ||
Chief Executive Officer and Director (Principal Executive Officer) |
Date: | November 13, 2018 | /s/ Renee Gaeta |
Renee Gaeta | ||
Chief Financial Officer (Principal Financial and Accounting Officer) |
Date: | November 13, 2018 | /s/ Juan José Chacón Quirós |
Juan José Chacón Quirós | ||
Chief Executive Officer and Director | ||
(Principal Executive Officer) | ||
Date: | November 13, 2018 | /s/ Renee Gaeta |
Renee Gaeta | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Nov. 09, 2018 |
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Document and Entity Information [Abstract] | ||
Entity Registrant Name | Establishment Labs Holdings Inc. | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --12-31 | |
Amendment Flag | false | |
Entity Central Index Key | 0001688757 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | true | |
Entity Small Business | false | |
Entity Ex Transition Period | false | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Entity Common Stock, Shares Outstanding (in shares) | 20,538,321 |
Condensed Consolidated Statement of Operations - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
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Income Statement [Abstract] | ||||
Revenue | $ 16,286 | $ 7,324 | $ 44,811 | $ 22,870 |
Cost of revenue | 6,173 | 3,720 | 18,566 | 11,731 |
Gross profit | 10,113 | 3,604 | 26,245 | 11,139 |
Operating expenses: | ||||
Sales, general and administrative | 12,985 | 8,139 | 32,462 | 22,114 |
Research and development | 3,174 | 1,436 | 9,026 | 4,420 |
Total operating expenses | 16,159 | 9,575 | 41,488 | 26,534 |
Loss from operations | (6,046) | (5,971) | (15,243) | (15,395) |
Interest income | 5 | 3 | 9 | 9 |
Interest expense | (2,204) | (6,691) | (6,548) | (8,632) |
Change in fair value of derivative instruments | 11,420 | 2,095 | 15,945 | (2,104) |
Change in fair value of contingent consideration | (694) | 0 | (1,446) | 0 |
Initial public offering expenses | 0 | 0 | 0 | (1,585) |
Other income (expense), net | (1,274) | (79) | (3,238) | (21) |
Income (loss) before income taxes | 1,207 | (10,643) | (10,521) | (27,728) |
Benefit (provision) for income taxes | 99 | (31) | (63) | (36) |
Net income (loss) | $ 1,306 | $ (10,674) | $ (10,584) | $ (27,764) |
Basic net income (loss) per share (in usd per share) | $ 0.07 | $ (1.21) | $ (0.66) | $ (3.15) |
Diluted net income (loss) per share (in usd per share) | $ 0.06 | $ (1.21) | $ (0.66) | $ (3.15) |
Weighted average outstanding shares used for basic net income (loss) per share (in shares) | 19,152,995 | 8,824,807 | 16,146,675 | 8,824,807 |
Weighted average outstanding shares used for diluted net income (loss) per share (in shares) | 20,123,297 | 8,824,807 | 16,146,675 | 8,824,807 |
Condensed Consolidated Statement of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 1,306 | $ (10,674) | $ (10,584) | $ (27,764) |
Other comprehensive income (loss): | ||||
Foreign currency translation gain (loss) | 200 | (49) | 723 | (37) |
Other comprehensive gain (loss) | 200 | (49) | 723 | (37) |
Comprehensive income (loss) | $ 1,506 | $ (10,723) | $ (9,861) | $ (27,801) |
Formation and Business of the Company |
9 Months Ended | ||||||||||||
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Sep. 30, 2018 | |||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||
Formation and Business of the Company | Formation and Business of the Company Formation and Business of the Company Establishment Labs Holdings Inc. and its wholly owned subsidiaries (collectively “the Company”, “we”, “us”, or “our”) is a global company that manufactures and markets innovative medical devices for aesthetic plastic surgery and reconstructive plastic surgery. The Company was established in the British Virgin Islands on October 9, 2013, at which time Establishment Labs, S.A., the Costa Rican manufacturing company, was reincorporated as a wholly-owned subsidiary. The Company also has wholly-owned subsidiaries in the United States (JAMM Technologies, Inc. and Motiva USA LLC), Belgium (European Distribution Center Motiva BVBA), Brazil (Establishment Labs Produtos para Saude Ltda), France (Motiva Implants France SAS), Sweden (Motiva Nordica AB),Switzerland (JEN-Vault AG), the United Kingdom (Motiva Implants UK Limited) and Italy (Motiva Italy S.R.L). Substantially all of the Company’s revenues are derived from the sale of silicone breast implants under the brand of Motiva Implants. The main manufacturing activities are conducted at two manufacturing facilities in Costa Rica. Beginning in 2010, the Company began operating under the Costa Rica free zone regime (Régimen de Zona Franca), which provides for reduced income tax and other tax obligations pursuant to an agreement with the Costa Rican authorities. The Company’s products are approved for sale in Europe, the Middle East, Latin America, and Asia. The Company sells its products internationally through a combination of distributors and direct sales to customers. The Company is pursuing regulatory approval to commercialize its products in the United States. The Company received approval of an investigational device exemption, or IDE, from the U.S. Food and Drug Administration, or FDA, in March 2018 to initiate the Motiva Implant clinical trial in the United States. Enrollment is anticipated to be completed in early 2019. The Company has been expanding its global operations through a series of acquisitions and establishing wholly-owned subsidiaries. In November 2015, the Company purchased certain assets from Magna Equities I, LLC and established its wholly-owned subsidiary, JAMM Technologies, Inc., in the United States. In January 2016, the Company purchased a distribution company in Brazil to support the application to sell its products in Brazil. In March 2016, the Company purchased a storage and distribution company in Belgium to support its continued growth in Europe. In September 2016, the Company purchased a distribution company in France and established a wholly-owned subsidiary in Switzerland. In November 2017, the Company acquired certain assets from Femiline AB and established its wholly-owned subsidiary in Sweden, Motiva Nordica AB. During 2018, the Company has established wholly-owned subsidiaries in the United Kingdom and Italy. Initial Public Offering On July 23, 2018, the Company completed its initial public offering, or IPO, whereby it sold a total of 4,272,568 shares of common stock at $18.00 per share including 557,291 shares sold to underwriters for the exercise of their option to purchase additional shares. The Company received net proceeds from the IPO of approximately $70.1 million, after deducting underwriting discounts and commissions of $5.4 million and deferred offering costs of $1.5 million. Concurrent with the closing of the IPO, the following transactions were completed in accordance with the related agreements:
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Summary of Significant Accounting Policies |
9 Months Ended | ||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||
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 during the nine months ended September 30, 2018 as compared to the significant accounting policies described in Note 2 of the “Notes to Consolidated Financial Statements” in the Company’s audited consolidated financial statements as of December 31, 2017 and 2016 and for the years then ended. Below are those policies with current period updates. Basis of Presentation and Consolidation The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and the applicable rules and regulations of the Securities and Exchange Commission, or SEC, for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the years ended December 31, 2017 and 2016 presented in the Company’s prospectus dated July 18, 2018, or the Prospectus, filed pursuant to Rule 424(b) on July 20, 2018, with the U.S. Securities and Exchange Commission. The condensed consolidated financial statements include the Company’s accounts and those of its wholly owned subsidiaries as of September 30, 2018 as follows:
All intercompany accounts and transactions have been eliminated in consolidation. Unaudited Interim Condensed Consolidated Financial Information The accompanying interim condensed consolidated financial statements as of September 30, 2018 and for the three and nine months ended September 30, 2018 and 2017, and the related interim information contained within the notes to the condensed consolidated financial statements, are unaudited. The unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP and on the same basis as the audited consolidated financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary to state fairly the Company’s financial position as of September 30, 2018, and the results of its operations and cash flows for the nine months ended September 30, 2018 and 2017. Such adjustments are of a normal and recurring nature. The results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the full fiscal year 2018, or for any future period. Segments The chief operating decision maker for the Company is the Chief Executive Officer. The Chief Executive Officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region, for purposes of allocating resources and evaluating financial performance. The Company has one business activity and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level. Accordingly, the Company has determined that it has a single reportable and operating segment structure. The Company and its Chief Executive Officer evaluate performance based primarily on revenue in the geographic regions in which the Company operates. Geographic Concentrations The Company derives all of its revenues from sales to customers in Europe, the Middle East, Latin America, and Asia, and has not yet received approval to sell its products in the United States. For the nine months ended September 30, 2018, Brazil accounted for 15.8% of consolidated revenue and no other individual country exceeded 10% of consolidated revenue, on a ship-to destination basis. For the nine months ended September 30, 2017, no individual country exceeded 10% of consolidated revenue, on a ship-to destination basis. The Company’s long-lived assets located in Costa Rica represented the majority of the total long-lived assets as of September 30, 2018 and December 31, 2017. Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant accounting estimates and management judgments reflected in the consolidated condensed financial statements include items such as accounts receivable valuation and allowances, inventory valuation and allowances, valuation of acquired intangible assets, valuation of derivatives, estimation of assets’ useful lives and valuation of deferred income tax assets, including tax valuation allowances. Estimates are based on historical experience, where applicable, and other assumptions believed to be reasonable by management. Actual results may differ from those estimates under different assumptions or conditions. Concentration of Credit Risk and Other Risks and Uncertainties Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash, restricted cash and accounts receivable. The majority of the Company’s cash is held at one financial institution in the United States. The Company has not experienced any losses on its deposits of cash. All of the Company’s revenue has been derived from sales of its products in international markets, principally Europe, Middle East, Latin America, and Asia. In the international markets in which the Company participates, the Company uses a combination of distributors and makes direct sales to customers. The Company performs ongoing credit evaluations of its distributors and customers, does not require collateral, and maintains allowances for potential credit losses on customer accounts when deemed necessary. During the nine months ended September 30, 2018 and 2017, no customers accounted for more than 10% of the Company’s revenue. No customers accounted for more than 10% of the Company’s accounts receivable balance as of September 30, 2018 and December 31, 2017. Substantially all of the Company’s revenues are derived from the sale of Motiva Implants. The Company relies on NuSil Technology, LLC, or NuSil, as the sole supplier of medical-grade silicone used in Motiva Implants as well as other products that are manufactured under contract to other customers. During the nine months ended September 30, 2018 and 2017, the Company had purchases of $10.6 million, or 64.9% of total purchases, and $7.8 million, or 39.0% of total purchases, respectively, from Nusil. As of September 30, 2018 and December 31, 2017, we had an outstanding balance owed to this vendor of zero and $0.7 million, respectively. The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of regulatory approval of the Company’s current and potential future products, uncertainty of market acceptance of the Company’s products, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals and sole source suppliers. Products developed by the Company require clearances from the FDA or other international regulatory agencies prior to commercial sales. There can be no assurance that the products will receive the necessary clearances. If the Company was denied clearance, clearance was delayed, or the Company was unable to maintain its existing clearances, these developments could have a material adverse impact on the Company. Cash The Company’s cash consists of cash maintained in checking and interest-bearing accounts. The Company accounts for financial instruments with original maturities of three months or less at the date of purchase as cash equivalents. The Company held no cash equivalents as of September 30, 2018 and December 31, 2017. Restricted Cash As of September 30, 2018 and December 31, 2017, the restricted cash balance represented a certificate of deposit collateralizing payment of charges related to the Company's corporate credit card. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable is stated at invoice value less estimated allowances for returns and doubtful accounts. The Company continually monitors customer payments and maintains an allowance for estimated losses resulting from customers’ inability to make required payments. In evaluating the Company’s ability to collect outstanding receivable balances, the Company considers various factors including the age of the balance, the creditworthiness of the customer, which is assessed based on ongoing credit evaluations and payment history, and the customer’s current financial condition. In cases where there are circumstances that may impair a specific customer’s ability to meet its financial obligations, an allowance is recorded against amounts due, which reduces the net recognized receivable to the amount reasonably believed to be collectible. As of September 30, 2018, an allowance of $72,000 was recorded for product returns. Prior to 2018, returns of products have been de minimis and accordingly no allowance for returns was recorded as of December 31, 2017. Inventory and Cost of Revenue Inventory is stated at the lower of cost to purchase or manufacture the inventory or the net realizable value of such inventory. Cost is determined using the standard cost method which approximates actual costs using the first-in, first-out basis. The Company regularly reviews inventory quantities considering actual losses, projected future demand, and remaining shelf life to record a provision for excess and slow-moving inventory. No inventory allowance has been recorded as of September 30, 2018 and December 31, 2017. The Company recognizes the cost of inventory transferred to the customer in cost of revenue when revenue is recognized. Shipping and Handling Costs Shipping and handling costs are expensed as incurred and are included in selling, general and administrative, or SG&A, expenses. For the nine months ended September 30, 2018 and 2017, shipping and handling costs were $1.4 million and $0.9 million, respectively. For the three months ended September 30, 2018 and 2017, shipping and handling costs were $0.6 million and $0.5 million, respectively. Revenue Recognition The Company recognizes revenue related to sales of products to distributors or directly to customers in markets where it has regulatory approval, net of trade discounts and allowances. The Company recognizes revenue in accordance with Accounting Standards Codification, or ASC, 605 Revenue Recognition when all of the following criteria are met: ▪persuasive evidence of an arrangement exists; ▪the sales price is fixed or determinable; ▪collection of the relevant receivable is probable at the time of sale; and ▪delivery has occurred or services have been rendered. The Company recognizes revenue related to the sales of products to distributors at the time of shipment of the product, which represents the point in time when the customer has taken ownership and assumed the risk of loss and the required revenue recognition criteria are satisfied. The Company’s distributors are obligated to pay within specified terms regardless of when, or if, they sell the products. The Company’s contracts with distributors typically do not contain right of return or price protection and have no post-delivery obligations. Appropriate reserves are established for anticipated sales returns based on historical experience, recent gross sales and any notification of pending returns. The Company recognizes revenue when title to the product and risk of loss transfer to customers, provided there are no remaining performance obligations required of the Company or any written matters requiring customer acceptance. The Company allows for the return of product from direct customers in certain regions within fifteen days after the original sale and records estimated sales returns as a reduction of sales in the same period revenue is recognized. Sales return provisions are calculated based upon historical experience with actual returns. Actual sales returns in any future period are inherently uncertain and thus may differ from the estimates. If actual sales returns differ significantly from the estimates, an adjustment to revenue in the current or subsequent period is recorded. As of September 30, 2018, an allowance of $72,000 was recorded for product returns. Prior to 2018, returns of products have been de minimis and accordingly no allowance for returns was recorded as of December 31, 2017. A portion of the Company’s revenue is generated from the sale of consigned inventory maintained at physician, hospital, and clinic locations. For these products, revenue is recognized at the time the Company is notified by the consignee that the product has been implanted, not when the consigned products are delivered to the consignee’s warehouse. The Company has a limited warranty to distributors for the shelf life of the product, which is five years from the time of manufacture. Estimated warranty obligations are recorded at the time of sale. The Company also offers a warranty to patients in the event of rupture and a replacement program for capsular contracture events provided certain registration requirements are met. Revenue for extended warranties are recognized ratably over the term of the agreement. To date, these warranty and program costs have been de minimis. The Company will continue to evaluate the warranty reserve policies for adequacy considering claims history. Deferred revenue primarily consists of payments received in advance of meeting revenue recognition criteria. The Company has received payments from distributors to provide distribution exclusivity within a geographic area and recognizes deferred revenue on a ratable basis over the term of such contractual distribution relationship. Additionally, the Company has received payments from customers in direct markets prior to surgical implantation, and recognizes deferred revenue at the time the Company is notified by the customer that the product has been implanted. For all arrangements, any revenue that has been deferred and is expected to be recognized beyond one year is classified as long-term deferred revenue and included in “Other liabilities, long term” on the consolidated balance sheets. Research and Development Costs related to research and development, or R&D, activities are expensed as incurred. R&D costs primarily include personnel costs, materials, clinical expenses, regulatory expenses, product development, consulting services, outside research activities, all of which are directly related to research and development activities. The Company estimates FDA clinical trial expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations that conduct and manage clinical trials on its behalf. In accruing service fees, the Company estimates the time period over which services will be performed and the level of patient enrollment and activity expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. Selling, General and Administrative Expenses SG&A expenses include sales and marketing costs, payroll and related benefit costs, insurance expenses, shipping and handling costs, legal and professional fees and administrative overhead. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the assets’ estimated useful lives of five to ten years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful life of the asset or the remaining lease term after factoring expected renewal periods. Upon retirement or disposal of assets, the costs and related accumulated depreciation are eliminated from the accounts and any gain or loss is recognized in operations. Maintenance and repairs are expensed as incurred. Substantially all of the Company’s manufacturing operations and related property and equipment is located in Costa Rica. Goodwill and Intangible Assets The Company records the excess of the acquisition purchase price over the net fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as goodwill. In accordance with ASC 350, Intangibles - Goodwill and Other, the Company tests goodwill for impairment annually during the fourth quarter of each year and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In connection with the annual impairment test for goodwill, the Company elected the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If the Company determines that it was more likely than not that the fair value of the reporting unit is less than its carrying amount, then the impairment test is performed. Consistent with the Company's assessment that it has only one reporting segment, the Company has determined that it has only one reporting unit and tests goodwill for impairment at the entity level using the two-step process required by ASC 350. In the first step, the Company compares the carrying amount of the reporting unit to the fair value of the enterprise. If the fair value of the enterprise exceeds the carrying value, goodwill is not considered impaired and no further testing is required. If the carrying value of the enterprise exceeds the fair value, goodwill is potentially impaired, and the second step of the impairment test must be performed. In the second step, the Company compares the implied fair value of the goodwill, as defined by ASC 350, to its carrying amount to determine the impairment loss, if any. The Company capitalizes certain costs related to intangible assets, such as patents and trademarks and records purchased intangible assets at their respective estimated fair values at the date of acquisition. Purchased finite-lived intangible assets are being amortized using the straight-line method over their remaining estimated useful lives, which range from two to fifteen years. The Company evaluates the remaining useful lives of intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to the remaining estimated amortization period. The Company tests indefinite-lived intangible assets for impairment on at least an annual basis and whenever circumstances suggest the assets may be impaired. If indicators of impairment are present, the Company evaluates the carrying value of the intangible assets in relation to estimates of future undiscounted cash flows. The Company also evaluates the remaining useful life of an indefinite-lived intangible asset to determine whether events and circumstances continue to support an indefinite useful life. During the year ended December 31, 2017, there has been no impairment of goodwill or intangible assets based on the qualitative assessments performed by the Company. As of September 30, 2018, no triggering events have occurred which would indicate that the acquired intangible asset values may not be recoverable. Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. When such an event occurs, management determines whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the related asset group’s carrying value. If an asset is considered impaired, the asset is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of the asset. There were no impairment charges, or changes in estimated useful lives recorded during the year ended December 31, 2017. As of September 30, 2018, no triggering events have occurred which would indicate that the acquired intangible asset values may not be recoverable. Debt and Embedded Derivatives The Company applies the accounting standards for derivatives and hedging and for distinguishing liabilities from equity when accounting for hybrid contracts. The Company accounts for convertible debt instruments when the Company has determined that the embedded conversion options should not be bifurcated from their host instruments in accordance with ASC 470-20 Debt with Conversion and Other Options. The Company records, when necessary, discounts to notes payable for the intrinsic value of conversion and other options embedded in debt instruments as a beneficial conversion option based upon the differences between the fair value of the underlying shares at the commitment date of the note transaction and the effective conversion price embedded in the note (see Note 6). The Company uses option pricing valuation models to determine the fair value of embedded derivatives and records any change in fair value as a component of other income or expense in the consolidated statements of operations (see Note 5). Debt Issuance Costs and Debt Discounts Costs incurred in connection with the issuance of new debt are capitalized. Capitalizable debt issuance costs paid to third parties and debt discounts, net of amortization, are recorded as a reduction to the long-term debt balance on the consolidated balance sheets. Amortization expense on capitalized debt issuance costs and debt discounts related to loans are calculated using the effective interest method over the term of the loan commitment and is recorded as interest expense in the condensed consolidated statements of operations. Income Taxes The Company records income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or income tax returns. In estimating future tax consequences, expected future events, enactments or changes in the tax law or rates are considered. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized. The Company operates in various tax jurisdictions and is subject to audit by various tax authorities. The Company records uncertain tax positions based on a two-step process whereby (1) a determination is made as to whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold the Company recognizes the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. Significant judgment is required in the identification of uncertain tax positions and in the estimation of penalties and interest on uncertain tax positions. There were no material uncertain tax positions in fiscal 2017 and for the nine months ended September 30, 2018. Foreign Currency The financial statements of the Company’s foreign subsidiaries whose functional currencies are the local currencies are translated into U.S. dollars for consolidation as follows: assets and liabilities at the exchange rate as of the balance sheet date, stockholders’ equity at the historical rates of exchange, and income and expense amounts at the average exchange rate for the period. Translation adjustments resulting from the translation of the subsidiaries’ accounts are included in “Accumulated other comprehensive income (loss)” as equity in the condensed consolidated balance sheet. Transactions denominated in currencies other than the applicable functional currency are converted to the functional currency at the exchange rate on the transaction date. At period end, monetary assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Gains and losses resulting from foreign currency transactions are included within “Other income (expense), net” in the condensed consolidated statement of operations. For the nine months ended September 30, 2018, foreign currency transaction loss amounted to $3.2 million as compared to a foreign currency transaction gain of $24,000 for the nine months ended September 30, 2017. Deferred Offering Costs Deferred offering costs, consisting of legal, accounting and other fees and costs relating to the Company’s IPO, are capitalized within “Other non-current assets” on the consolidated balance sheet. Due to a delayed IPO process beyond 90 days, the Company expensed the previously deferred offering costs of $1.6 million during the year ended December 31, 2017. In 2018, the Company resumed the IPO activities and capitalized $1.5 million of deferred offering costs which, upon completion of the IPO, were reclassified to equity to offset the IPO proceeds. Comprehensive Income (Loss) The Company’s comprehensive loss consists of net loss and foreign currency translation adjustments arising from the consolidation of the Company’s foreign subsidiaries. Share-Based Compensation The Company measures and recognizes compensation expense for all stock-based awards in accordance with the provisions of ASC 718, Stock Compensation. Stock-based awards granted include stock options, restricted stock units, or RSUs, and restricted stock awards, or RSAs. Share-based compensation expense for stock options and RSAs granted to employees is measured at the grant date based on the fair value of the awards and is recognized as an expense ratably on a straight-line basis over the requisite service period. The fair value of options to purchase shares granted to employees is estimated on the grant date using the Black-Scholes option valuation model. The company accounts for stock options and RSAs issued to non-employees under ASC 505-50 Equity: Equity-Based Payments to Non-Employees, using the Black-Scholes option valuation model to value stock options. The fair value of such non-employee awards is remeasured at each quarter-end over the vesting period. The calculation of share-based compensation expense requires that the company make assumptions and judgments about the variables used in the Black-Scholes model, including the expected term, expected volatility of the underlying common shares, risk-free interest rate and dividends. The company adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, under which it recognizes forfeitures as they occur rather than applying a prospective forfeiture rate in advance (see Note 10). Net Income (Loss) Per Share Basic net income (loss) per share is calculated by dividing the net income (loss) attributable to shareholders by the weighted-average number of shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, any shares issuable upon exercise of share warrants, share options and non-vested restricted stock outstanding under the Company’s equity plan are potentially dilutive securities. Diluted net loss per share is the same as basic net loss per share for periods where the Company reported a net loss because including the dilutive securities would be anti-dilutive. Recent Accounting Standards Periodically, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption. Under the Jumpstart Our Business Startups Act of 2012, or JOBS Act, the Company meets the definition of an emerging growth company, and has elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. The Company will remain an emerging growth company until the earliest of (1) the last day of its first fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million of the prior June 30th and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. The following recent accounting pronouncements issued by the FASB, could have a material effect on our financial statements: Recently Adopted Accounting Standards In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides additional guidance on evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The guidance requires an entity to evaluate if substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the new guidance would define this as an asset acquisition; otherwise, the entity then evaluates whether the asset meets the requirement that a business include, at a minimum, an input and substantive process that together significantly contribute to the ability to create outputs. The Company early adopted this ASU on a prospective basis on July 1, 2018. The adoption of this ASU did not have a material impact on the financial statements. In July 2017, the Company early adopted ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities From Equity (Topic 480); Derivatives And Hedging (Topic 815): (Part I) Accounting For Certain Financial Instruments With Down Round Features, (Part Ii) Replacement Of The Indefinite Deferral For Mandatorily Redeemable Financial Instruments Of Certain Nonpublic Entities And Certain Mandatorily Redeemable Noncontrolling Interests With A Scope Exception. As a result, certain warrants that were previously classified as a liability due to an existence of down round features became qualified to be classified as equity. The adoption of this standard resulted in $1.0 million reclassification of warrant liability into additional paid in capital as of July 1, 2017. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU provides amendments to the current guidance on determining which changes to the terms and conditions of share-based payment awards require the application of modification accounting. The effects of a modification should be accounted for unless there are no changes between the fair value, vesting conditions, and classification of the modified award and the original award immediately before the original award is modified. ASU 2017-09 became effective for non-public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. The adoption of this ASU did not have a material impact on the financial statements. Recently Issued Accounting Standards In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements. The modifications removed the following disclosure requirements: (i) the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy; (ii) the policy for timing of transfers between levels; and (iii) the valuation processes for Level 3 fair value measurements. This ASU added the following disclosure requirements: (i) the changes in unrealized gains and losses for the period included in other comprehensive income ("OCI") for recurring Level 3 fair value measurements held at the end of the reporting period; and (ii) the range and weighted average of significant observable inputs used to develop Level 3 fair value measurements. This update is effective for non-public entities for annual and interim periods beginning after December 15, 2020, with early adoption permitted. As the requirements of this literature are disclosure only, ASU 2018-13 will not impact our financial condition or results of operations. In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with accounting for employee share-based compensation. This guidance is effective for non-public entities for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently in the process of evaluating the impact of this guidance on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of their classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases today. ASC 842 supersedes the previous leases standard, ASC 840 Leases. The standard is effective for non-public business entities for fiscal years beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the effects, if any, that the adoption of this guidance will have on its consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 provides two methods of retrospective application. The first method would require the Company to apply ASU 2014-09 to each prior reporting period presented. The second method would require the Company to retrospectively apply ASU 2014-09 with the cumulative effect recognized at the date of initial application. ASU 2014-09 is effective for non-public business entities beginning in fiscal 2019 as a result of ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which was issued by the FASB in August 2015 and extended the original effective date by one year. In 2016, the FASB issued additional updates to the new revenue standard relating to reporting revenue on a gross versus net basis, identifying performance obligations and licensing arrangements, and narrow-scope improvements and practical expedients, respectively. The effective date of this additional update is the same as that of ASU 2014-09. The Company is currently evaluating the impact of adopting the available methodologies of ASU 2014-09 and the related updated revenue recognition guidance upon its financial statements in future reporting periods. The Company has not yet selected a transition method. The Company is in the process of evaluating the new standard against its existing accounting policies, including the timing of revenue recognition, and its contracts with customers to determine the effect the guidance will have on its financial statements and what changes to systems and controls may be warranted. The Company plans to complete the assessment on the impact of the ASU 2014-09 adoption in December 2018 and adopt the new standard on January 1, 2019. |
Balance Sheet Accounts |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Accounts | Balance Sheet Accounts Inventory
Property and Equipment, Net
For the nine months ended September 30, 2018 and 2017, depreciation and amortization expense related to property and equipment was $1.6 million and $1.1 million, respectively. For the three months ended September 30, 2018 and 2017, depreciation and amortization expense related to property and equipment was $0.5 million and $0.4 million, respectively. The Company entered into capital leases relating to equipment and vehicles and recorded the fair value of the lease payments on the initial contract date, and is amortizing the assets over the term of the leases. As of September 30, 2018 and December 31, 2017, the gross asset value for capital lease assets was $1.4 million and $1.3 million, respectively. Depreciation expense for assets under capital leases has been de minimus. In August 2015, the Company entered into a contract with the Zona Franca Coyol, S.A. to have them build a new manufacturing facility in Costa Rica. The construction of the new 27,900 square foot facility began in November 2015 and was finished during the first quarter of fiscal 2017. The construction costs were paid for by the Company. The Company has an option to purchase the title to the building for approximately $3.5 million and on May 11, 2016 the Company provided notice of the intent to exercise the purchase right and expects the transaction to complete by the end of 2018. Currently, the Company leases the building from Zona Franca Coyol, S.A. for approximately $28,000 per month. |
Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Intangible assets resulting from the acquisitions of entities accounted for using the acquisition method of accounting are recorded at the estimated fair value of the assets acquired. Purchased intangibles include certain patents and license rights, 510(k) authorization by the FDA to sell a medical device and other intangible assets. The Company’s goodwill and most intangibles at September 30, 2018 are the result of acquisitions of certain assets formerly owned by VeriTeQ Corporation in November 2015 and Femiline AB in November 2017 and business acquisitions of Establishment Labs Brasil Productos para Saude Ltda. in January 2016, European Distribution Center Motiva BVBA in March 2016 and Motiva Implants France in September 2016. Finite-lived intangibles are amortized over their estimated useful lives based on expected future benefit. In addition to the intangibles acquired, the Company capitalized certain patent and license rights as identified intangibles based on patent and license rights agreements entered into over the past several years. Additionally, the Company capitalized certain software development costs associated with its development of a manufacturing software module, which the Company began amortizing in fiscal 2017 upon implementation of the software. There were no changes in the carrying amount of goodwill during the nine months ended September 30, 2018:
Only goodwill related to the 2017 acquisition is deductible for tax purposes (see Note 11). The carrying amounts of these intangible assets as of September 30, 2018 were as follows:
The carrying amounts of intangible assets as of December 31, 2017 were as follows:
The amortization expense associated with intangible assets was $0.5 million and $0.2 million for the nine months ended September 30, 2018 and 2017, respectively. For the three months ended September 30, 2018 and 2017, amortization expense related to intangible assets was $0.2 million and $0.1 million, respectively. In fiscal 2018, non-product related amortization was recorded in SG&A while product related amortization was recorded in cost of revenue. In fiscal 2017, all amortization expense was recorded in cost of revenue as non-product related amortization was de minimus. As of September 30, 2018, the amortization expense related to identifiable intangible assets, with definite useful lives, in future periods is expected to be as follows:
The Company evaluates the recoverability of goodwill and indefinite-lived intangible assets annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. As of September 30, 2018, no triggering events have occurred which would indicate that the acquired intangible asset values may not be recoverable. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements The carrying value of the Company’s cash, restricted cash, accounts receivable, accounts payable and short-term notes payable approximate fair value due to the short-term nature of these items. Based on the borrowing rates available to the Company for debt with similar terms and consideration of default and credit risk, the carrying value of the related-party notes payable approximates its fair value. Contingent equity consideration, warrants and put and call options that qualify for liability treatment are carried at fair value and re-measured at each reporting period. Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:
The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy at period end:
The fair value measurement of derivatives and contingent consideration related to the business acquisition completed in fiscal 2017 is based on significant inputs not observed in the market and thus represents a Level 3 measurement. In August 2017 the Company entered into a credit agreement, or the Madryn Credit Agreement, with Madryn Health Partners, LP, or Madryn, as administrative agent, and a syndicate of lenders (see Note 6). The Company determined that the Madryn Credit Agreement contained put options related to early redemption mandatory prepayment terms in case of change in control or an event of default and a call option related to voluntary repayment option. The Company valued these put options and the call option and allocated a fair value of $15.1 million for these identified embedded derivatives as a debt discount on the original commitment date. An additional $5.0 million debt discount was recorded on respective borrowing dates when the Company met the required milestones and borrowed an additional $10.0 million in the fourth quarter of fiscal 2017. The Company revalued the options as of each reporting period and recorded the change in the fair value in the consolidated statement of operations as other income or expense. Valuation of the embedded derivatives is complex and requires interest rate simulation, estimating the resultant bond valuation and the resultant pay-off to the option holder. The Company estimated the fair value of the embedded redemption options using the probability-weighted Binomial Lattice Model which is based on generalized binomial option pricing formula. The Binomial Lattice Model allows for the possibility of exercise before the end of the option’s life and considers future interest rates, volatility and other data with regards to the Company’s credit rating and credit spread. The probability of a change in control occurring was determined to be 60% at September 30, 2018 and 90% at December 31, 2017. The Company used the following assumptions to value Madryn derivatives: Put Option Liability (Madryn)
Call Option Liability (Madryn)
On November 17, 2017, the Company and Femiline AB and Johan Anderson, or the Seller, entered into an agreement to purchase certain assets from the Seller. The assets purchased included all existing inventory previously sold by the Company to the Seller, all customer relationships and a covenant not to compete. The aggregate purchase price for the assets purchased was 100,000 Class A Ordinary shares of the Company, contingently issuable upon achievement of specific milestones. Based on the valuation of the Company’s shares performed by a valuation specialist, the contingently issuable shares had an aggregate value of $1.0 million calculated as a product of contingently issuable shares and estimated fair value per share (see Note 11) on the date of the agreement. As of September 30, 2018, the fair value of the contingently issuable shares was determined using the closing price of the Company’s publicly traded shares. As of September 30, 2018 and December 31, 2017, the short term and long term portions of contingent consideration liability were included in “Other liabilities, short term” and “Other liabilities, long term”, respectively. The estimates are based, in part, on subjective assumptions and could differ materially in the future. During the periods presented, the Company has not changed the manner in which it values liabilities that are measured at fair value using Level 3 inputs. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the nine months ended September 30, 2018 or during the year ended December 31, 2017. The fair value of the debt conversion feature liability includes the estimated volatility and risk-free rate. The higher/lower the estimated volatility, the higher/lower the value of the debt conversion feature liability. The higher/lower the risk-free interest rate, the higher/lower the value of the debt conversion feature liability. The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial instruments as follows:
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Notes Payable Related Party In August 2015, the Company entered into agreements with all of the Class Z redeemable convertible preferred shareholders to exchange their outstanding shares and accumulated dividends for notes payable with a principal balance of $4.2 million. Per the original agreement, the notes bore interest at a simple rate of 7% per annum with the interest payments due annually starting March 30, 2017 and a note maturity date of March 31, 2020. Per agreement, as amended, the notes became due and payable on July 23, 2018 when the Company successfully completed the IPO. During the nine months ended September 30, 2018 and 2017, the Company recorded interest expense of $0.2 million, to accrue for interest due on the notes. The Company repaid the balance due of $5.1 million, including accrued interest of $0.9 million, in August 2018. The Company recorded the notes on the balance sheet as follows:
Related Party Convertible Notes Payable In August 2015, the Company entered into a Note and Warrant Purchase Agreement, or the Note Agreement or the Notes, with CPH TU, LP, or CPH, a primary shareholder, to borrow up to $15.0 million. The Notes issued pursuant to the agreement bore interest at a simple rate of 10% per annum. In January and July 2016, the Company amended the Note Agreement to increase the aggregate borrowing limit to $18.0 million and $19.8 million, respectively. In September 2016, the Company entered into an amended agreement with CPH to terminate the warrants originally issued in connection with the Notes, fix the conversion rate, and extend the maturity date. In connection with the Notes, the Company issued warrants for the purchase of ordinary shares to CPH and to Rockport Ventures, the placement agent. The estimated fair value of the warrants issued in August 2015 was determined to be $1.1 million, which was recorded as a debt discount and was being amortized using the effective interest rate method over the term of the Notes (see Note 9). The Company determined that the Note Agreement contained several put options related to liquidity events or an event of default. The Company valued these put options and allocated the fair value of $0.1 million for these identified embedded derivatives as a debt discount on the original commitment date in August 2015. The Company revalued the put options as of each reporting period and recorded the change in the fair value in the consolidated statement of operations as other income or expense (see Note 5). August 2017 Conversion On August 24, 2017, CPH elected to convert the principal and the accrued interest outstanding under the Notes into 5,869,417 shares of the Company’s Class B ordinary shares. The related beneficial conversion feature liability was amortized into non-cash interest expense while the CPH put option liability expired upon the conversion of the notes. There was no outstanding balance under the Notes as of September 30, 2018 or December 31, 2017. Madryn Debt On August 24, 2017 the Company entered into a credit agreement, or the Madryn Credit Agreement, with Madryn Health Partners, LP, or Madryn, as administrative agent, and a syndicate of lenders. The Madryn Credit Agreement provides for a credit facility for a maximum principal amount of $55.0 million, $30.0 million (Term A) of which became available upon signing. The final maturity date under the Madryn Credit Agreement is June 30, 2023. The availability of the additional Term B and Term C commitments under the Madryn Credit Agreement, which are for an aggregate principal amount of up to $25 million, are subject to the Company achieving certain revenue milestones. The Company met some of these milestones and borrowed an additional $5.0 million (Term B-1) on October 31, 2017 and $5.0 million (Term B-2) on December 15, 2017 bringing up the total outstanding principal balance to $40.0 million as of December 31, 2017. As of June 15, 2018, we were eligible to draw down an additional $5.0 million (Term B-3) under the amended Credit Agreement, and an additional $10.0 million (Term C) may become available on or before June 30, 2020 if the required milestones for this tranche are achieved. The Company has not yet met the required milestones for the Term C tranche as of the date of the issuance of these interim financial statements. The availability of each tranche is also conditioned on the Company having advanced the maximum loan amount under each prior tranche. In connection with the Madryn Credit Agreement, the Company and certain of its subsidiaries, granted a security interest in substantially all of the property of the Company and certain of its subsidiaries, including, without limitation, intellectual property, and pledges of certain shares of the Brazilian subsidiary and the Belgian subsidiary, subject to certain excluded collateral exceptions. Borrowings under the Madryn Credit Agreement bear interest at a rate equal to 3-month LIBOR plus 11.0% per annum provided that no default has occurred. In an event of a default, the interest would increase by an additional 4.0% per annum. The weighted average interest rate under the credit agreement was approximately 13.3% at September 30, 2018. The Company incurred $4.0 million in interest expense in connection with Madryn Credit Agreement during the nine months ended September 30, 2018 and $1.4 million in fiscal 2017. No principal payments are due until 2021. Eight quarterly payments of 12.5% of the principal amounts borrowed under each tranche are due beginning September 30, 2021 and each quarter end through and including June 30, 2023. The Company also determined that the Madryn Credit Agreement contained put options which are mandatory repayment provisions related to liquidity events or an event of default and a call option related to voluntary repayment option. The Company valued these put options and the call option and allocated a fair value of $15.1 million for these identified embedded derivatives as a debt discount on the original commitment date in August 2017. An additional $5.0 million debt discount was recorded on respective borrowing dates when the Company met the required milestones and borrowed an additional $10.0 million in the fourth quarter of fiscal 2017. The Company revalues the options as of each reporting period and records the change in the fair value in the consolidated statement of operations as other income or expense (see Note 5). The Company also incurred legal expenses of $1.3 million in the third quarter of fiscal 2017, which were recorded as a debt discount and are being amortized over the term of the Madryn Credit Agreement. The Madryn Credit Agreement contains customary affirmative and negative covenants, including, but not limited to, restrictions on the ability to incur additional indebtedness, create liens, make certain investments, make restricted payments, enter into or undertake certain liquidations, mergers, consolidations or acquisitions and dispose of assets or subsidiaries. In addition, the Madryn Credit Agreement requires the Company to maintain minimum revenues and liquidity. In January 2018, management made an assessment that the Company would potentially technically default on the Madryn Credit Agreement due to its investment in our Brazilian subsidiary approaching the $5.0 million limit. The Company informed Madryn and the syndicate of lenders, or the Lenders, of the potential technical default event and started the process to obtain a forbearance agreement. The Company initially defaulted on the Madryn Credit Agreement on January 19, 2018 when it failed to put a Qualifying Control Agreement in place for certain bank deposit accounts and subsequently on February 28, 2018 when its investment in its Brazilian subsidiary exceeded the allowable $5.0 million threshold permitted under the Madryn Credit Agreement. Accordingly, the Company recorded the Madryn debt as a current liability on the consolidated balance sheet as of December 31, 2017. Effective June 15, 2018, Madryn Credit Agreement was amended to remove the restrictive covenants that resulted in the technical defaults which allowed the Company to reclassify the arrangement as long-term as of September 30, 2018. The Company recorded Madryn debt on the balance sheet as follows:
The Company granted Madryn the right to purchase up to $2.0 million of shares issued by the Company in the next succeeding eligible equity investment in the Company. Under this agreement, to the extent the Company redeems or repurchases any shares from any holder, the Company shall offer to resell one half of the repurchased shares to Madryn at the same price paid by the Company to purchase or retire the shares. The Company has completed qualified financings during the first half of 2018 and also completed its IPO in July 2018; Madryn chose not to exercise their right to purchase shares in those financings. As of September 30, 2018, the Company is in compliance with all debt covenants. |
Commitment and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitment and Contingencies | Commitments and Contingencies Operating Leases We lease certain facilities under various operating leases. Most of the lease agreements provide us with the option of renewing our leases at the end of the initial lease term, at fair market rates. In most cases, we expect that in the normal course of business, facility leases will be renewed or replaced by other leases. For the nine months ended September 30, 2018 and 2017, rent expense was $0.7 million and $0.6 million, respectively. For the three months ended September 30, 2018 and 2017, rent expense was $0.3 million and $0.2 million, respectively. On May 18, 2018, the Company’s wholly-owned subsidiary in Belgium entered into a lease agreement for an office rental for an approximate annual base lease amount of approximately $0.2 million per year for a duration of nine years. Future minimum lease payments under the operating leases as of September 30, 2018 were as follows:
Capital Lease The Company entered into capital lease arrangements relating to software, equipment and vehicles. The lease periods are from one to seven years. The repayments are made monthly with an interest rates ranging from 4% to 7% per year. Future minimum lease payments under these capital leases as of September 30, 2018 were as follows:
Contingencies Periodically, the Company may have certain contingent liabilities that arise in the ordinary course of business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. There have been no contingent liabilities requiring accrual or disclosure at September 30, 2018 and December 31, 2017. Indemnification The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third-party with respect to the Company’s technology. The term of these indemnification agreements is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future, but have not yet been made. The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual. The Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. No liability associated with such indemnifications has been recorded to date. |
Shareholders' Equity (Deficit) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity (Deficit) | Shareholders’ Equity (Deficit) General Under the Memorandum of Association and Articles of Association, or Articles, in effect as of December 31, 2017, the Company had authorized 84,050,000 common shares with a par value of $1.00 per share, 13,482,782 Class A ordinary shares with a par value of $1.00 per share, 7,723,848 Class B ordinary shares with a par value of $1.00 per share, 96,301 Class C ordinary shares with no par value, 1,539,359 Class D ordinary shares with no par value, 323,366 Class E ordinary shares with no par value and 357,143 Class F ordinary shares with no par value. During the first half of 2018, the Company amended its Articles to authorize 1,250,000 Class G and 625,000 Class G-1 ordinary shares with no par value. On July 23, 2018, the Company completed its initial public offering, or IPO, whereby it sold a total of 4,272,568 shares of common stock at $18.00 per share including 557,291 shares sold to underwriters for the exercise of their option to purchase additional shares. The Company received net proceeds from the IPO of approximately $70.1 million, after deducting underwriting discounts and commissions of $5.4 million and deferred offering costs of $1.5 million. All outstanding shares of ordinary stock were converted on a 1-to-1 basis into shares of the Company’s common stock of a single class of no par value. An unlimited number of common shares was authorized. Common Shares As of September 30, 2018 and December 31, 2017, 20,539,095 and zero shares, respectively, of common shares were issued and 20,131,025 and zero shares, respectively, were outstanding. During the nine months ended September 30, 2018, the Company issued restricted stock awards to employees and contractors. The Company records the awards as outstanding equity as they vest (see Note 10). Ordinary Shares As of September 30, 2018 and December 31, 2017, zero and 15,743,705 shares, respectively, of ordinary shares were issued and zero and 14,522,495 shares, respectively, were outstanding. Class A and B Ordinary Shares As of September 30, 2018 and December 31, 2017, zero and 13,427,536 shares, respectively, of ordinary Class A and Class B shares were issued and zero and 12,206,326 shares, respectively, were outstanding. Class A and Class B ordinary shares have a par value of $1.00 per share. Class C, D, E, F, G and G-1 Ordinary Shares As of September 30, 2018 and December 31, 2017, zero and 2,316,169 shares, respectively, of ordinary Class C, D, E, F, G and G-1 shares were issued and outstanding. Class C, D, E, F, G and G-1 shares had no par value. In multiple closings during the first nine months ended September 30, 2018, the Company issued an aggregate of $6.2 million of Class G ordinary shares at a purchase price of $16.00 per share to several investors. In connection with the issuance of these shares, the Company amended and restated its Articles to increase the authorized shares of the Company to a total of 109,447,799 shares and to authorize 1,250,000 Class G and 625,000 Class G-1 shares. In May 2018, the Company issued an aggregate of $10.0 million of Class G-1 ordinary shares at a purchase price of $16.00 per share to entities affiliated with RTW Investments. The Company had reserved common shares for future issuances as follows:
Warrants In connection with the Notes issued to CPH in August 2015, the Company agreed to issue warrants to purchase ordinary shares to CPH and to Rockport Ventures, the placement agent for the Notes. In March 2017, the Rockport Warrants were canceled and new warrants for the purchase of 145,000 Class B ordinary shares were issued to parties related to Rockport Ventures, with a fixed exercise price of $3.80 per share. During the first half of 2017, the Company classified the fair value of these warrants as liabilities on the balance sheet due to the existence of certain cash settlement features that are not within the sole control of the Company and variable settlement provision that cause them to not be indexed to the Company’s own shares. The value of the CPH warrants was estimated using the Black-Scholes valuation model which approximates a Lattice valuation model, and at issuance, the Company initially recorded the fair value of the warrants as a debt discount against the related loan balance in its consolidated balance sheet. The recorded value of the warrants is being amortized to interest expense over the estimated repayment term of the related loans. The value of the Rockport Ventures warrants was estimated using the Black Sholes valuation model which approximates a Lattice valuation model, and at issuance, the Company initially recorded the fair value of the warrants as a debt offering cost against the related loan balance in its balance sheet. The recorded value of the warrants is being amortized to interest expense using the straight-line method over the term of the related loans. During the nine months ended September 30, 2018, a warrant to purchase 31,474 shares was exercised. As of September 30, 2018 and December 31, 2017, 113,526 and 145,000 warrants to purchase the Company’s common shares, respectively, were outstanding and exercisable:
In July 2017, the Company early adopted ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities From Equity (Topic 480); Derivatives And Hedging (Topic 815): (Part I) Accounting For Certain Financial Instruments With Down Round Features, (Part Ii) Replacement Of The Indefinite Deferral For Mandatorily Redeemable Financial Instruments Of Certain Nonpublic Entities And Certain Mandatorily Redeemable Noncontrolling Interests With A Scope Exception. As a result, certain warrants that were previously classified as a liability due to an existence of down round features became qualified to be classified as equity. The adoption of this standard resulted in $1.0 million reclassification of warrant liability into additional paid in capital as of July 1, 2017. |
Warrants |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants | Shareholders’ Equity (Deficit) General Under the Memorandum of Association and Articles of Association, or Articles, in effect as of December 31, 2017, the Company had authorized 84,050,000 common shares with a par value of $1.00 per share, 13,482,782 Class A ordinary shares with a par value of $1.00 per share, 7,723,848 Class B ordinary shares with a par value of $1.00 per share, 96,301 Class C ordinary shares with no par value, 1,539,359 Class D ordinary shares with no par value, 323,366 Class E ordinary shares with no par value and 357,143 Class F ordinary shares with no par value. During the first half of 2018, the Company amended its Articles to authorize 1,250,000 Class G and 625,000 Class G-1 ordinary shares with no par value. On July 23, 2018, the Company completed its initial public offering, or IPO, whereby it sold a total of 4,272,568 shares of common stock at $18.00 per share including 557,291 shares sold to underwriters for the exercise of their option to purchase additional shares. The Company received net proceeds from the IPO of approximately $70.1 million, after deducting underwriting discounts and commissions of $5.4 million and deferred offering costs of $1.5 million. All outstanding shares of ordinary stock were converted on a 1-to-1 basis into shares of the Company’s common stock of a single class of no par value. An unlimited number of common shares was authorized. Common Shares As of September 30, 2018 and December 31, 2017, 20,539,095 and zero shares, respectively, of common shares were issued and 20,131,025 and zero shares, respectively, were outstanding. During the nine months ended September 30, 2018, the Company issued restricted stock awards to employees and contractors. The Company records the awards as outstanding equity as they vest (see Note 10). Ordinary Shares As of September 30, 2018 and December 31, 2017, zero and 15,743,705 shares, respectively, of ordinary shares were issued and zero and 14,522,495 shares, respectively, were outstanding. Class A and B Ordinary Shares As of September 30, 2018 and December 31, 2017, zero and 13,427,536 shares, respectively, of ordinary Class A and Class B shares were issued and zero and 12,206,326 shares, respectively, were outstanding. Class A and Class B ordinary shares have a par value of $1.00 per share. Class C, D, E, F, G and G-1 Ordinary Shares As of September 30, 2018 and December 31, 2017, zero and 2,316,169 shares, respectively, of ordinary Class C, D, E, F, G and G-1 shares were issued and outstanding. Class C, D, E, F, G and G-1 shares had no par value. In multiple closings during the first nine months ended September 30, 2018, the Company issued an aggregate of $6.2 million of Class G ordinary shares at a purchase price of $16.00 per share to several investors. In connection with the issuance of these shares, the Company amended and restated its Articles to increase the authorized shares of the Company to a total of 109,447,799 shares and to authorize 1,250,000 Class G and 625,000 Class G-1 shares. In May 2018, the Company issued an aggregate of $10.0 million of Class G-1 ordinary shares at a purchase price of $16.00 per share to entities affiliated with RTW Investments. The Company had reserved common shares for future issuances as follows:
Warrants In connection with the Notes issued to CPH in August 2015, the Company agreed to issue warrants to purchase ordinary shares to CPH and to Rockport Ventures, the placement agent for the Notes. In March 2017, the Rockport Warrants were canceled and new warrants for the purchase of 145,000 Class B ordinary shares were issued to parties related to Rockport Ventures, with a fixed exercise price of $3.80 per share. During the first half of 2017, the Company classified the fair value of these warrants as liabilities on the balance sheet due to the existence of certain cash settlement features that are not within the sole control of the Company and variable settlement provision that cause them to not be indexed to the Company’s own shares. The value of the CPH warrants was estimated using the Black-Scholes valuation model which approximates a Lattice valuation model, and at issuance, the Company initially recorded the fair value of the warrants as a debt discount against the related loan balance in its consolidated balance sheet. The recorded value of the warrants is being amortized to interest expense over the estimated repayment term of the related loans. The value of the Rockport Ventures warrants was estimated using the Black Sholes valuation model which approximates a Lattice valuation model, and at issuance, the Company initially recorded the fair value of the warrants as a debt offering cost against the related loan balance in its balance sheet. The recorded value of the warrants is being amortized to interest expense using the straight-line method over the term of the related loans. During the nine months ended September 30, 2018, a warrant to purchase 31,474 shares was exercised. As of September 30, 2018 and December 31, 2017, 113,526 and 145,000 warrants to purchase the Company’s common shares, respectively, were outstanding and exercisable:
In July 2017, the Company early adopted ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities From Equity (Topic 480); Derivatives And Hedging (Topic 815): (Part I) Accounting For Certain Financial Instruments With Down Round Features, (Part Ii) Replacement Of The Indefinite Deferral For Mandatorily Redeemable Financial Instruments Of Certain Nonpublic Entities And Certain Mandatorily Redeemable Noncontrolling Interests With A Scope Exception. As a result, certain warrants that were previously classified as a liability due to an existence of down round features became qualified to be classified as equity. The adoption of this standard resulted in $1.0 million reclassification of warrant liability into additional paid in capital as of July 1, 2017. |
Share-based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation | Share-Based Compensation In December 2015, the Board of Directors approved and adopted the 2015 Equity Incentive Plan, or 2015 Plan. Under the 2015 Plan, the Company may grant share options, equity appreciation rights, and restricted shares and restricted share units. Pursuant to the 2015 Plan, the Company has granted RSAs and stock options to Board of Directors, employees and consultants. The 2015 Plan, as amended, reserves 2,650,000 Class A shares for issuance. If an award granted under the 2015 Plan expires, terminates, is unexercised, or is forfeited, or if any shares are surrendered in connection with an incentive award, the shares subject to such award and the surrendered shares become available for further awards under the 2015 Plan. Concurrent with the closing of the IPO, the Board of Directors terminated the 2015 Plan and approved the 2018 Equity Incentive Plan, or the 2018 Plan, with an initial reserve of 1,500,000 shares of the Company’s common shares for issuance under the 2018 Plan. During the periods presented, the Company recorded the following share-based compensation expense for stock options and restricted stock awards:
Stock Options
As of September 30, 2018, 407,126 options were vested and exercisable with weighted-average exercise price of $4.81 per share and a total aggregate intrinsic value of $7.9 million. During the nine months ended September 30, 2018, 125,596 options were exercised at a price of $4.91 per share. The intrinsic value of the options exercised during the nine months ended September 30, 2018 and 2017 was $2.4 million and zero, respectively. Upon the exercise of stock options, the Company issued new shares from its authorized shares. There were no exercises of stock options during the year ended December 31, 2017. At September 30, 2018, unrecognized compensation expense was $3.7 million related to stock options granted to employees and Board of Directors and $6.7 million related to stock options granted to consultants. The weighted-average period over which such compensation expense will be recognized is 3.1 years. Stock Options Granted to Employees Share-based compensation expense for employees is based on the grant date fair value. The Company recognizes compensation expense for all share-based awards on a straight-line basis over the requisite service period of the awards, which is generally the vesting term of four years. During the nine months ended September 30, 2018 and 2017, the Company recognized $0.6 million and $62,000, respectively, of stock-based compensation expense for stock options granted to employees. The Company uses the Black-Scholes option valuation model to value options granted to employees and consultants, which requires the use of highly subjective assumptions to determine the fair value of share-based awards. The assumptions used in the Company’s option-pricing model represent management’s best estimates. These estimates are complex, involve a number of variables, uncertainties and assumptions and the application of management’s judgment. If factors change and different assumptions are used, the Company’s share-based compensation expense could be materially different in the future. The assumptions and estimates that the Company uses in the Black-Scholes model are as follows:
The fair value of stock options granted to employees in 2018 was estimated using the following assumptions:
The Company did not grant any stock options to employees during 2017. Stock Options Granted to Non-Employees Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock options are earned using an accelerated attribution method. The Company believes that the estimated fair value of the stock options is more readily measurable than the fair value of the services rendered. For the nine months ended September 30, 2018 and 2017, the Company recognized expense of $2.7 million and $0.7 million for stock options granted to consultants. The fair value of stock options granted to consultants was estimated using the following assumptions during the following periods presented:
Restricted Stock Each vested RSA and RSU entitles the holder to be issued one common share. These awards vest according to a vesting schedule determined by the Compensation Committee of the Company’s Board of Directors, generally over a one to four year period. The following table represents RSA activity for fiscal 2018:
The following table represents RSU activity for fiscal 2018:
The fair value of restricted stock is the grant date market value of common shares. The Company recognizes share-based compensation expense related to restricted stock using a straight-line method over the vesting term of the awards. The fair value of RSAs and RSUs that vested during the nine months ended September 30, 2018 and 2017, was $1.6 million and $1.5 million, which was calculated based on the market value of the Company’s common shares on the applicable date of vesting. As of September 30, 2018, we had unrecognized share-based compensation cost of approximately $4.3 million associated with unvested restricted stock awards. This cost is expected to be recognized over a weighted-average period of approximately 2.1 years. |
Business Combinations |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations | Business Combinations On November 17, 2017, the Company and Femiline AB and Johan Anderson, or the Seller, entered into an agreement to purchase certain assets from the Seller. The assets purchased included all existing inventory previously sold by the Company to the Seller, all customer relationships and a covenant not to compete. The aggregate purchase price for the assets purchased was 100,000 Class A Ordinary shares of the Company, contingently issuable upon achievement of specific milestones. Based on the valuation of the Company’s shares performed by a valuation specialist, the contingently issuable shares had an aggregate value of $1.0 million. The book value of the inventory at the time of the acquisition was approximately $0.7 million, which was revalued on the transaction date to be the estimated selling price less the cost to sell, which increased the fair value of the inventory to approximately $1.5 million. Concurrently, the Company entered into a Separation Agreement with Novaform Ltd, or Novaform, and Pantelis Ioannou. In April 2015, Novaform had become a distributor for Establishment Labs S.A., wholly-owned subsidiary of the Company and subsequently sublicensed its distribution rights to Femiline AB. Under the Separation Agreement, Novaform agreed to relinquish the distribution rights back to the Company for $1.0 million in cash and 35,714 Class A ordinary shares. Based on the valuation of the Company’s shares performed by a valuation specialist, the fair value of the shares issued was $0.3 million. This transaction enabled the Company to realign its existing distribution network in Sweden, Denmark and Norway and initiate direct sales to customers in the region. The purchase price and allocation of purchase price were as follows:
As of December 31, 2017, the consideration of $1.0 million to Novaform and $0.7 million to Femiline AB has not been paid and is included in “Accounts payable”. As of September 30, 2018, the consideration of $0.4 million to Novaform was still outstanding. The goodwill resulting from this acquisition is deductible for tax purposes. |
Net Income (Loss) Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) Per Share | Net Income (Loss) Per Share The following table summarizes the computation of basic and diluted net loss per share for the periods presented:
Basic net income/(loss) per share is computed by dividing the net income/(loss) by the weighted-average number of shares outstanding for the period. Diluted net income/(loss) per share is computed by dividing the net income/(loss) by the weighted-average number of shares and dilutive share equivalents outstanding for the period, determined using the treasury-share method and the as-if converted method, for convertible securities, if inclusion of these is dilutive. If the Company reports a net loss, diluted net loss per share is the same as basic net loss per share for those periods because including the dilutive securities would be anti-dilutive. The following potentially dilutive securities outstanding at the end of the periods presented have been excluded from the computation of diluted shares:
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Related Party Transactions |
9 Months Ended |
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Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions In August 2015, the Company entered into a Note and Warrant purchase agreement with CPH (see Note 6). On August 24, 2017, CPH elected to convert the principal and the accrued interest outstanding under the Notes into 5,869,417 shares of the Company’s Class B ordinary shares. There was no outstanding balance under the Note and Warrant purchase agreement as of December 31, 2017. CPH owns approximately 37.3% of the common shares of the Company as of September 30, 2018. In January 2017, the Company issued secured promissory notes to Mr. Chacón Quirós, the Company’s Chief Executive Officer and director, and to Crown Predator Holdings, LLC, a related party, in an aggregate principal amount of $1.2 million under existing note purchase, security and pledge agreements. These promissory notes were repaid by the Company in January 2017 and April 2017. In August 2017, the Company entered into a credit agreement with Madryn and a syndicate of lenders to borrow up to $55.0 million (see Note 6). As of September 30, 2018, Madryn owns approximately 3.6% of the common shares of the Company. In August 2015, the Company entered into a Note Agreement with the former Class Z preferred shareholders to exchange the outstanding shares for notes payable in the aggregate principal amount of $4.3 million. The notes became due and payable on July 23, 2018 when the Company successfully completed the IPO. The Company repaid the balance due, including accrued interest, in August 2018 (see Note 6). The Class Z preferred shareholders were primarily the original founders of the Company. During the nine months ended September 30, 2018 and 2017, the Company recorded revenue of $0.6 million and $0.5 million, respectively, for product sales to Herramientas Medicas, S.A., a distribution company owned by a family member of the Chief Executive Officer of the Company. Accounts receivable owed to the Company from this distribution company amounted to approximately $0.2 million and $87,000 as of September 30, 2018 and December 31, 2017, respectively. In December 2016, the Company entered into a note agreement to borrow $0.2 million from an executive officer of the Company. This note was repaid in 2017. In September 2016, the Company entered into a share repurchase agreement with Global Silicone SRL for the repurchase of 813,140 ordinary shares of the Company owned by Global Silicone SRL in exchange for $3.7 million. These treasury shares were retired in 2018. In October 2016, the Company paid $2.0 million to Global Silicone SRL to repurchase 440,040 shares and the remaining $1.7 million was paid in April 2017. In July 2017, the Company paid $2.8 million to repurchase additional 406,570 Class A ordinary shares from Global Silicone SRL. In May 2016, the Company entered into a scientific board advisory agreement with Dr. Manuel Enrique Chacón Quirós pursuant to which Dr. Chacón Quirós joined the Company’s Scientific Advisory Board, provides general scientific advice, and serves as a clinical investigator, among other services. In exchange for these services, Dr. Chacón Quirós was granted options to purchase 20,580 shares, vesting over four years in equal annual installments, provided that he continues to provide these services at such times. In September 2016, the Company entered into a separate agreement whereby Dr. Chacón Quirós will maintain his clinic in Costa Rica as a MotivaImagine Excellence Center and will host and train physicians in the use of the Company products in relevant procedures, among other services, in exchange for cash reimbursement of up to $4,500 per day that such services are rendered. Dr. Chacón Quirós is the brother of our Chief Executive Officer, Juan José Chacón Quirós. During the nine months ended September 30, 2018 and 2017, the Company paid Dr. Chacón Quirós approximately $69,000 and $90,600, respectively, for services rendered. During the nine months ended September 30, 2018 and 2017, the Company recorded revenue of approximately $40,000 and $0.2 million for product sales to Motiva Netherlands BV, a distribution company owned by Erick Vogelanzeng, our Vice President of Sales, Europe. There were no accounts payable due to this distribution company at September 30, 2018 and December 31, 2017. |
Subsequent Events |
9 Months Ended |
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Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The Company has reviewed and evaluated subsequent events that occurred through November 13, 2018. Between October 1, 2018 and November 13, 2018, the Board of Directors approved grants of 32,000 shares of stock options under the 2018 Plan. Spain Asset Purchase Agreement On October 1, 2018, European Distribution Center Motiva BVBA, or EDC, entered into an asset purchase agreement, or the Spain Asset Purchase Agreement, with Motiva Matrix Spain SL, or the Spain Seller, to purchase certain assets from the Spain Seller. The assets purchased included all existing inventory previously sold by the Company to the Spain Seller and all customer relationships and contracts. The aggregate purchase price for the assets purchased was the aggregate sum of book value of the inventory at the time of the transaction (subject to certain adjustments as set forth in the Spain Asset Purchase Agreement) plus a cash payment of €1.6 million, or approximately $1.9 million, to be paid to the Spain Seller no later than December 1, 2018 following repayment by the Spain Seller to the Company of outstanding balance in the amount of €2.0 million, or approximately $2.3 million. Germany Asset Purchase Agreement On October 3, 2018, EDC entered into an asset purchase agreement, or the Germany Asset Purchase Agreement, with Menke Med GmbH, or the Germany Seller, to purchase certain assets from the Germany Seller. The assets purchased included all existing inventory previously sold by the Company to the Germany Seller and all customer relationships and contracts. The aggregate purchase price for the assets purchased was the aggregate sum of book value of the inventory at the time of the transaction plus a cash payment of up to a maximum of €1.9 million, or approximately $2.2 million, to be paid out in installments upon the achievement of certain milestones as set forth in the Germany Asset Purchase Agreement. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
Basis of Presentation/Unaudited Interim Condensed Consolidated Financial Information | Basis of Presentation and Consolidation The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and the applicable rules and regulations of the Securities and Exchange Commission, or SEC, for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the years ended December 31, 2017 and 2016 presented in the Company’s prospectus dated July 18, 2018, or the Prospectus, filed pursuant to Rule 424(b) on July 20, 2018, with the U.S. Securities and Exchange Commission. Unaudited Interim Condensed Consolidated Financial Information The accompanying interim condensed consolidated financial statements as of September 30, 2018 and for the three and nine months ended September 30, 2018 and 2017, and the related interim information contained within the notes to the condensed consolidated financial statements, are unaudited. The unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP and on the same basis as the audited consolidated financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary to state fairly the Company’s financial position as of September 30, 2018, and the results of its operations and cash flows for the nine months ended September 30, 2018 and 2017. Such adjustments are of a normal and recurring nature. The results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the full fiscal year 2018, or for any future period. |
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Consolidation | The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the years ended December 31, 2017 and 2016 presented in the Company’s prospectus dated July 18, 2018, or the Prospectus, filed pursuant to Rule 424(b) on July 20, 2018, with the U.S. Securities and Exchange Commission. The condensed consolidated financial statements include the Company’s accounts and those of its wholly owned subsidiaries as of September 30, 2018 as follows:
All intercompany accounts and transactions have been eliminated in consolidation. |
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Segments | Segments The chief operating decision maker for the Company is the Chief Executive Officer. The Chief Executive Officer reviews financial information presented on a consolidated basis, accompanied by information about revenue by geographic region, for purposes of allocating resources and evaluating financial performance. The Company has one business activity and there are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level. Accordingly, the Company has determined that it has a single reportable and operating segment structure. The Company and its Chief Executive Officer evaluate performance based primarily on revenue in the geographic regions in which the Company operates. |
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Use of Estimates | Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant accounting estimates and management judgments reflected in the consolidated condensed financial statements include items such as accounts receivable valuation and allowances, inventory valuation and allowances, valuation of acquired intangible assets, valuation of derivatives, estimation of assets’ useful lives and valuation of deferred income tax assets, including tax valuation allowances. Estimates are based on historical experience, where applicable, and other assumptions believed to be reasonable by management. Actual results may differ from those estimates under different assumptions or conditions. |
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Concentration of Credit Risk and Other Risks and Uncertainties | Concentration of Credit Risk and Other Risks and Uncertainties Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash, restricted cash and accounts receivable. The majority of the Company’s cash is held at one financial institution in the United States. The Company has not experienced any losses on its deposits of cash. All of the Company’s revenue has been derived from sales of its products in international markets, principally Europe, Middle East, Latin America, and Asia. In the international markets in which the Company participates, the Company uses a combination of distributors and makes direct sales to customers. The Company performs ongoing credit evaluations of its distributors and customers, does not require collateral, and maintains allowances for potential credit losses on customer accounts when deemed necessary. During the nine months ended September 30, 2018 and 2017, no customers accounted for more than 10% of the Company’s revenue. No customers accounted for more than 10% of the Company’s accounts receivable balance as of September 30, 2018 and December 31, 2017. Substantially all of the Company’s revenues are derived from the sale of Motiva Implants. The Company relies on NuSil Technology, LLC, or NuSil, as the sole supplier of medical-grade silicone used in Motiva Implants as well as other products that are manufactured under contract to other customers. During the nine months ended September 30, 2018 and 2017, the Company had purchases of $10.6 million, or 64.9% of total purchases, and $7.8 million, or 39.0% of total purchases, respectively, from Nusil. As of September 30, 2018 and December 31, 2017, we had an outstanding balance owed to this vendor of zero and $0.7 million, respectively. The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of regulatory approval of the Company’s current and potential future products, uncertainty of market acceptance of the Company’s products, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals and sole source suppliers. Products developed by the Company require clearances from the FDA or other international regulatory agencies prior to commercial sales. There can be no assurance that the products will receive the necessary clearances. If the Company was denied clearance, clearance was delayed, or the Company was unable to maintain its existing clearances, these developments could have a material adverse impact on the Company. |
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Cash | Cash The Company’s cash consists of cash maintained in checking and interest-bearing accounts. The Company accounts for financial instruments with original maturities of three months or less at the date of purchase as cash equivalents. |
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Restricted Cash | Restricted Cash As of September 30, 2018 and December 31, 2017, the restricted cash balance represented a certificate of deposit collateralizing payment of charges related to the Company's corporate credit card. |
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Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable is stated at invoice value less estimated allowances for returns and doubtful accounts. The Company continually monitors customer payments and maintains an allowance for estimated losses resulting from customers’ inability to make required payments. In evaluating the Company’s ability to collect outstanding receivable balances, the Company considers various factors including the age of the balance, the creditworthiness of the customer, which is assessed based on ongoing credit evaluations and payment history, and the customer’s current financial condition. In cases where there are circumstances that may impair a specific customer’s ability to meet its financial obligations, an allowance is recorded against amounts due, which reduces the net recognized receivable to the amount reasonably believed to be collectible. As of September 30, 2018, an allowance of $72,000 was recorded for product returns. Prior to 2018, returns of products have been de minimis and accordingly no allowance for returns was recorded as of December 31, 2017. |
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Inventory and Cost of Revenue | Inventory and Cost of Revenue Inventory is stated at the lower of cost to purchase or manufacture the inventory or the net realizable value of such inventory. Cost is determined using the standard cost method which approximates actual costs using the first-in, first-out basis. The Company regularly reviews inventory quantities considering actual losses, projected future demand, and remaining shelf life to record a provision for excess and slow-moving inventory. No inventory allowance has been recorded as of September 30, 2018 and December 31, 2017. The Company recognizes the cost of inventory transferred to the customer in cost of revenue when revenue is recognized. |
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Shipping and Handling Costs | Shipping and Handling Costs Shipping and handling costs are expensed as incurred and are included in selling, general and administrative, or SG&A, expenses. |
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Revenue Recognition | Revenue Recognition The Company recognizes revenue related to sales of products to distributors or directly to customers in markets where it has regulatory approval, net of trade discounts and allowances. The Company recognizes revenue in accordance with Accounting Standards Codification, or ASC, 605 Revenue Recognition when all of the following criteria are met: ▪persuasive evidence of an arrangement exists; ▪the sales price is fixed or determinable; ▪collection of the relevant receivable is probable at the time of sale; and ▪delivery has occurred or services have been rendered. The Company recognizes revenue related to the sales of products to distributors at the time of shipment of the product, which represents the point in time when the customer has taken ownership and assumed the risk of loss and the required revenue recognition criteria are satisfied. The Company’s distributors are obligated to pay within specified terms regardless of when, or if, they sell the products. The Company’s contracts with distributors typically do not contain right of return or price protection and have no post-delivery obligations. Appropriate reserves are established for anticipated sales returns based on historical experience, recent gross sales and any notification of pending returns. The Company recognizes revenue when title to the product and risk of loss transfer to customers, provided there are no remaining performance obligations required of the Company or any written matters requiring customer acceptance. The Company allows for the return of product from direct customers in certain regions within fifteen days after the original sale and records estimated sales returns as a reduction of sales in the same period revenue is recognized. Sales return provisions are calculated based upon historical experience with actual returns. Actual sales returns in any future period are inherently uncertain and thus may differ from the estimates. If actual sales returns differ significantly from the estimates, an adjustment to revenue in the current or subsequent period is recorded. As of September 30, 2018, an allowance of $72,000 was recorded for product returns. Prior to 2018, returns of products have been de minimis and accordingly no allowance for returns was recorded as of December 31, 2017. A portion of the Company’s revenue is generated from the sale of consigned inventory maintained at physician, hospital, and clinic locations. For these products, revenue is recognized at the time the Company is notified by the consignee that the product has been implanted, not when the consigned products are delivered to the consignee’s warehouse. The Company has a limited warranty to distributors for the shelf life of the product, which is five years from the time of manufacture. Estimated warranty obligations are recorded at the time of sale. The Company also offers a warranty to patients in the event of rupture and a replacement program for capsular contracture events provided certain registration requirements are met. Revenue for extended warranties are recognized ratably over the term of the agreement. To date, these warranty and program costs have been de minimis. The Company will continue to evaluate the warranty reserve policies for adequacy considering claims history. Deferred revenue primarily consists of payments received in advance of meeting revenue recognition criteria. The Company has received payments from distributors to provide distribution exclusivity within a geographic area and recognizes deferred revenue on a ratable basis over the term of such contractual distribution relationship. Additionally, the Company has received payments from customers in direct markets prior to surgical implantation, and recognizes deferred revenue at the time the Company is notified by the customer that the product has been implanted. For all arrangements, any revenue that has been deferred and is expected to be recognized beyond one year is classified as long-term deferred revenue and included in “Other liabilities, long term” on the consolidated balance sheets. |
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Research and Development | Research and Development Costs related to research and development, or R&D, activities are expensed as incurred. R&D costs primarily include personnel costs, materials, clinical expenses, regulatory expenses, product development, consulting services, outside research activities, all of which are directly related to research and development activities. The Company estimates FDA clinical trial expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations that conduct and manage clinical trials on its behalf. In accruing service fees, the Company estimates the time period over which services will be performed and the level of patient enrollment and activity expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. |
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Selling, General and Administrative Expenses | Selling, General and Administrative Expenses SG&A expenses include sales and marketing costs, payroll and related benefit costs, insurance expenses, shipping and handling costs, legal and professional fees and administrative overhead. |
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Property and Equipment | Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the assets’ estimated useful lives of five to ten years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful life of the asset or the remaining lease term after factoring expected renewal periods. Upon retirement or disposal of assets, the costs and related accumulated depreciation are eliminated from the accounts and any gain or loss is recognized in operations. Maintenance and repairs are expensed as incurred. Substantially all of the Company’s manufacturing operations and related property and equipment is located in Costa Rica. |
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Goodwill and Intangible Assets | Goodwill and Intangible Assets The Company records the excess of the acquisition purchase price over the net fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as goodwill. In accordance with ASC 350, Intangibles - Goodwill and Other, the Company tests goodwill for impairment annually during the fourth quarter of each year and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In connection with the annual impairment test for goodwill, the Company elected the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If the Company determines that it was more likely than not that the fair value of the reporting unit is less than its carrying amount, then the impairment test is performed. Consistent with the Company's assessment that it has only one reporting segment, the Company has determined that it has only one reporting unit and tests goodwill for impairment at the entity level using the two-step process required by ASC 350. In the first step, the Company compares the carrying amount of the reporting unit to the fair value of the enterprise. If the fair value of the enterprise exceeds the carrying value, goodwill is not considered impaired and no further testing is required. If the carrying value of the enterprise exceeds the fair value, goodwill is potentially impaired, and the second step of the impairment test must be performed. In the second step, the Company compares the implied fair value of the goodwill, as defined by ASC 350, to its carrying amount to determine the impairment loss, if any. The Company capitalizes certain costs related to intangible assets, such as patents and trademarks and records purchased intangible assets at their respective estimated fair values at the date of acquisition. Purchased finite-lived intangible assets are being amortized using the straight-line method over their remaining estimated useful lives, which range from two to fifteen years. The Company evaluates the remaining useful lives of intangible assets on a periodic basis to determine whether events or circumstances warrant a revision to the remaining estimated amortization period. The Company tests indefinite-lived intangible assets for impairment on at least an annual basis and whenever circumstances suggest the assets may be impaired. If indicators of impairment are present, the Company evaluates the carrying value of the intangible assets in relation to estimates of future undiscounted cash flows. The Company also evaluates the remaining useful life of an indefinite-lived intangible asset to determine whether events and circumstances continue to support an indefinite useful life. |
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Long-Lived Assets | Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. When such an event occurs, management determines whether there has been impairment by comparing the anticipated undiscounted future net cash flows to the related asset group’s carrying value. If an asset is considered impaired, the asset is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of the asset. There were no impairment charges, or changes in estimated useful lives recorded during the year ended December 31, 2017. As of September 30, 2018, no triggering events have occurred which would indicate that the acquired intangible asset values may not be recoverable. |
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Debt and Embedded Derivatives | Debt and Embedded Derivatives The Company applies the accounting standards for derivatives and hedging and for distinguishing liabilities from equity when accounting for hybrid contracts. The Company accounts for convertible debt instruments when the Company has determined that the embedded conversion options should not be bifurcated from their host instruments in accordance with ASC 470-20 Debt with Conversion and Other Options. The Company records, when necessary, discounts to notes payable for the intrinsic value of conversion and other options embedded in debt instruments as a beneficial conversion option based upon the differences between the fair value of the underlying shares at the commitment date of the note transaction and the effective conversion price embedded in the note (see Note 6). The Company uses option pricing valuation models to determine the fair value of embedded derivatives and records any change in fair value as a component of other income or expense in the consolidated statements of operations (see Note 5). |
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Debt Issuance Costs and Debt Discounts | Debt Issuance Costs and Debt Discounts Costs incurred in connection with the issuance of new debt are capitalized. Capitalizable debt issuance costs paid to third parties and debt discounts, net of amortization, are recorded as a reduction to the long-term debt balance on the consolidated balance sheets. Amortization expense on capitalized debt issuance costs and debt discounts related to loans are calculated using the effective interest method over the term of the loan commitment and is recorded as interest expense in the condensed consolidated statements of operations. |
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Income Taxes | Income Taxes The Company records income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or income tax returns. In estimating future tax consequences, expected future events, enactments or changes in the tax law or rates are considered. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized. The Company operates in various tax jurisdictions and is subject to audit by various tax authorities. The Company records uncertain tax positions based on a two-step process whereby (1) a determination is made as to whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold the Company recognizes the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. Significant judgment is required in the identification of uncertain tax positions and in the estimation of penalties and interest on uncertain tax positions. |
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Foreign Currency | Foreign Currency The financial statements of the Company’s foreign subsidiaries whose functional currencies are the local currencies are translated into U.S. dollars for consolidation as follows: assets and liabilities at the exchange rate as of the balance sheet date, stockholders’ equity at the historical rates of exchange, and income and expense amounts at the average exchange rate for the period. Translation adjustments resulting from the translation of the subsidiaries’ accounts are included in “Accumulated other comprehensive income (loss)” as equity in the condensed consolidated balance sheet. Transactions denominated in currencies other than the applicable functional currency are converted to the functional currency at the exchange rate on the transaction date. At period end, monetary assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Gains and losses resulting from foreign currency transactions are included within “Other income (expense), net” in the condensed consolidated statement of operations. |
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Deferred Offering Costs | Deferred Offering Costs Deferred offering costs, consisting of legal, accounting and other fees and costs relating to the Company’s IPO, are capitalized within “Other non-current assets” on the consolidated balance sheet. |
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Comprehensive Income (Loss) | Comprehensive Income (Loss) The Company’s comprehensive loss consists of net loss and foreign currency translation adjustments arising from the consolidation of the Company’s foreign subsidiaries. |
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Share-based Compensation | Share-Based Compensation The Company measures and recognizes compensation expense for all stock-based awards in accordance with the provisions of ASC 718, Stock Compensation. Stock-based awards granted include stock options, restricted stock units, or RSUs, and restricted stock awards, or RSAs. Share-based compensation expense for stock options and RSAs granted to employees is measured at the grant date based on the fair value of the awards and is recognized as an expense ratably on a straight-line basis over the requisite service period. The fair value of options to purchase shares granted to employees is estimated on the grant date using the Black-Scholes option valuation model. The company accounts for stock options and RSAs issued to non-employees under ASC 505-50 Equity: Equity-Based Payments to Non-Employees, using the Black-Scholes option valuation model to value stock options. The fair value of such non-employee awards is remeasured at each quarter-end over the vesting period. The calculation of share-based compensation expense requires that the company make assumptions and judgments about the variables used in the Black-Scholes model, including the expected term, expected volatility of the underlying common shares, risk-free interest rate and dividends. The company adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, under which it recognizes forfeitures as they occur rather than applying a prospective forfeiture rate in advance (see Note 10). |
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Net Income (Loss) Per Share | Net Income (Loss) Per Share Basic net income (loss) per share is calculated by dividing the net income (loss) attributable to shareholders by the weighted-average number of shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, any shares issuable upon exercise of share warrants, share options and non-vested restricted stock outstanding under the Company’s equity plan are potentially dilutive securities. Diluted net loss per share is the same as basic net loss per share for periods where the Company reported a net loss because including the dilutive securities would be anti-dilutive. |
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Recent Accounting Standards | Recent Accounting Standards Periodically, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption. Under the Jumpstart Our Business Startups Act of 2012, or JOBS Act, the Company meets the definition of an emerging growth company, and has elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. The Company will remain an emerging growth company until the earliest of (1) the last day of its first fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million of the prior June 30th and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. The following recent accounting pronouncements issued by the FASB, could have a material effect on our financial statements: Recently Adopted Accounting Standards In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides additional guidance on evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The guidance requires an entity to evaluate if substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the new guidance would define this as an asset acquisition; otherwise, the entity then evaluates whether the asset meets the requirement that a business include, at a minimum, an input and substantive process that together significantly contribute to the ability to create outputs. The Company early adopted this ASU on a prospective basis on July 1, 2018. The adoption of this ASU did not have a material impact on the financial statements. In July 2017, the Company early adopted ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities From Equity (Topic 480); Derivatives And Hedging (Topic 815): (Part I) Accounting For Certain Financial Instruments With Down Round Features, (Part Ii) Replacement Of The Indefinite Deferral For Mandatorily Redeemable Financial Instruments Of Certain Nonpublic Entities And Certain Mandatorily Redeemable Noncontrolling Interests With A Scope Exception. As a result, certain warrants that were previously classified as a liability due to an existence of down round features became qualified to be classified as equity. The adoption of this standard resulted in $1.0 million reclassification of warrant liability into additional paid in capital as of July 1, 2017. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU provides amendments to the current guidance on determining which changes to the terms and conditions of share-based payment awards require the application of modification accounting. The effects of a modification should be accounted for unless there are no changes between the fair value, vesting conditions, and classification of the modified award and the original award immediately before the original award is modified. ASU 2017-09 became effective for non-public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. The adoption of this ASU did not have a material impact on the financial statements. Recently Issued Accounting Standards In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements. The modifications removed the following disclosure requirements: (i) the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy; (ii) the policy for timing of transfers between levels; and (iii) the valuation processes for Level 3 fair value measurements. This ASU added the following disclosure requirements: (i) the changes in unrealized gains and losses for the period included in other comprehensive income ("OCI") for recurring Level 3 fair value measurements held at the end of the reporting period; and (ii) the range and weighted average of significant observable inputs used to develop Level 3 fair value measurements. This update is effective for non-public entities for annual and interim periods beginning after December 15, 2020, with early adoption permitted. As the requirements of this literature are disclosure only, ASU 2018-13 will not impact our financial condition or results of operations. In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with accounting for employee share-based compensation. This guidance is effective for non-public entities for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently in the process of evaluating the impact of this guidance on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of their classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases today. ASC 842 supersedes the previous leases standard, ASC 840 Leases. The standard is effective for non-public business entities for fiscal years beginning after December 15, 2018 and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the effects, if any, that the adoption of this guidance will have on its consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 provides two methods of retrospective application. The first method would require the Company to apply ASU 2014-09 to each prior reporting period presented. The second method would require the Company to retrospectively apply ASU 2014-09 with the cumulative effect recognized at the date of initial application. ASU 2014-09 is effective for non-public business entities beginning in fiscal 2019 as a result of ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which was issued by the FASB in August 2015 and extended the original effective date by one year. In 2016, the FASB issued additional updates to the new revenue standard relating to reporting revenue on a gross versus net basis, identifying performance obligations and licensing arrangements, and narrow-scope improvements and practical expedients, respectively. The effective date of this additional update is the same as that of ASU 2014-09. The Company is currently evaluating the impact of adopting the available methodologies of ASU 2014-09 and the related updated revenue recognition guidance upon its financial statements in future reporting periods. The Company has not yet selected a transition method. The Company is in the process of evaluating the new standard against its existing accounting policies, including the timing of revenue recognition, and its contracts with customers to determine the effect the guidance will have on its financial statements and what changes to systems and controls may be warranted. |
Summary of Significant Accounting Policies (Tables) |
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||
Schedule of Consolidated Entities | The condensed consolidated financial statements include the Company’s accounts and those of its wholly owned subsidiaries as of September 30, 2018 as follows:
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Balance Sheet Accounts (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory | Inventory
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Property, Plant and Equipment | Property and Equipment, Net
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Goodwill and Other Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | There were no changes in the carrying amount of goodwill during the nine months ended September 30, 2018:
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Schedule of Finite-Lived Intangible Assets | The carrying amounts of these intangible assets as of September 30, 2018 were as follows:
The carrying amounts of intangible assets as of December 31, 2017 were as follows:
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Schedule of Indefinite-Lived Intangible Assets | The carrying amounts of intangible assets as of December 31, 2017 were as follows:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | As of September 30, 2018, the amortization expense related to identifiable intangible assets, with definite useful lives, in future periods is expected to be as follows:
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Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Liabilities Measured on Recurring Basis | The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy at period end:
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Fair Value Measurement Inputs and Valuation Techniques | The Company used the following assumptions to value Madryn derivatives: Put Option Liability (Madryn)
Call Option Liability (Madryn)
The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial instruments as follows:
|
Debt (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt | The Company recorded the notes on the balance sheet as follows:
The Company recorded Madryn debt on the balance sheet as follows:
|
Commitment and Contingencies (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases | Future minimum lease payments under the operating leases as of September 30, 2018 were as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Lease Payments for Capital Leases | Future minimum lease payments under these capital leases as of September 30, 2018 were as follows:
|
Shareholders' Equity (Deficit) (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Reserved Ordinary Shares for Future Issuances | The Company had reserved common shares for future issuances as follows:
|
Warrants (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stockholders' Equity Note, Warrants or Rights | As of September 30, 2018 and December 31, 2017, 113,526 and 145,000 warrants to purchase the Company’s common shares, respectively, were outstanding and exercisable:
|
Share-based Compensation (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-based Compensation Expense | During the periods presented, the Company recorded the following share-based compensation expense for stock options and restricted stock awards:
|
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Schedule of Stock Options | Stock Options
|
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Schedule of Employee Stock Options Valuation Assumptions | The fair value of stock options granted to employees in 2018 was estimated using the following assumptions:
|
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Schedule of Non-employee Stock Options Valuation Assumptions | The fair value of stock options granted to consultants was estimated using the following assumptions during the following periods presented:
|
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Schedule of Restricted Stock | The following table represents RSA activity for fiscal 2018:
The following table represents RSU activity for fiscal 2018:
|
Business Combinations (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Purchase Price Allocation | The purchase price and allocation of purchase price were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed |
|
Net Income (Loss) Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Basic and Diluted Earnings Per Share | The following table summarizes the computation of basic and diluted net loss per share for the periods presented:
|
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following potentially dilutive securities outstanding at the end of the periods presented have been excluded from the computation of diluted shares:
|
Balance Sheet Accounts - Inventory (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Raw materials | $ 3,333 | $ 1,978 |
Work in process | 60 | 1,132 |
Finished goods | 11,972 | 10,063 |
Inventory, gross | $ 15,365 | $ 13,173 |
Balance Sheet Accounts - Property and Equipment (Details) - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 17,529 | $ 16,679 |
Less: Accumulated depreciation and amortization | (4,637) | (3,179) |
Property, plant and equipment, net | 12,892 | 13,500 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 6,907 | 5,473 |
Vehicles | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 399 | 353 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 2,182 | 2,110 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 8,041 | $ 8,743 |
Balance Sheet Accounts - Narrative (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2017
USD ($)
|
Dec. 31, 2017
USD ($)
|
Nov. 30, 2015
ft²
|
|
Property, Plant and Equipment [Line Items] | ||||||
Depreciation and amortization expense | $ 500 | $ 400 | $ 1,600 | $ 1,100 | ||
Capital leased assets, gross value | 1,400 | 1,400 | $ 1,300 | |||
Costa Rica Manufacturing Facility | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Area of real estate property | ft² | 27,900 | |||||
Option to purchase title to the building | $ 3,500 | 3,500 | ||||
Monthly lease amount | $ 28 |
Goodwill and Other Intangible Assets - Goodwill (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2018
USD ($)
| |
Goodwill [Roll Forward] | |
Beginning Balance | $ 465 |
Additions | 0 |
Accumulated Impairment Losses | 0 |
Ending Balance | $ 465 |
Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization of intangible assets | $ 0.2 | $ 0.1 | $ 0.5 | $ 0.2 |
Goodwill and Other Intangible Assets - Amortization Expense (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2018 (remaining) | $ 177 |
2019 | 551 |
2020 | 551 |
2021 | 511 |
2022 | 215 |
Thereafter | 674 |
Net Carrying Amount | $ 2,679 |
Fair Value Measurements - Narrative (Details) $ in Millions |
3 Months Ended | ||||
---|---|---|---|---|---|
Nov. 17, 2017
USD ($)
shares
|
Dec. 31, 2017
USD ($)
|
Sep. 30, 2018 |
Dec. 15, 2017
USD ($)
|
Aug. 31, 2017
USD ($)
|
|
Femiline AB and Jonah Anderson | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Shares contingently issuable | shares | 100,000 | ||||
Acquisition-related contingent consideration | $ 1.0 | ||||
Line of Credit | Madryn Credit Agreement | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Fair value of options | $ 15.1 | ||||
Debt discount | $ 5.0 | $ 5.0 | |||
Additional amount borrowed | $ 10.0 | ||||
Measurement Input, Probability of Change in Control | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Change in control, percentage | 0.90 | 0.60 |
Debt - Notes (Details) - Affiliated Entity - Notes Payable - Seven Percent Notes Payable - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
Aug. 31, 2015 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Principal | $ 0 | $ 4,218 | $ 4,300 |
Accrued interest | 0 | 703 | |
Net carrying value of Madryn debt | $ 0 | $ 4,921 |
Debt - Madryn Debt (Details) - Madryn Credit Agreement - Line of Credit - USD ($) $ in Thousands |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Line of Credit Facility [Line Items] | ||
Principal | $ 40,000 | $ 40,000 |
Accrued interest | 0 | 0 |
Total principal and accrued interest at end of period | 40,000 | 40,000 |
Net unamortized debt discount and issuance costs | (18,514) | (20,833) |
Net carrying value of Madryn debt | $ 21,486 | $ 19,167 |
Commitment and Contingencies - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
May 18, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Loss Contingencies [Line Items] | |||||
Rent expense | $ 0.3 | $ 0.2 | $ 0.7 | $ 0.6 | |
Operating lease term | 9 years | ||||
Belgium Office Rental | |||||
Loss Contingencies [Line Items] | |||||
Operating lease annual base rent | $ 0.2 | ||||
Capital lease obligation | Minimum | |||||
Loss Contingencies [Line Items] | |||||
Capital lease term | 1 year | ||||
Interest rate | 4.00% | 4.00% | |||
Capital lease obligation | Maximum | |||||
Loss Contingencies [Line Items] | |||||
Capital lease term | 7 years | ||||
Interest rate | 7.00% | 7.00% |
Commitment and Contingencies - Operating Leases (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2018 (remaining) | $ 249 |
2019 | 938 |
2020 | 884 |
2021 | 823 |
2022 | 851 |
Thereafter | 4,038 |
Total | $ 7,783 |
Commitment and Contingencies - Capital Leases (Details) $ in Thousands |
Sep. 30, 2018
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2018 (remaining) | $ 87 |
2019 | 333 |
2020 | 243 |
2021 | 139 |
2022 | 37 |
Thereafter | 0 |
Total | 839 |
Interest included in the above payments | (94) |
Amount payable without interest | 745 |
Short-term minimum capital lease payments (included in accrued liabilities) | 323 |
Long-term minimum capital lease payments | $ 422 |
Shareholders' Equity - Reserved Ordinary Shares (Details) - shares |
Sep. 30, 2018 |
Jul. 23, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Class of Stock [Line Items] | |||
Shares reserved for future issuance (in shares) | 3,116,521 | 1,685,169 | |
Rockport Warrants | |||
Class of Stock [Line Items] | |||
Shares reserved for future issuance (in shares) | 113,526 | 145,000 | |
Equity Incentive Plan, 2015 | |||
Class of Stock [Line Items] | |||
Shares reserved for future issuance (in shares) | 0 | 91,181 | |
Equity Incentive Plan, 2018 | |||
Class of Stock [Line Items] | |||
Shares reserved for future issuance (in shares) | 1,047,148 | 1,500,000 | 0 |
Employee Share Purchase Plan, 2018 | |||
Class of Stock [Line Items] | |||
Shares reserved for future issuance (in shares) | 100,000 | 100,000 | 0 |
Option on Securities | |||
Class of Stock [Line Items] | |||
Shares reserved for future issuance (in shares) | 1,460,863 | 863,932 | |
Restricted Stock | |||
Class of Stock [Line Items] | |||
Shares reserved for future issuance (in shares) | 394,984 | 585,056 |
Warrants - Warrant (Details) - Rockport Warrants - $ / shares |
Sep. 30, 2018 |
Dec. 31, 2017 |
Mar. 31, 2017 |
---|---|---|---|
Class of Stock [Line Items] | |||
Shares (in shares) | 113,526 | 145,000 | |
Exercise Price (in USD per share) | $ 3.80 | $ 3.80 |
Share-based Compensation - Stock Options and Restricted Stock (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense | $ 2,754 | $ 568 | $ 4,966 | $ 2,390 |
Selling, General and Administrative Expenses | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense | 1,409 | 230 | 1,995 | 865 |
Research and Development Expense | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense | $ 1,345 | $ 338 | $ 2,971 | $ 1,525 |
Share-based Compensation - Stock Option Granted to Employees (Details) |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Employee Stock Option | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk free interest rate, minimum | 2.70% | |
Risk-free interest rate, maximum | 2.90% | |
Term (in years) | 6 years 2 months 30 days | |
Dividend yield | 0.00% | |
Employee Stock Option | Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Volatility | 56.00% | |
Employee Stock Option | Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Volatility | 57.00% | |
Consultant | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate | 2.30% | |
Consultant | Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate | 2.80% | |
Consultant | Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate | 3.10% |
Share-based Compensation - Stock Options Granted to Non-employees (Details) - Consultant |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Volatility | 43.00% | |
Risk-free interest rate | 2.30% | |
Term (in years) | 10 years | |
Dividend yield | 0.00% | 0.00% |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Volatility | 58.00% | |
Risk-free interest rate | 2.80% | |
Term (in years) | 9 years 6 months | |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Volatility | 59.00% | |
Risk-free interest rate | 3.10% | |
Term (in years) | 9 years 9 months 18 days |
Business Combinations - Narrative (Details) - Femiline AB and Jonah Anderson - USD ($) $ in Thousands |
Nov. 17, 2017 |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Shares contingently issuable | 100,000 | ||
Contingent consideration | $ 964 | ||
Cash paid for inventory | 704 | ||
Inventory fair value | 1,498 | ||
Cash consideration | $ 1,000 | ||
Equity interest issued or issuable (in shares) | 35,714 | ||
Fair market value of Class A ordinary shares issued | $ 344 | ||
Novaform | |||
Business Acquisition [Line Items] | |||
Accounts payable | $ 400 | $ 1,000 | |
Femiline AB | |||
Business Acquisition [Line Items] | |||
Accounts payable | $ 700 |
Business Combinations - Purchase Price (Details) - USD ($) $ in Thousands |
Nov. 17, 2017 |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Allocation of Purchase Price: | |||
Goodwill | $ 465 | $ 465 | |
Femiline AB and Jonah Anderson | |||
Purchase Price: | |||
Cash consideration | $ 1,000 | ||
Fair market value of Class A ordinary shares issued | 344 | ||
Contingent consideration | 964 | ||
Cash paid for inventory | 704 | ||
Total purchase price | 3,012 | ||
Allocation of Purchase Price: | |||
Inventory | 1,498 | ||
Goodwill | 210 | ||
Total purchase price allocated | 3,012 | ||
Femiline AB and Jonah Anderson | Customer relationships | |||
Allocation of Purchase Price: | |||
Finite-lived intangibles | 1,280 | ||
Femiline AB and Jonah Anderson | Covenant not to compete | |||
Allocation of Purchase Price: | |||
Finite-lived intangibles | $ 24 |
Net Income (Loss) Per Share - Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Numerator: | ||||||
Net income (loss) | $ 1,306 | $ (5,360) | $ (6,530) | $ (10,674) | $ (10,584) | $ (27,764) |
Denominator: | ||||||
Weighted average outstanding shares used for basic net income (loss) per share (in shares) | 19,152,995 | 8,824,807 | 16,146,675 | 8,824,807 | ||
Weighted average outstanding shares used for diluted net income (loss) per share (in shares) | 20,123,297 | 8,824,807 | 16,146,675 | 8,824,807 | ||
Earnings (loss) per share: | ||||||
Basic (in usd per share) | $ 0.07 | $ (1.21) | $ (0.66) | $ (3.15) | ||
Diluted (in usd per share) | $ 0.06 | $ (1.21) | $ (0.66) | $ (3.15) |
Net Income (Loss) Per Share - Dilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share (in shares) | 1,969,373 | 1,549,270 |
Employee Stock Option | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share (in shares) | 1,460,863 | 786,503 |
Restricted Stock Units (RSUs) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share (in shares) | 394,984 | 617,767 |
Warrant | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share (in shares) | 113,526 | 145,000 |
Subsequent Events - Narrative (Details) $ in Thousands, € in Millions |
1 Months Ended | 9 Months Ended | |||||
---|---|---|---|---|---|---|---|
Oct. 03, 2018
USD ($)
|
Oct. 03, 2018
EUR (€)
|
Oct. 01, 2018
USD ($)
|
Oct. 01, 2018
EUR (€)
|
Nov. 13, 2018
shares
|
Sep. 30, 2018
USD ($)
shares
|
Sep. 30, 2017
USD ($)
|
|
Subsequent Event [Line Items] | |||||||
Grants in period (in shares) | 778,628 | ||||||
Repayments on related-party notes payable | $ | $ 5,083 | $ 0 | |||||
Subsequent Event | Equity Incentive Plan, 2018 | |||||||
Subsequent Event [Line Items] | |||||||
Grants in period (in shares) | 32,000 | ||||||
SPAIN | Subsequent Event | |||||||
Subsequent Event [Line Items] | |||||||
Payments to acquire productve assets | $ 1,900 | € 1.6 | |||||
Repayments on related-party notes payable | $ 2,300 | € 2.0 | |||||
GERMANY | Subsequent Event | |||||||
Subsequent Event [Line Items] | |||||||
Payments to acquire productve assets | $ 2,200 | € 1.9 |
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