CORINDUS VASCULAR ROBOTICS, INC., 10-Q filed on 8/9/2019
Quarterly Report
v3.19.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2019
Aug. 01, 2019
Document And Entity Information    
Entity Registrant Name Corindus Vascular Robotics, Inc.  
Entity Central Index Key 0001528557  
Document Type 10-Q  
Document Period End Date Jun. 30, 2019  
Entity File Number 001-37406  
Entity Incorporation, State or Country Code DE  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity's Reporting Status Current Yes  
Entity Interactive Data Current Yes  
Entity Small Business true  
Entity Filer Category Accelerated Filer  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   208,137,406
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2019  
v3.19.2
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Jun. 30, 2019
Dec. 31, 2018
Current Assets:    
Cash and cash equivalents $ 31,939 $ 23,849
Accounts receivable 4,817 4,599
Inventories 1,799 2,508
Prepaid expenses and other current assets 1,114 447
Total current assets 39,669 31,403
Property and equipment, net 1,798 1,779
Operating lease right-of-use assets 909  
Deposits and other assets 312 343
Total assets 42,688 33,525
Current Liabilities:    
Accounts payable 3,791 3,591
Accrued expenses 4,379 3,292
Deferred revenue 825 662
Current portion of long-term debt 3,539 1,011
Current portion of operating lease liabilites 601  
Current portion of financial lease liability 60 56
Total current liabilities 13,195 8,612
Long-term Liabilities    
Deferred revenue, net of current portion 426 285
Long-term debt, net of current portion 10,823 10,774
Long-term operating lease liabilities, net of current portion 391  
Long-term finance lease liability, net of current portion 15 46
Other liabilities   62
Total long-term liabilities 11,655 11,167
Total liabilities 24,850 19,779
Preferred stock:    
Total preferred stock 24,450 22,952
Stockholders' equity (deficit):    
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; 2,000,000 shares designated at June 30, 2019 and December 31, 2018 0 0
Common stock, $0.0001 par value; 350,000,000 shares authorized; 208,012,466 and 191,731,152 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively 21 19
Additional paid-in capital 229,095 206,165
Accumulated deficit (235,728) (215,390)
Total stockholders' equity (deficit) (6,612) (9,206)
Total liabilities, preferred stock and stockholders' equity (deficit) 42,688 33,525
Series A Preferred Stock [Member]    
Preferred stock:    
Total preferred stock 20,564 20,564
Series A-1 Preferred Stock [Member]    
Preferred stock:    
Total preferred stock $ 3,886 $ 2,388
v3.19.2
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Jun. 30, 2019
Dec. 31, 2018
Preferred stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Preferred stock, authorized shares 10,000,000 10,000,000
Preferred stock, designated shares 2,000,000 2,000,000
Common stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Common stock, authorized shares 350,000,000 350,000,000
Common stock, issued shares 208,012,466 191,731,152
Common stock, outstanding shares 208,012,466 191,731,152
Series A Preferred Stock [Member]    
Convertible preferred stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Convertible preferred stock, designated shares 1,000,000 1,000,000
Convertible preferred stock, issued shares 1,000,000 1,000,000
Convertible preferred stock, outstanding shares 1,000,000 1,000,000
Series A-1 Preferred Stock [Member]    
Convertible preferred stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Convertible preferred stock, designated shares 1,000,000 1,000,000
Convertible preferred stock, issued shares 130,400 70,400
Convertible preferred stock, outstanding shares 130,400 70,400
v3.19.2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Income Statement [Abstract]        
Revenue $ 4,575 $ 1,665 $ 7,611 $ 3,150
Cost of revenue 2,778 2,151 5,192 4,080
Gross profit (loss) 1,797 (486) 2,419 (930)
Operating expenses:        
Research and development 3,719 2,000 6,595 4,135
Selling, general and administrative 8,373 6,874 15,520 14,329
Restructuring charge   349   349
Total operating expense 12,092 9,223 22,115 18,813
Operating loss (10,295) (9,709) (19,696) (19,743)
Other income (expense)        
Interest expense (556) (383) (967) (452)
Interest income 192 66 333 91
Warrant revaluation   70   100
Other, net (2) 47 (8) 45
Total other income (expense), net (366) (200) (642) (216)
Net loss (10,661) (9,909) (20,338) (19,959)
Accretion of beneficial conversion feature of Series A and Series A-1 preferred stock (510)   (510) (5,236)
Dividends on preferred stock (751) (753) (1,498) (878)
Net loss attributable to common stockholders $ (11,922) $ (10,662) $ (22,346) $ (26,073)
Net loss per share attributed to common stockholders--basic and diluted (in dollars per share) $ (0.06) $ (0.06) $ (0.11) $ (0.14)
Weighted-average common shares used in computing net loss per share attributable to common stockholders--basic and diluted (in shares) 207,121,077 188,833,877 201,935,302 188,802,720
Comprehensive loss $ (10,661) $ (9,909) $ (20,338) $ (19,959)
v3.19.2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) - USD ($)
$ in Thousands
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-In Capital [Member]
Accumulated Deficit [Member]
Total
Beginning balance at Dec. 31, 2017   $ 19 $ 198,337 $ (180,841) $ 17,515
Beginning balance, (in shares) at Dec. 31, 2017   188,764,851      
Cumulative effect of a change in accounting principles       440 440
Stock-based compensation expense     674   674
Issuance of Series A preferred stock in connection with private placement, net of issuance costs $ 20,564        
Issuance of Series A preferred stock in connection with private placement, net of issuance costs (in shares) 1,000,000        
Issuance of warrants in connection with private placement     4,108   4,108
Beneficial conversion feature of Series A and Series A-1 preferred stock $ (5,236)   5,236   5,236
Accretion of beneficial conversion feature of Series A and Series A-1 preferred stock 5,236   (5,236)   (5,236)
Accrued dividends on Series A preferred stock 125   (125)   (125)
Issuance of common stock upon vesting of restricted stock units (in shares)   17,190      
Net loss       (10,050) (10,050)
Ending balance at Mar. 31, 2018 $ 20,689 $ 19 202,994 (190,451) 12,562
Ending balance, (in shares) at Mar. 31, 2018 1,000,000 188,782,041      
Beginning balance at Dec. 31, 2017   $ 19 198,337 (180,841) 17,515
Beginning balance, (in shares) at Dec. 31, 2017   188,764,851      
Net loss         (19,959)
Ending balance at Jun. 30, 2018 $ 21,442 $ 19 202,943 (200,360) 2,602
Ending balance, (in shares) at Jun. 30, 2018 1,010,400 188,887,817      
Beginning balance at Mar. 31, 2018 $ 20,689 $ 19 202,994 (190,451) 12,562
Beginning balance, (in shares) at Mar. 31, 2018 1,000,000 188,782,041      
Stock-based compensation expense     631   631
Accrued dividends on Series A preferred stock $ 618   (618)   (618)
Issuance of Series A-1 preferred stock as dividends on Series A preferred stock $ 135   (135)   (135)
Issuance of Series A-1 preferred stock as dividends on Series A preferred stock (in shares) 10,400        
Issuance of common stock upon vesting of restricted stock units (in shares)   12,929      
Issuance of common stock upon exercise of stock options     65   65
Issuance of common stock upon exercise of stock options (in shares)   87,507      
Issuance of stock, net of issuance costs     6   6
Issuance of stock, net of issuance costs (in shares)   5,340      
Net loss       (9,909) (9,909)
Ending balance at Jun. 30, 2018 $ 21,442 $ 19 202,943 (200,360) 2,602
Ending balance, (in shares) at Jun. 30, 2018 1,010,400 188,887,817      
Ending balance at Dec. 31, 2018 $ 22,952 $ 19 206,165 (215,390) $ (9,206)
Ending balance, (in shares) at Dec. 31, 2018 1,070,400 191,731,152     191,731,152
Stock-based compensation expense     963   $ 963
Issuance of warrants in connection with private placement     440   440
Accrued dividends on Series A preferred stock $ 625   (625)   (625)
Issuance of Series A-1 preferred stock as dividends on Series A preferred stock $ 122   (122)   (122)
Issuance of Series A-1 preferred stock as dividends on Series A preferred stock (in shares) 30,000        
Issuance costs in connection with at-the-market offering     (71)   (71)
Issuance of common stock upon vesting of restricted stock units (in shares)   83,735      
Issuance of common stock upon exercise of stock options   $ 1 160   161
Issuance of common stock upon exercise of stock options (in shares)   413,292      
Issuance of stock, net of issuance costs   $ 1 19,530   19,531
Issuance of stock, net of issuance costs (in shares)   14,384,840      
Issuance of common stock to non-employee directors     15   15
Issuance of common stock to non-employee directors (in shares)   16,629      
Net loss       (9,677) (9,677)
Ending balance at Mar. 31, 2019 $ 23,699 $ 21 226,455 (225,067) 1,409
Ending balance, (in shares) at Mar. 31, 2019 1,100,400 206,629,648      
Beginning balance at Dec. 31, 2018 $ 22,952 $ 19 206,165 (215,390) $ (9,206)
Beginning balance, (in shares) at Dec. 31, 2018 1,070,400 191,731,152     191,731,152
Net loss         $ (20,338)
Ending balance at Jun. 30, 2019 $ 24,450 $ 21 229,095 (235,728) $ (6,612)
Ending balance, (in shares) at Jun. 30, 2019 1,130,400 208,012,466     208,012,466
Beginning balance at Mar. 31, 2019 $ 23,699 $ 21 226,455 (225,067) $ 1,409
Beginning balance, (in shares) at Mar. 31, 2019 1,100,400 206,629,648      
Stock-based compensation expense     1,329   1,329
Beneficial conversion feature of Series A and Series A-1 preferred stock $ (510)   510   510
Accretion of beneficial conversion feature of Series A and Series A-1 preferred stock 510   (510)   (510)
Accrued dividends on Series A preferred stock 626   (626)   (626)
Issuance of Series A-1 preferred stock as dividends on Series A preferred stock $ 125   (125)   (125)
Issuance of Series A-1 preferred stock as dividends on Series A preferred stock (in shares) 30,000        
Issuance of common stock upon vesting of restricted stock units (in shares)   80,001      
Issuance of common stock upon exercise of stock options     459   459
Issuance of common stock upon exercise of stock options (in shares)   753,775      
Issuance of stock, net of issuance costs     1,589   1,589
Issuance of stock, net of issuance costs (in shares)   541,025      
Issuance of common stock to non-employee directors     14   14
Issuance of common stock to non-employee directors (in shares)   8,017      
Net loss         (10,661)
Ending balance at Jun. 30, 2019 $ 24,450 $ 21 $ 229,095 $ (235,728) $ (6,612)
Ending balance, (in shares) at Jun. 30, 2019 1,130,400 208,012,466     208,012,466
v3.19.2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended
Jun. 30, 2019
Mar. 31, 2019
Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]      
Issuance costs $ 147 $ 314 $ 329
v3.19.2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Operating activities    
Net loss $ (20,338) $ (19,959)
Adjustments to reconcile net loss to net cash flows used in operating activities:    
Depreciation and amortization 398 331
Stock-based compensation expense 2,321 1,311
Accretion of interest expense 285 116
Write down of inventories   317
Warrant liability revaluation   (100)
Loss on disposal of property and equipment   59
Changes in operating assets and liabilities:    
Accounts receivable (218) 1,043
Prepaid expenses and other current assets (488) (229)
Inventories 569 (1,397)
Operating lease right-of use asset, deposits and other assets (12) 4
Accounts payable, accrued expenses and other liabilities 1,068 (698)
Customer deposits   (93)
Deferred revenue 304 151
Net cash used in operating activities (16,111) (19,144)
Investing activities    
Purchase of property and equipment (254) (338)
Net cash used in investing activities (254) (338)
Financing activities    
Proceeds from issuance of common stock, net of issuance costs 21,130  
Proceeds from issuance of long term debt and warrants, net of deferred financing costs and discounts 2,732 11,626
Proceeds from issuance of Series A preferred stock and warrants, net of issuance costs   24,671
Proceeds from exercise of stock options 620 65
Payments on finance lease liability (27) (23)
Net cash provided by financing activities 24,455 36,339
Net increase in cash and cash equivalents 8,090 16,857
Cash and cash equivalents at beginning of period 23,849 17,458
Cash and cash equivalents at end of period 31,939 34,315
Supplemental Disclosure of Cash Flow Information:    
Accrued dividends on Series A preferred stock 626 618
Fair value of warrants issued with long-term debt 440 210
Interest paid 666 286
Financing costs included in accounts payable and accrued expenses 82  
Issuance of Series A-1 preferred stock as dividends on Series A preferred stock 872 260
Transfer from inventories to property and equipment in the field 140 382
Fair value of warrants issued with Series A preferred stock   $ 4,162
Deferred offering costs in accounts payable and accrued expenses $ 179  
v3.19.2
Nature of Operations
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations

Note 1 Nature of Operations

 

The Company

 

Corindus Vascular Robotics, Inc. (the “Company”), a Delaware corporation, has its corporate headquarters, manufacturing and research and development facility in Waltham, Massachusetts. The Company is engaged in the design, manufacture and sales of precision vascular robotic-assisted systems (“CorPath System”) for use in interventional vascular procedures.

 

On August 8, 2019, the Company announced that it had entered into a definitive merger agreement to be acquired by a wholly-owned subsidiary of Siemens Healthineers AG, a German stock listed company. Under the terms of the merger agreement, Siemens Medical Solutions USA, Inc. (“SMS USA”), a wholly-owned subsidiary of Siemens Healthineers AG, will acquire all of the issued and outstanding shares of common stock of the Company for $4.28 per share in cash. The transaction has been approved by the Board of Directors of the Company and is expected to close in the fourth quarter of 2019, subject to approval by Company stockholders, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction of other customary closing conditions. If the Merger is consummated, it is expected that the common stock of the Company will be removed from listing on the NYSE American and from registration under Section 12(b) of the Securities Exchange Act of 1934, as amended. For additional information related to the Merger Agreement, please refer to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “Commission”) on August 8, 2019.

 

The Company’s future capital requirements will depend upon many factors, including progress with developing, manufacturing and marketing its technologies, the time and costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and other proprietary rights, its ability to establish collaborative arrangements, marketing activities and competing technological and market developments, including regulatory changes affecting medical procedure reimbursement, and overall economic conditions in the Company’s target markets.

 

Liquidity

 

On February 26, 2019, the Company consummated a private placement offering with a large institutional investor consisting of the sale of 10,872,716 shares of the Company’s common stock, at a price of $1.3796 per share (the “Private Placement”). On March 12, 2019, the Company consummated a second closing to the Private Placement with certain existing stockholders entitled to preemptive rights in connection with the initial closing of the Private Placement, consisting of the sale of 3,512,124 shares of the Company’s common stock, at the same price and on the same terms as the initial closing of the Private Placement, through the exercise of such preemptive rights and the purchase of certain additional shares. The aggregate gross proceeds from both closings of the Private Placement was $19,845 and the aggregate net proceeds was $19,531.

 

On March 14, 2019, the Company amended its financing arrangement with its two lenders to add an additional term loan of $2,750, all of which was outstanding principal as of June 30, 2019. The $2,750 term loan is interest only through April 1, 2020, after which the principal will be due in twenty-four consecutive monthly payments. Refer to Note 5 for additional disclosure.

 

In August 2018, the Company entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) with respect to an at-the-market offering program (the “Offering”) under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock having an aggregate offering price of up to $30,000 (the “Placement Shares”) through Cowen as its sales agent. The issuance and sale of the Placement Shares by the Company under the Sales Agreement will be made pursuant to its effective “shelf” registration statement on Form S-3 and an accompanying base prospectus contained therein (Registration Statement No. 333-2217344) filed with the Commission on April 17, 2017, and declared effective on May 1, 2017. The Company filed a prospectus supplement (the “Prospectus Supplement”), dated August 31, 2018, with the Commission in connection with the offer and sale of the shares pursuant to the Sales Agreement.

 

Cowen may sell the Placement Shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act of 1933, as amended. The Company will pay Cowen a commission equal to 3% of the gross sales proceeds of any Placement Shares sold through Cowen under the Sales Agreement. During the six months ended June 30, 2019, the Company received net proceeds of $1,518 under the Sales Agreement through the sales of its common stock. The Company is not obligated to make any sales of common stock under the Sales Agreement and cannot provide any assurances that it will issue any additional shares pursuant to the Sales Agreement. The offering of Placement Shares pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all Placement Shares subject to the Sales Agreement or (ii) termination of the Sales Agreement in accordance with its terms.

 

The Company has incurred losses since inception and has funded its cash flow deficits primarily through the issuance of capital stock and debt. As of June 30, 2019, the Company had an accumulated deficit of $235,728. As of June 30, 2019, the Company had cash and cash equivalents of $31,939 and working capital of $26,474. The Company has evaluated whether or not its cash and cash equivalents on hand and the cash proceeds from the financing activities described above would be sufficient to sustain projected operating activities through one year following the date of the filing of this Form 10-Q as required by Accounting Standards Codification (ASC) 205-40 Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. Based on the Company’s current forecast of annual cash flow deficits, the Company will not have sufficient resources to meet its cash requirements through August 9, 2020.

 

Management has considered its plans to alleviate its projected cash deficit at August 9, 2020 and the probability and effectiveness of such plans to eliminate its projected cash deficit at August 9, 2020. In the event the Company needs to conserve cash based on anticipated deficit, the Company will undertake any or all of the following activities to reduce its cash flow deficits:

 

• Eliminate or defer the 2019 discretionary bonus payouts for all bonus eligible employees, including executive management;

• Reduce spending on prototypes and clinical trials;

• Eliminate planned headcount additions in research and development;

• Defer or limit some or all spending on capital equipment planned; or

• Reduce employee travel and entertainment expenses, external consulting resources and its presence at tradeshows.

 

It is probable that the above activities can be effectively implemented by management and it is probable that the plans will eliminate the cash deficit at August 9, 2020, such that the Company has the ability to continue as a going concern for one year from August 9, 2019. As a result, management believes its plans can be effectively implemented, if required.

 

As the Company continues to incur losses and cash flow deficits, its transition to profitability is dependent upon achieving a level of revenues adequate to support its cost structure, but the Company will otherwise rely on additional capital funding until such time as that is achieved. The Company may never achieve profitability, and unless and until doing so, the Company intends to fund future operations through additional non-dilutive or dilutive financings. There can be no assurances; however, that additional funding will be available on terms acceptable to the Company, if at all.

 

v3.19.2
Significant Accounting Policies
6 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
Significant Accounting Policies

Note 2 Significant Accounting Policies

 

Basis of Presentation

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial statements for interim periods in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The information included in this quarterly report on Form 10-Q should be read in conjunction with the audited condensed consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”). The Company’s accounting policies are described in the “Notes to Consolidated Financial Statements” in the 2018 Form 10-K and are updated, as necessary, in this Form 10-Q. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from the audited financial statements but does not include all disclosures required by U.S. GAAP. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Corindus, Inc. and Corindus Security Corporation. All intercompany transactions and balances have been eliminated in consolidation. The functional currency of both wholly-owned subsidiaries is the U.S. dollar and, therefore, the Company has not recorded any currency translation adjustments.

 

In the fourth quarter of 2014, the Company participated in the formation of a not-for-profit that was established to generate awareness of the health risks linked to the use of fluoroscopy in hospital catheterization. As of June 30, 2019, the Company’s Chief Executive Officer and one of its senior executives represented two of the three voting members of the board of directors of the entity. As a result, under the voting model used for the consolidation of related parties, which are controlled by a company, the Company has consolidated the financial statements of the entity, and recognized expenses of $3 and $6 for the three months ended June 30, 2019 and 2018, respectively, and $9 and $11 for the six months ended June 30, 2019 and 2018, respectively, and other income of $0 and $40 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $40 for the six months ended June 30, 2019 and 2018, respectively. The entity had assets and liabilities of $38 and $11 respectively, on the Company’s condensed consolidated balance sheet at June 30, 2019 and assets and liabilities of $33 and $1, respectively, on the Company’s condensed consolidated balance sheet at December 31, 2018. 

 

Segment Information

 

The Company operates in one business segment, which is the design, manufacture and sale of precision vascular robotic-assisted systems for use in interventional vascular procedures. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, the chief operating decision-maker has made such decisions and assessed performance at the Company level, as one segment. The Company’s chief operating decision-maker is the Chief Executive Officer.

 

Use of Estimates

 

The process of preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such management estimates include those relating to revenue recognition, inventory valuation, assumptions used in the valuation of the Company's preferred stock and warrants, valuation of stock-based awards, and valuation allowances against deferred income tax assets. Actual results could differ from those estimates.

 

Significant Customers

 

The table below sets forth the Company's customers that accounted for greater than 10% of its revenues for the three and six months ended June 30, 2019 and 2018, respectively:

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Customer   2019   2018   2019   2018
A     14 %     1 %     8 %     23 %
B     12 %     22 %     9 %     12 %
C     11 %           7 %      
D     11 %           6 %      
E     10 %           6 %      
F     8 %     24 %     5 %     13 %
G                 10 %      
H           29 %           15 %
I           10 %           6 %
J                       16 %

 

 

Customers A, B, C, D, E, F and one other accounted for 13%, 11%, 11%, 11%, 10%, 10% and 10%, respectively, of the Company’s accounts receivable balance at June 30, 2019. Given the current revenue levels, in a period in which the Company sells a system, that customer is likely to represent a significant customer.

 

Revenues from domestic customers were $2,852 and $1,285 for the three months ended June 30, 2019 and 2018, respectively, and $5,463 and $2,716 for the six months ended June 30, 2019 and 2018, respectively. Revenues from international customers were $1,723 and $380 for the three months ended June 30, 2019 and 2018, respectively, and $2,148 and $434 for the six months ended June 30, 2019 and 2018, respectively.

 

Off-Balance Sheet Arrangements

 

The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts, or other hedging arrangements.

 

Fair Value Measurements

 

In accordance with ASC 820, Fair Value Measurements and Disclosures, the Company generally defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company uses a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

 

Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

 

Level 2 - inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.

 

Level 3 - inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

 

The Company had one item, cash equivalents, measured at fair value on a recurring basis totaling $31,888 and $23,849 at June 30, 2019 and December 31, 2018, respectively, which was valued based on Level 1 inputs.

 

The Company’s financial instruments of deposits and other assets are carried at cost and approximate their fair values given the liquid nature of such items. The fair value of the Company’s long-term debt and finance lease obligation approximates their carrying values due to their recent negotiation and variable market rate for the long-term debt.

 

Cash Equivalents

 

The Company considers highly liquid short-term investments, which consists of money market funds, to be cash equivalents. From time to time, the Company’s cash balances may exceed federal deposit insurance limits.

 

Inventories

 

Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. The Company routinely monitors the recoverability of its inventory and reduces the carrying value based on current selling prices and evaluates potential excess and obsolete inventories based on historical and forecasted usage, as required. Scrap and excess manufacturing costs are charged to cost of revenue as incurred and not capitalized as part of inventories. The Company only capitalizes pre-launch inventories when purchased for commercial use and it deems regulatory approval to be probable.

 

Leases

 

The Company determines if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has elected not to separate non-lease components from all classes of its existing leases. Non-lease components have been accounted for as part of the single lease component to which they are related. The Company utilizes its incremental borrowing rate as the basis to calculate the present value of future lease payments at lease commencement. The Company’s incremental borrowing rate represents the rate the Company would have to pay to borrow funds on a collateralized basis over a similar term and in a similar economic environment.

 

Revenue Recognition

 

The Company generates revenues primarily from the sale of the CorPath System, CorPath Cassettes, accessories and service contracts. Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that are within the scope of the revenue recognition accounting standard, the Company performs the following five steps: (i) identifies the contract with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

 

 Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value method to which it expects to be entitled. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.

 

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. The Company does not assess whether a significant financing component exists if the period between when it performs its obligations under the contract and when the customer pays is one year or less. For contracts where the period between performance and payment is greater than one year, the Company assesses whether a significant financing component exists, by applying a discount rate to the expected cash collections. If this difference is significant, the Company will conclude that a significant financing component exists. The Company identified a small number of contracts where the period between performance and payment was greater than one year; however, none of the Company’s contracts contained a significant financing component as of June 30, 2019.

 

Contracts that are modified to account for changes in contract specifications and requirements are assessed to determine if the modification either creates new or changes the existing enforceable rights and obligations. Generally, contract modifications are for products or services that are not distinct from the existing contract due to the inability to use, consume or sell the products or services on their own to generate economic benefits and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

 

Revenue is generally recognized when the customer obtains control of the Company’s product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract, or upon installation when the combined performance obligation is not distinct within the context of the contract. Service revenue is generally recognized over time as the services are delivered to the customer based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. Services are expected to be delivered to the customer throughout the term of the contract and the Company believes recognizing revenue ratably over the term of the contract best depicts the transfer of value to the customer.

 

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The Company enters into certain contracts that have multiple performance obligations, one or more of which may be delivered subsequent to the delivery of other performance obligations. These performance obligations may include installation, training, maintenance and support services, cassettes, and accessories. The Company allocates the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price considering available information such as market conditions and internally approved pricing guidelines related to the performance obligations. Revenue is then allocated to the performance obligations using the relative selling prices of each of the performance obligations in the contract.

 

Deferred Revenue

 

The Company records deferred revenues when cash payments are received or due in advance of performance. Amounts received prior to satisfying the related performance obligations are recorded as deferred revenue in the accompanying balance sheets.

 

The Company’s contract liabilities consist of advance payments and billings in excess of revenue recognized (deferred revenues and customer deposits). The Company’s contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. The Company classifies deferred revenue as current or noncurrent based on the timing of when it expects to recognize revenue. In order to determine revenue recognized in the period from contract liabilities, the Company first allocates revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance. If additional advances are received on those contracts in subsequent periods, the Company assumes all revenue recognized in the reporting period first applies to the beginning contract liability as opposed to a portion applying to the new advances for the period.

  

Contract Assets

 

Contract assets include unbilled amounts primarily for maintenance and support service and future cassette purchases where revenue recognized exceeds the amount billed to the customer, and the Company’s right to bill is not until the maintenance and support service period commence or the cassettes are delivered. Amounts may not exceed their net realizable value. Short-term contract assets are included in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets. Long-term contract assets are included in deposits and other assets on the Company’s condensed consolidated balance sheets.

 

Deferred Contract Costs

 

The Company’s incremental direct costs of obtaining a contract, which consist of sales commissions, are deferred and amortized over the period of contract performance. Capitalized commissions are amortized based on the transfer of the products or services to which the assets relate. Applying the practical expedient, the Company recognizes sales commission expense when incurred if the amortization period of the assets that it otherwise would have recognized is one year or less. These costs are included in selling, general, and administrative expenses. Short-term deferred contract costs are included in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets. Long-term deferred contract costs are included in deposits and other assets on the Company’s condensed consolidated balance sheets. The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products.

 

Deferred Offering Costs

 

Specific incremental costs directly attributable to a proposed or actual offering of securities are deferred and charged against the gross proceeds of the offering through additional paid-in capital. Deferred offering costs for a transaction identified by management as no longer viable are immediately charged to the results of operations.

 

Warrants to Purchase Common Stock

 

The Company classifies warrants within stockholders’ equity (deficit) on its condensed consolidated balance sheets if the warrants are considered to be indexed to the Company’s own capital stock, and otherwise would be recorded in stockholders’ equity (deficit). Warrants to purchase common stock issued in connection with the Company’s amended financing arrangement met these criteria and therefore were equity classified.

 

The table below is a summary of the Company’s warrant activity during the six months ended June 30, 2019:

 

 

Number of
Warrants

  Weighted Average Exercise Price
Outstanding at December 31, 2018       9,246,315     $ 1.40  
  Granted       300,000     $ 1.38  
  Exercised       —         —    
  Expired       —         —    
Outstanding at June 30, 2019       9,546,315     $ 1.40  

 

On August 5, 2019, a warrant to purchase 355,037 shares of common stock held by Steward Capital Holdings, LP ("Steward Capital") was exercised.  Steward Capital paid one exercise price of $1.41 per share for an aggregate purchase price of $500.  The shares were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. 

 

Stock-Based Compensation

 

The Company adopted Accounting Standards Update (“ASU”) 2018-07, Stock-based Compensation: Improvements to Nonemployee Share-based Payment Accounting, effective July 1, 2018. Subsequent to the adoption of ASU 2018-07, the Company recognizes compensation costs resulting from the issuance of “service-based” awards to employees, non-employees and directors as an expense in the condensed consolidated statements of operations and comprehensive loss over the requisite service period based on a measurement of fair value for each stock award. The awards issued to date have primarily been stock options with service-based vesting periods over two or four years, restricted stock units with service-based vesting periods of one year, and shares of common stock. Prior to the adoption of ASU 2018-07, the Company recognized compensation costs resulting from the issuance of stock-based awards to non-employees as an expense in the condensed consolidated statements of operations and comprehensive loss over the service period based on a measurement of fair value for each stock award at each performance date and period end.

 

Upon vesting of the restricted stock units, the Company issues shares of its common stock which have a required holding period of 36 months from the date of grant of the restricted stock unit. As a result, the Company values the restricted stock units based on the closing price of the Company’s common stock on the date of grant less a discount for lack of marketability during the holding period.

 

During 2018, the Company issued certain stock-based awards that contain both market and service-based vesting conditions. Each of these stock-based awards is contingent on the recipient still providing services to the Company or its affiliates on the date of such achievement. Portions of the awards vest upon the Company’s stock price achieving certain targets for a period of at least twenty consecutive trading days at any time before May 31, 2021. The Company estimated the fair value of these market condition stock-based awards using a Monte Carlo simulation model, which involves a series of random scenarios that may take different future price paths over the award’s contractual life. The grant date fair value was determined by taking the average of the grant date fair values under each of many Monte Carlo simulations. The determination of the fair value is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables including its expected stock price volatility over the expected term of the awards, and risk-free interest rate. The total number of shares of common stock that are subject to issuance under these market condition stock-based awards is 5,183,322 shares. The Company records expense on these stock-based awards ratably over the expected term of the award. During the quarter ended June 30, 2019, the first market condition covering 1,295,830 shares was achieved and vested and the remaining unamortized cost of the vested portion of the grant was expensed.

 

Research and Development

 

Costs for research and development are expensed as incurred. Research and development expense consists primarily of salaries, salary related expenses and costs of contractors and materials. Cash receipts from collaboration agreements accounted for under ASC 808, Collaborative Arrangements, are netted against the related research and development expenses in the period received and totaled $0 and $347 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $492 for the six months ended June 30, 2019 and 2018, respectively.

 

Income Taxes

 

The Company accounts for income taxes using the liability method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance to reduce deferred tax assets to amounts that are realizable. Consistent with all prior periods, the Company did not record any income tax benefit for its operating losses for the three and six months ended June 30, 2019 and 2018 due to the uncertainty regarding future taxable income.

 

Utilization of net operating losses and tax credit carryforwards may be subject to a substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986, and similar state provisions. The annual limitation may result in the expiration of net operating losses and tax credit carryforwards before utilization. Through December 31, 2018, the Company had completed several financings since its inception which it believed had not resulted in any changes in ownership as defined by Sections 382 and 383 of the Internal Revenue Code. If the financings caused an “ownership change”, generally defined as a greater than 50 percent change (by value) in its equity ownership of its “5-percent shareholders” over a three-year period, the Company’s attributes may be subject to an annual limitation. The Company is in the process of completing a Section 382 study for both federal and state. The federal portion of the study is substantially complete and indicates an ownership change has occurred. The study indicates that $1,790 of the federal net operating loss carryover and $1,581 of the federal research credit carryover would expire without being utilized. The reduction in these attributes have a corresponding adjustment to the valuation allowance and therefore there is no impact to the condensed consolidated statements of operation and comprehensive loss. Subsequent ownership changes may further affect the limitation in future years.

 

Net Loss per Share

 

Basic net loss per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed using the sum of the weighted-average number of common shares outstanding during the period and, if dilutive, the weighted-average number of potential common shares, including the assumed exercise of share options.

  

The Company applies the two-class method to calculate its basic and diluted net loss per share attributable to common stockholders, as its Series A and Series A-1 preferred shares are participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. However, for the periods presented, the two-class method does not impact the net loss per common share as the Company was in a net loss position for each of the periods presented and holders of Series A and Series A-1 preferred shares do not participate in losses.

 

The Company’s Series A and Series A-1 preferred shares contractually entitle the holders of such shares to participate in dividends but do not contractually require the holders of such shares to participate in losses of the Company. Accordingly, for periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

 

Recently Adopted Accounting Pronouncements

 

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases (ASC 842), which was amended by ASU 2018-11, Leases (ASC 842): Targeted Improvements. The new guidance requires lessee recognition on the balance sheet of a right-of-use asset and a lease liability, initially measured at the present value of the lease payments. It further requires recognition in the income statement of a single lease cost, calculated so that the cost of the lease is allocated over the lease term generally on a straight-line basis. Finally, it requires classification of all cash payments within operating activities in the statement of cash flows. The standard is effective for public companies for fiscal years beginning after December 15, 2018.The Company adopted this standard on January 1, 2019 using the prospective adoption approach as described under ASC 842. Results for reporting periods beginning January 1, 2019 are presented under ASC 842 while prior periods were not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 840, Leases.

 

As allowed by ASC 842, the Company has elected the hindsight practical expedient to determine the lease term for existing leases. This practical expedient enables an entity to use hindsight in determining the lease term when considering options to extend and terminate leases as well as purchase the underlying assets. The Company also elected the package of practical expedients that provide no need to reassess whether any expired or existing contracts contain a lease, the related lease classification for such expired or expiring leases, and the initial direct costs for existing leases.

 

Adoption of this standard resulted in the recording of right-of-use asset and lease liabilities of approximately $1,164 and $1,267, respectively, as of January 1, 2019. The difference between the right-of-use asset and the operating lease liability represents the amount of deferred rent previously recorded in accrued expenses and other liabilities for $41 and $62, respectively, at December 31, 2018 which was removed from the condensed consolidated financial statements upon adoption of this standard. The adoption of the standard did not materially impact the Company’s condensed consolidated results of operations and had no impact on cash flows.

v3.19.2
Inventories
6 Months Ended
Jun. 30, 2019
Inventory Disclosure [Abstract]  
Inventories

Note 3 Inventories

 

Inventories are valued at the lower of cost or net realizable value using the FIFO method and consist of the following:

 

 

June 30,

2019

  December 31,
2018
Raw material  $926   $1,036 
Work in progress   382    348 
Finished goods   491    1,124 
     Total  $1,799   $2,508 

 

v3.19.2
Leases
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Leases

Note 4 Leases

 

The Company has an operating lease for approximately 26,402 square feet at its corporate headquarters and manufacturing plant in Waltham, Massachusetts, which expires in January 2021. The lease terms include escalating rent payments over the life of the lease and rent expense is recognized over the life of the lease on a straight-line basis. The lease contains certain variable lease payments. Variable payments based on the change in an index or rate, or payments based on a change in the Company’s portion of the operating expenses, including real estate taxes, are recorded as a period expense when incurred.

 

In connection with the facility lease, the Company is required to maintain a security deposit with its landlord. The security deposit is $134 at both June 30, 2019 and December 31, 2018 and is included in deposits and other assets in the accompanying condensed consolidated balance sheets. The lease contains an option to extend the term for an additional five years. The exercise of the lease renewal options is at the sole discretion of the Company. The amounts disclosed in the condensed consolidated balance sheet pertaining to right-of-use assets and lease liabilities are measured based on management’s current expectations regarding the renewal option.

 

In 2019, the Company entered into a noncancelable operating lease for additional business equipment. Amounts included on the Company’s condensed consolidated balance sheets as operating lease right-of-use assets and operating lease liabilities relate to these two leases.

 

The Company also has a finance lease covering office furniture and carpeting, which expires in November 2020. Finance lease assets are included in property and equipment while the related finance lease liabilities are separately presented on the condensed consolidated balance sheets.

 

The components of lease cost for operating and finance leases for the three and six months ended June 30, 2019 are as follows:

 

 

Three Months Ended

June 30,

2019

 

Six Months Ended

June 30,

2019

Operating leases:          
   Lease costs  $156   $312 
   Variable lease costs   4    5 
     Operating lease costs   160    317 
           
Finance lease:          
   Amortization of right-of-use asset   12    25 
   Interest on lease liability   3    6 
      Finance lease costs   15    31 
         Total lease costs  $175   $348 

 

Other lease data is as follows:

 

  June 30, 2019
Weighted-average remaining lease term (years):     
   Operating lease   1.6 
   Finance lease   1.4 
Weighted-average discount rate:     
   Operating lease   10.6%
   Finance lease   13.6%

 

Supplemental cash flow information related to the Company’s leases is as follows:

 

 

Three Months Ended

June 30,

2019

 

Six Months Ended

June 30,

2019

Operating lease payments classified as cash used in operating          
   activities, excluding variable lease costs  $172   $337 
Financing lease payments classified as cash used in financing          
   activity   14    27 
Financing lease payments classified as cash used in operating          
   activity   3    6 

 

Future minimum lease payments under non-cancellable leases as of June 30, 2019 are as follows:

 

  Operating
Leases
 

Finance

Lease

 

 

Total

 2019   $334   $33   $367 
 2020    683    48    731 
 2021    60    —      60 
 2022    3    —      3 
 Total lease payments    1,080    81    1,161 
 Less: Interest    (88)   (6)   (94)
 Present value of lease liabilities   $992    75   $1,067 

 

v3.19.2
Long-Term Debt
6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Long-Term Debt

Note 5 Long-Term Debt

 

On March 16, 2018 (the “Initial Effective Date”), the Company completed a financing arrangement (the “Loan Agreement”) with Silicon Valley Bank and Solar Capital Ltd. (the “Lenders”) which provided for borrowings of up to $26,000 in the form of up to $23,000 in term loans and up to a $3,000 revolving line-of-credit through March 2022. The Company received $12,000 in proceeds under the term loan facility during 2018 and no proceeds under the revolving loan facility during 2018 or 2019. As of December 31, 2018, the Company had not achieved the gross profit or equity financing milestones required to draw on the additional $11,000 that had been available under the term loan. Therefore, these term loans are no longer available. The revolving line-of-credit also has various covenants which restrict its availability and for which the Company currently does not meet such restrictions.

 

On March 14, 2019, the Company entered into the first amendment (the “Amendment”) to the Loan Agreement by and among the Lenders, dated March 16, 2018 (the “Amendment Effective Date”). The Amendment provided the Company with an additional term loan of $2,750, all of which was outstanding principal as of June 30, 2019.

 

In connection with the Amendment, the Company issued the lenders warrants (the “Warrants”) to purchase an aggregate of 300,000 shares of the Company’s common stock at an exercise price of $1.3796, subject to adjustment for stock splits, stock dividends, combinations or similar events. The Warrants may be exercised for cash or on a cashless basis. The Company estimated the fair value of the Warrants at issuance using the Black-Scholes Model based on the estimated market value of the underlying shares of common stock at the valuation measurement date, the remaining contractual term of the Warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying shares of common stock. The fair value of these Warrants was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

 

The Company used the following assumptions for the valuation of these Warrants at the issuance date:

 

Risk-free 2.6%
Dividend yield 0.0%
Expected volatility 79.4%
Expected term (years) 10.0

 

Term Loans

 

As of June 30, 2019, the Company had $14,750 in principal outstanding under the term loan facilities and $0 in principal outstanding under the revolving loan facility. The initial term loan was made on March 16, 2018 in the amount of $12,000 (“Initial Term Loan”) and the Amendment provided the Company with an additional term loan of $2,750 (the “2019 Term Loan”). The Initial Term Loan is repayable in equal monthly installments of principal and interest over 30 months beginning on October 1, 2019, and prior to October 1, 2019, the Company is required to make interest only payments. The 2019 Term Loan is repayable in equal monthly installments of principal and interest over 24 months beginning on April 1, 2020, and prior to April 1, 2020, the Company is required to make interest only payments. All unpaid principal and accrued and unpaid interest with respect to both term loans is due and payable in full during March of 2022.

 

Both the Initial Term Loan and the 2019 Term Loan (collectively, the “Term Loans”) bear interest at a stated rate equal to the greater of (a) the ICE Benchmark LIBOR Rate plus 7.25% or (b) 8.83%. The stated interest rate in effect on the Term Loans was 9.69% at June 30, 2019.

 

All of the loan facilities are secured by substantially all of the Company’s personal property other than the Company’s intellectual property. Both loan facilities include customary affirmative and negative covenants. At the Company’s option, the Company may prepay the outstanding principal balance of Term Loans in whole but not in part, subject to a prepayment fee of 2.5% of any amount prepaid if the prepayment occurs through and including the first anniversary of the Term Loan’s respective issuance date, 1.5% of the amount prepaid if the prepayment occurs after the first anniversary of the Term Loan’s respective issuance date being issued through and including the second anniversary of the term loan being issued, or 1.0% of the amount prepaid if the prepayment occurs after the second anniversary of the Term Loans effective date through and including the third anniversary of the Term Loan’s respective issuance date.

 

For the Initial Term Loan and the 2019 Term Loan, the Company is also required to make final payments of $720 and $165, respectively, to the lenders equal to 6.0% of the original principal amount of Term Loans funded. The Company recognizes the final payment using the effective interest method over the term of each term loan. The final payments are included within long term debt on the condensed consolidated balance sheet. As of June 30, 2019, $319 of the discount on the final payment has been accreted.

 

Revolving Loan Facility

 

The Company also has a revolving line of credit with the lenders, pursuant to which the lenders agreed to make a revolving line of credit available to the Company in an aggregate amount of up to the lesser of (i) $3,000 or (ii) a borrowing base equal to 80% of the Company’s eligible accounts receivable. The revolving line-of-credit also has various clauses which restrict its availability and, as such, the Company is not currently eligible to draw down on the revolving line-of-credit. Proceeds from the revolving line of credit may be used for working capital and general business purposes.

 

The principal amount outstanding under the revolving line bears interest at a floating rate per annum equal to the greater of (i) 5.0% and (ii) the sum of (a) the “prime rate,” as reported in The Wall Street Journal, plus (b) 0.5%, which interest is payable monthly. Principal amounts borrowed under the revolving line of credit may be repaid and, prior to the maturity date, re-borrowed, subject to the terms and conditions set forth in the Revolving Loan Facility. The revolving line terminates, and all unpaid principal and accrued and unpaid interest with respect thereto is due and payable in full, on March 1, 2022. The Company is also required to pay an annual facility fee on the revolving line of $15 on each anniversary of the Initial Effective Date, a termination fee of $22 if the revolving line is terminated prior to the maturity date for any reason, and an unused revolving line facility fee in an amount equal to 0.5% per annum of the average unused portion of the revolving line payable monthly.

 

All of the loan facilities also include other events of default, the occurrence and continuation of which could cause interest to be charged at the rate that is otherwise applicable plus 5.0% and would provide the collateral agent under the term loan facility or the lender under the revolving loan facility, as applicable, with the right to exercise remedies against the Company and the collateral securing the loan facilities. These events of default include, among other things, any failure by the Company to pay principal or interest due under the loan facilities, a breach of certain covenants under the loan facilities, the Company’s insolvency, a material adverse change, the occurrence of any default under certain other indebtedness in an amount greater than $250, one or more judgments against the Company in an amount greater than $250 individually or in the aggregate, and any default under the other loan facility. The Company was not in default on any conditions of the loan facilities at June 30, 2019.

 

In connection with Initial Term Loan, the Company issued the lenders warrants to purchase 141,287 shares of the Company’s common stock at an exercise price of $1.27 per share. The fair value of the warrants issued was determined to be $210 at the date of issuance and the balance was remeasured at December 31, 2018 and was reclassified to equity in the accompanying condensed consolidated balance sheets.

 

Future principal payments under the term loan facilities as of June 30, 2019 are as follows:

 

Year Ending
December 31,
 

 

Amount

 2019   $1,200 
 2020    5,831 
 2021    6,175 
 2022    1,544 
     $14,750 

 

v3.19.2
Stockholders' Equity (Deficit)
6 Months Ended
Jun. 30, 2019
Equity [Abstract]  
Stockholders' Equity (Deficit)

Note 6 Stockholders’ Equity (Deficit)

 

Common Stock

 

On February 26, 2019, the Company consummated a private placement offering with a large institutional investor consisting of the sale of 10,872,716 shares of the Company’s common stock, at a price of $1.3796 per share (the “Private Placement”). On March 12, 2019, the Company consummated a second closing to the Private Placement with certain existing stockholders entitled to preemptive rights in connection with the initial closing of the Private Placement, consisting of the sale of 3,512,124 shares of the Company’s common stock, at the same price and on the same terms as the initial closing of the Private Placement, through the exercise of such preemptive rights and the purchase of certain additional shares. The aggregate gross proceeds from both closings of the Private Placement was $19,845 and the aggregate net proceeds was $19,531. The investors included HEC Master Fund LP, an affiliate of Douglas L. Braunstein and BioStar Ventures III-XF, L.P., an affiliate of Louis A. Cannon M.D., both of whom are directors of the Company. The shares sold in the private placement are subject to a contractual six-month lock-up.

 

In connection with the Private Placement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the investors participating in the financing, requiring the Company to register the resale of the shares sold in the private placement. Under the Registration Rights Agreement, the Company was required to file a registration statement with the Commission within 90 days of the closing of the Private Placement. These shares were registered in a registration statement filed on March 27, 2019 and declared effective on May 7, 2019. The Company filed a prospectus supplement (the “Prospectus Supplement”) dated May 8, 2019 with the Commission in connection with the resale of the private placement shares.

 

On August 31, 2018, the Company entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) with respect to an at-the-market offering program (the “Offering”) under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock having an aggregate offering price of up to $30,000 (the “Placement Shares”) through Cowen as its sales agent.

 

Cowen may sell the Placement Shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act of 1933, as amended. The Company will pay Cowen a commission equal to 3% of the gross sales proceeds of any Placement Shares sold through Cowen under the Sales Agreement. During the six months ended June 30, 2019, the Company sold 541,025 shares of common stock at a weighted average per share price of $3.08 at the market pursuant to the Sales Agreement for $1,518 in net proceeds and during the six months ended December 31, 2018, the Company sold 2,569,159 shares of common stock at a weighted average share price of $1.19 at the market pursuant to the Sales Agreement for $2,688 in net proceeds. The Company is not obligated to make any sales of common stock under the Sales Agreement and cannot provide any assurances that it will issue any additional shares pursuant to the Sales Agreement. The offering of Placement Shares pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all Placement Shares subject to the Sales Agreement or (ii) termination of the Sales Agreement in accordance with its terms.

 

Preferred Stock

 

The Company is authorized to issue 10,000,000 shares, $0.0001 par value per share, preferred stock. Of these shares, 1,000,000 shares of preferred stock have been designated as Series A Preferred Stock and 1,000,000 shares have been designated as Series A-1 Preferred Stock (Series A Preferred Stock and the Series A-1 Preferred Stock are collectively referred to as “Preferred Stock”).

 

On March 16, 2018, the Company issued 1,000,000 shares of Series A Preferred Stock along with warrants to purchase up to 8,750,000 shares of the Company’s common stock at an exercise price per share of $1.40 for proceeds of $24,671, net of issuance costs of $329. The Preferred Stock is classified outside of stockholders’ (deficit) equity because the shares contain certain redemption features which require redemption upon a change in control of the Company. The warrants were determined to be equity classified and are recorded in additional paid-in capital. The Company recorded the Series A Preferred Stock and the warrants at their relative fair values which were $20,838 and $4,162, respectively. The conversion option was determined to have a beneficial conversion feature which was valued at $5,236 and was recorded to additional paid-in capital and as a discount to the Series A Preferred Stock. This resulting discount was immediately amortized as the Series A Preferred Stock has no set redemption date but is currently convertible.

 

The Company estimated the fair value of the warrants at issuance using the Black-Scholes Model based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrants, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock. The fair value of these warrants was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

 

The Company used the following assumptions for the valuation of these Warrants at the issuance date.

 

Risk-free interest rate 2.9%
Dividend yield 0.0%
Expected volatility 61.6%
Expected term (years) 10.0

 

The Company estimated the fair value of the Series A Preferred Stock using a Monte Carlo simulation to determine the applicable dividend rate for each respective period based on the financial performance milestone and market condition milestone, as well as to determine the ultimate settlement method of the Series A Preferred Stock. The fair value of the Series A Preferred Stock was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

 

The Company used the following assumptions utilized in the valuation of the Series A Preferred Stock at the issuance date:

 

Expected volatility of future equity 45.9%
Estimated timing of Series A Preferred Stock liquidity event (years) 3.8

 

Dividends. Shares of the Series A Preferred Stock will be entitled to receive non-compounding dividends in additional shares of preferred stock, at the rate of 12% per annum, subject to reduction in the event certain milestones are achieved, whether or not declared by the Board of Directors of the Company. Dividends on the Series A Preferred Stock are payable in shares of the Company’s Series A-1 Convertible Preferred Stock, par value $0.0001 per share, equal to the quotient of (x) the dividend amount divided by (y) the applicable conversion price. The dividend rate may be reduced to (i) 8.00% in the event the Company achieves at least $50,000 of revenue, other than any one-time license or similar fees, for any period of twelve consecutive months, or (ii) 6.00% if the Common Stock trading price exceeds $3.00 per share (as equitably adjusted for stock splits, stock dividends, combinations, recapitalizations and the like after the date hereof) for a period of 90 consecutive trading days (a “Trading Price Dividend Rate Adjustment”); provided that in the event the dividend rate is reduced to 8.00% pursuant to clause (i) before the occurrence of a Trading Price Dividend Rate Adjustment, the dividend rate shall be permanently fixed at 8.00% and clause (ii) shall cease to be applicable notwithstanding any future achievement of a Common Stock trading price in excess of $3.00 per share (as equitably adjusted for stock splits, stock dividends, combinations, recapitalizations and the like after the date hereof) for a period of 90 consecutive trading days.

 

Voting Rights. For so long as HEC Master Fund LP beneficially owns at least a majority of the outstanding Preferred Stock, the preferred stockholders will be entitled to vote with the shares of Common Stock and not as a separate class, at any annual or special meeting of shareholders of the Company upon the following basis: each holder shall be entitled to a number of votes in respect of the shares of Preferred Stock owned of record by it equal to the number of shares of Common Stock determined by dividing (x) the number of shares of Preferred Stock held by such holder by (y) $1.29, the closing price per share of the Common Stock on the NYSE American on March 15, 2018, as of the record date for the determination of stockholders entitled to vote on such matters or, if no such record date is established, as of the date such vote is taken or any written consent of stockholders is solicited. For so long as at least 10% of the shares of Preferred Stock purchased under the purchase agreement remains outstanding the Company may not directly or indirectly (i) amend, alter, repeal or otherwise modify any provision of the Certificate of Incorporation, the Certificate of Designation or the Bylaws in a manner that would alter or change the terms or the powers, preferences, rights or privileges of the Preferred Stock as to affect them adversely, (ii) create (by reclassification or otherwise) or authorize any senior securities or any parity securities, or (iii) issue, or authorize for issuance, any new shares of Preferred Stock without the prior affirmative vote or written consent of the holders of at least a majority of the then-issued and outstanding shares of Preferred Stock. For so long as HEC Master Fund LP holds at least a majority of the outstanding shares of Preferred Stock, the Company may not directly or indirectly (a) incur or guarantee, assume or suffer to exist any indebtedness (other than permitted indebtedness), (b) sell, lease, license, assign, transfer, spin-off, split-off, close, convey, encumber, pledge or otherwise dispose of any intellectual property owned whether in a single transaction or a series of related transactions to any person(s), other than pursuant to permitted indebtedness; (c) engage in any material line of business substantially different from those lines of business conducted by or publicly contemplated to be conducted by the Company on the initial issuance date unless such engagement in the line of business has received the prior approval of the Board; (d) modify its corporate structure, unless such modification has received the prior approval of the Board; or (e) enter into any agreement with respect to the foregoing without the affirmative vote or written consent of the holders representing at least a majority of the then-issued and outstanding shares of Preferred Stock. In the election of directors to the Company, for so long as the holders of Preferred Stock hold at least 25% of the shares of Preferred Stock purchased under the purchase agreement, the holders of the Preferred Stock, voting as a separate class, shall be entitled to elect by majority vote one individual to the Company’s Board.

 

Rank. Each share of preferred stock shall rank equally in all respects. With respect to distributions upon Liquidation (as defined below), the preferred stock rank senior to the Common Stock and to each other class of the Company’s capital stock existing now or hereafter created that are not specifically designated as ranking senior to the preferred stock.

 

Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company or such subsidiaries the assets of which constitute all or substantially all of the assets of the business of the Company and its subsidiaries, taken as a whole (“Liquidation”), each holder of preferred stock shall be entitled to receive liquidating distributions out of the assets of the Company legally available for distribution to its stockholders, before any payment or distribution of any assets of the Company shall be made or set apart for holders of any junior securities, including the Common Stock, for such holder’s shares of preferred stock in an amount equal to the greater of (i) the sum of (A) the aggregate Liquidation Preference ($25.00 per share of Series A Preferred Stock) and (B) the aggregate Accrued Dividends of such shares as of the date of the Liquidation (as such terms are defined in the Certificate of Designation) and (ii) the amount such holder would have received had such shares of preferred stock, immediately prior to such Liquidation, been converted into shares of Common Stock.

 

Conversion. Each Holder of shares of preferred stock shall have the right (the “Conversion Right”), at any time and from time to time, at such holder’s option, to convert all or any portion of such holder’s shares of preferred stock into fully paid and non-assessable shares of Common Stock. Upon a holder’s election to exercise its Conversion Right, each share of preferred stock for which the Conversion Right is exercised shall be converted into such number of shares of Common Stock equal to the quotient of (A) the sum of (1) the Liquidation Preference and (2) the Accrued Dividends on such share as of the conversion date, divided by (B) the Conversion Price of such share in effect at the time of conversion.

 

Forced Conversion. If (a) at any time after the original issuance date, the Common Stock trading price exceeds $4.00 per share (as equitably adjusted for stock splits, stock dividends, combinations, recapitalizations and the like after the date hereof) for a 30 consecutive trading day period and (b) the Company, at its option, delivers a written notice to the holders of the preferred stock within 10 business days of the conclusion of such period, then each share of preferred stock outstanding shall be converted into such number of fully paid and nonassessable shares of Common Stock equal to the quotient of (A) the sum of (1) the Liquidation Preference and (2) the Accrued Dividends on such share, divided by (B) the conversion price of such share in effect as of the business day immediately prior to the date of the Company’s notice to the holder.

 

As of June 30, 2019, the redemption value and Liquidation Preference of the Preferred Stock was $28,260 and it was convertible into 22,608,000 shares of the Company’s Common Stock.

 

The Company issued the following shares of Series A-1 Preferred Stock to the holders of Series A Preferred Stock to fulfill the dividend payment obligation:

 

Series A dividend
payment dates
Number of
shares
4/16/2018 10,400
7/16/2018 30,000
10/15/2018 30,000
1/15/2019 30,000
4/15/2019 30,000
7/15/2019 30,000

 

v3.19.2
Revenue
6 Months Ended
Jun. 30, 2019
Revenue from Contract with Customer [Abstract]  
Revenue

Note 7 Revenue

 

Disaggregation of Revenue

 

The following table summarizes the timing of revenue source by major products and service lines for:

 

  

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Major Products/Service Lines  2019  2018  2019  2018
Revenue:            
     Systems  $3,757   $1,190   $6,251   $2,182 
     Capital upgrades   217    150    217    326 
     Cassettes and accessories   358    198    649    411 
     Service revenue   243    127    494    231 
        Total  $4,575   $1,665   $7,611   $3,150 

 

 

  

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Timing of Revenue Recognition  2019  2018  2019  2018
     Product transferred at a point in time  $4,332   $1,538   $7,117   $2,919 
     Service transferred over time   198    127    387    231 
     Service transferred at a point in time   45    —      107    —   
        Total  $4,575   $1,665   $7,611   $3,150 

 

Transaction Price Allocated to Future Performance Obligations

 

The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied) as of June 30, 2019:

 

  

Less than

1 year

 

Greater than

1 year

 

 

Total

     Product revenue  $368   $512   $880 
     Service and other revenue   751    710    1,461 
           Total  $1,119   $1,222   $2,341 

 

Contract Balances from Contracts with Customers

 

Contract assets consist of unbilled amounts at the reporting date and are transferred to accounts receivable when the rights become unconditional. Contract liabilities consist of deferred revenue. The following table presents changes in contract assets and contract liabilities during the six months ended June 30, 2019:

 

   Balance at
December 31,
2018
 

 

 

Additions

 

 

 

Subtractions

 

Balance at

June 30,

2019

             
Contract assets  $205   $47   $(45)  $207 
Contract acquisitions and fulfillment costs:                    
     Deferred contract costs  $64   $2   $(23)  $43 
Contract liabilities:                    
     Deferred revenue  $947   $713   $(409)  $1,251 

 

During the three and six months ended June 30, 2019, the Company recognized the following revenues as a result of changes in the contract asset and the contract liability balances in the respective periods:

 

  

Three Months Ended

June 30,

 

Six Months Ended

June 30,

   2019  2018  2019  2018
Revenue recognized in the period from:                    
Amounts included in the contract liability at the beginning of the period  $207   $107   $346   $187 
Performance obligations satisfied in previous periods                

v3.19.2
Stock-based Compensation
6 Months Ended
Jun. 30, 2019
Share-based Payment Arrangement [Abstract]  
Stock-based Compensation

Note 8 Stock-based Compensation

 

Stock-based compensation expense was allocated based on the employees’ and non-employees’ functions as follows:

 

  

Three Months Ended

June 30,

 

Six Months Ended

June 30,

   2019  2018  2019  2018
Cost of revenue  $54   $31   $103   $59 
Research and development   127    56    240    117 
Selling, general and administrative   1,162    550    1,978    1,135 
     Total  $1,343   $637   $2,321   $1,311 

 

The Company granted options to purchase 2,752,000 shares of common stock at a price range of $1.20 to $2.17, with a weighted average exercise price of $1.33 per share, during the six months ended June 30, 2019. The weighted-average fair value of the stock options granted was $0.95 per share for the six months ended June 30, 2019. The Company granted options to purchase 9,189,322 shares of common stock at an exercise price ranging from $0.75 to $1.05 per share during the six months ended June 30, 2018. The weighted-average fair value of the stock options granted was $0.81 per share for the six months ended June 30, 2018.

 

During 2018 the Company issued certain stock-based awards that contained both market and service-based vesting conditions. In June 2019, the first market condition covering 1,295,830 shares was achieved and vested and the remaining unamortized cost of the vested portion of the grant of $122 was expensed.

 

The following assumptions were used to estimate the fair value of stock options granted using the Black-Scholes option-pricing model:

 

    

Six Months Ended

June 30,

 
    2019    2018 
Risk-free interest rate   2.39-2.56%    2.69-2.86% 
Expected term in years   6.25 years    6.25-10 years 
Expected volatility   80-81%    64-71% 
Expected dividend yield   -%    -% 

 

The following table summarizes the activities for the Company’s unvested restricted stock units for the six months ended June 30, 2019:

 

     Unvested Restricted Stock Units 
    

Number of
Shares

    

Weighted-
average Grant
Date Fair Value

 
Unvested as of December 31, 2018    163,736   $0.63 
   Granted    165,894   $1.79 
   Vested    (163,736)  $0.63 
   Forfeited/Cancelled         
Unvested as of June 30, 2019    165,894   $1.79 

 

v3.19.2
Net Loss per Share
6 Months Ended
Jun. 30, 2019
Earnings Per Share [Abstract]  
Net Loss per Share

Note 9 Net Loss per Share

 

The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated, because including them would have had an anti-dilutive effect:

 

   As of June 30,
   2019  2018
Options to purchase common stock   26,386,209    25,532,850 
Warrants to purchase common stock   9,546,315    9,246,315 
Restricted stock units   165,894    331,206 
Series A preferred stock   20,000,000    20,000,000 
Series A-1 preferred stock   2,608,000    208,000 
v3.19.2
Restructuring Charges
6 Months Ended
Jun. 30, 2019
Restructuring and Related Activities [Abstract]  
Restructuring Charges

Note 10 Restructuring Charges

 

In May 2018, the Company undertook cost cutting initiatives which included a reduction in force from each functional area of the Company’s operations. In the second quarter of 2018, the Company recorded a restructuring charge of approximately $349 relating to severance-related costs. As of June 30, 2019, all of the 2018 restructuring charges had been paid.

v3.19.2
Subsequent Event
6 Months Ended
Jun. 30, 2019
Subsequent Events [Abstract]  
Subsequent Event

Note 11 Subsequent Event

 

On August 7, 2019, the Company entered into a definitive merger agreement to be acquired by a wholly-owned subsidiary of Siemens Healthineers AG, a German stock listed company. Under the terms of the merger agreement, SMS USA, a wholly-owned subsidiary of Siemens Healthineers AG, will acquire all of the issued and outstanding shares of common stock of the Company for $4.28 per share in cash. On a fully diluted basis, including payment to the Company’s preferred stockholders, option holders and holders of restricted stock units, the total consideration in the merger will be approximately $1,100,000.  The merger is subject to customary closing conditions, including approval of the merger by Company stockholders and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 

 

v3.19.2
Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial statements for interim periods in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The information included in this quarterly report on Form 10-Q should be read in conjunction with the audited condensed consolidated financial statements and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”). The Company’s accounting policies are described in the “Notes to Consolidated Financial Statements” in the 2018 Form 10-K and are updated, as necessary, in this Form 10-Q. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from the audited financial statements but does not include all disclosures required by U.S. GAAP. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.

Principles of Consolidation

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Corindus, Inc. and Corindus Security Corporation. All intercompany transactions and balances have been eliminated in consolidation. The functional currency of both wholly-owned subsidiaries is the U.S. dollar and, therefore, the Company has not recorded any currency translation adjustments.

 

In the fourth quarter of 2014, the Company participated in the formation of a not-for-profit that was established to generate awareness of the health risks linked to the use of fluoroscopy in hospital catheterization. As of June 30, 2019, the Company’s Chief Executive Officer and one of its senior executives represented two of the three voting members of the board of directors of the entity. As a result, under the voting model used for the consolidation of related parties, which are controlled by a company, the Company has consolidated the financial statements of the entity, and recognized expenses of $3 and $6 for the three months ended June 30, 2019 and 2018, respectively, and $9 and $11 for the six months ended June 30, 2019 and 2018, respectively, and other income of $0 and $40 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $40 for the six months ended June 30, 2019 and 2018, respectively. The entity had assets and liabilities of $38 and $11 respectively, on the Company’s condensed consolidated balance sheet at June 30, 2019 and assets and liabilities of $33 and $1, respectively, on the Company’s condensed consolidated balance sheet at December 31, 2018.

Segment Information

Segment Information

 

The Company operates in one business segment, which is the design, manufacture and sale of precision vascular robotic-assisted systems for use in interventional vascular procedures. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, the chief operating decision-maker has made such decisions and assessed performance at the Company level, as one segment. The Company’s chief operating decision-maker is the Chief Executive Officer.

Use of Estimates

Use of Estimates

 

The process of preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such management estimates include those relating to revenue recognition, inventory valuation, assumptions used in the valuation of the Company's preferred stock and warrants, valuation of stock-based awards, and valuation allowances against deferred income tax assets. Actual results could differ from those estimates.

Significant Customers

Significant Customers

 

The table below sets forth the Company's customers that accounted for greater than 10% of its revenues for the three and six months ended June 30, 2019 and 2018, respectively:

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Customer   2019   2018   2019   2018
A     14 %     1 %     8 %     23 %
B     12 %     22 %     9 %     12 %
C     11 %           7 %      
D     11 %           6 %      
E     10 %           6 %      
F     8 %     24 %     5 %     13 %
G                 10 %      
H           29 %           15 %
I           10 %           6 %
J                       16 %

 

 

Customers A, B, C, D, E, F and one other accounted for 13%, 11%, 11%, 11%, 10%, 10% and 10%, respectively, of the Company’s accounts receivable balance at June 30, 2019. Given the current revenue levels, in a period in which the Company sells a system, that customer is likely to represent a significant customer.

 

Revenues from domestic customers were $2,852 and $1,285 for the three months ended June 30, 2019 and 2018, respectively, and $5,463 and $2,716 for the six months ended June 30, 2019 and 2018, respectively. Revenues from international customers were $1,723 and $380 for the three months ended June 30, 2019 and 2018, respectively, and $2,148 and $434 for the six months ended June 30, 2019 and 2018, respectively.

Off-Balance Sheet Arrangements

Off-Balance Sheet Arrangements

 

The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts, or other hedging arrangements.

Fair Value Measurements

Fair Value Measurements

 

In accordance with ASC 820, Fair Value Measurements and Disclosures, the Company generally defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company uses a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

 

Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

 

Level 2 - inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.

 

Level 3 - inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

 

The Company had one item, cash equivalents, measured at fair value on a recurring basis totaling $31,888 and $23,849 at June 30, 2019 and December 31, 2018, respectively, which was valued based on Level 1 inputs.

 

The Company’s financial instruments of deposits and other assets are carried at cost and approximate their fair values given the liquid nature of such items. The fair value of the Company’s long-term debt and finance lease obligation approximates their carrying values due to their recent negotiation and variable market rate for the long-term debt.

Cash Equivalents

Cash Equivalents

 

The Company considers highly liquid short-term investments, which consists of money market funds, to be cash equivalents. From time to time, the Company’s cash balances may exceed federal deposit insurance limits.

Inventories

Inventories

 

Inventories are valued at the lower of cost or net realizable value using the first-in, first-out (FIFO) method. The Company routinely monitors the recoverability of its inventory and reduces the carrying value based on current selling prices and evaluates potential excess and obsolete inventories based on historical and forecasted usage, as required. Scrap and excess manufacturing costs are charged to cost of revenue as incurred and not capitalized as part of inventories. The Company only capitalizes pre-launch inventories when purchased for commercial use and it deems regulatory approval to be probable.

Leases

Leases

 

The Company determines if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company has elected not to separate non-lease components from all classes of its existing leases. Non-lease components have been accounted for as part of the single lease component to which they are related. The Company utilizes its incremental borrowing rate as the basis to calculate the present value of future lease payments at lease commencement. The Company’s incremental borrowing rate represents the rate the Company would have to pay to borrow funds on a collateralized basis over a similar term and in a similar economic environment.

Revenue Recognition

Revenue Recognition

 

The Company generates revenues primarily from the sale of the CorPath System, CorPath Cassettes, accessories and service contracts. Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that are within the scope of the revenue recognition accounting standard, the Company performs the following five steps: (i) identifies the contract with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

 

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or services to a customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing the expected value method to which it expects to be entitled. Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the Company’s anticipated performance and all information (historical, current and forecasted) that is reasonably available. Sales, value add, and other taxes collected on behalf of third parties are excluded from revenue.

 

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. The Company does not assess whether a significant financing component exists if the period between when it performs its obligations under the contract and when the customer pays is one year or less. For contracts where the period between performance and payment is greater than one year, the Company assesses whether a significant financing component exists, by applying a discount rate to the expected cash collections. If this difference is significant, the Company will conclude that a significant financing component exists. The Company identified a small number of contracts where the period between performance and payment was greater than one year; however, none of the Company’s contracts contained a significant financing component as of June 30, 2019.

 

Contracts that are modified to account for changes in contract specifications and requirements are assessed to determine if the modification either creates new or changes the existing enforceable rights and obligations. Generally, contract modifications are for products or services that are not distinct from the existing contract due to the inability to use, consume or sell the products or services on their own to generate economic benefits and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

 

Revenue is generally recognized when the customer obtains control of the Company’s product, which occurs at a point in time, and may be upon shipment or upon delivery based on the contractual shipping terms of a contract, or upon installation when the combined performance obligation is not distinct within the context of the contract. Service revenue is generally recognized over time as the services are delivered to the customer based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. Services are expected to be delivered to the customer throughout the term of the contract and the Company believes recognizing revenue ratably over the term of the contract best depicts the transfer of value to the customer.

 

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The Company enters into certain contracts that have multiple performance obligations, one or more of which may be delivered subsequent to the delivery of other performance obligations. These performance obligations may include installation, training, maintenance and support services, cassettes, and accessories. The Company allocates the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price considering available information such as market conditions and internally approved pricing guidelines related to the performance obligations. Revenue is then allocated to the performance obligations using the relative selling prices of each of the performance obligations in the contract.

Deferred Revenue

Deferred Revenue

 

The Company records deferred revenues when cash payments are received or due in advance of performance. Amounts received prior to satisfying the related performance obligations are recorded as deferred revenue in the accompanying balance sheets.

 

The Company’s contract liabilities consist of advance payments and billings in excess of revenue recognized (deferred revenues and customer deposits). The Company’s contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. The Company classifies deferred revenue as current or noncurrent based on the timing of when it expects to recognize revenue. In order to determine revenue recognized in the period from contract liabilities, the Company first allocates revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance. If additional advances are received on those contracts in subsequent periods, the Company assumes all revenue recognized in the reporting period first applies to the beginning contract liability as opposed to a portion applying to the new advances for the period.

Contract Assets

Contract Assets

 

Contract assets include unbilled amounts primarily for maintenance and support service and future cassette purchases where revenue recognized exceeds the amount billed to the customer, and the Company’s right to bill is not until the maintenance and support service period commence or the cassettes are delivered. Amounts may not exceed their net realizable value. Short-term contract assets are included in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets. Long-term contract assets are included in deposits and other assets on the Company’s condensed consolidated balance sheets.

Deferred Contract Costs

Deferred Contract Costs

 

The Company’s incremental direct costs of obtaining a contract, which consist of sales commissions, are deferred and amortized over the period of contract performance. Capitalized commissions are amortized based on the transfer of the products or services to which the assets relate. Applying the practical expedient, the Company recognizes sales commission expense when incurred if the amortization period of the assets that it otherwise would have recognized is one year or less. These costs are included in selling, general, and administrative expenses. Short-term deferred contract costs are included in prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets. Long-term deferred contract costs are included in deposits and other assets on the Company’s condensed consolidated balance sheets. The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products.

Deferred Offering Costs

Deferred Offering Costs

 

Specific incremental costs directly attributable to a proposed or actual offering of securities are deferred and charged against the gross proceeds of the offering through additional paid-in capital. Deferred offering costs for a transaction identified by management as no longer viable are immediately charged to the results of operations.

Warrants to Purchase Common Stock

Warrants to Purchase Common Stock

 

The Company classifies warrants within stockholders’ equity (deficit) on its condensed consolidated balance sheets if the warrants are considered to be indexed to the Company’s own capital stock, and otherwise would be recorded in stockholders’ equity (deficit). Warrants to purchase common stock issued in connection with the Company’s amended financing arrangement met these criteria and therefore were equity classified.

 

The table below is a summary of the Company’s warrant activity during the six months ended June 30, 2019:

 

 

Number of
Warrants

  Weighted Average Exercise Price
Outstanding at December 31, 2018       9,246,315     $ 1.40  
  Granted       300,000     $ 1.38  
  Exercised       —         —    
  Expired       —         —    
Outstanding at June 30, 2019       9,546,315     $ 1.40  

 

On August 5, 2019, a warrant to purchase 355,037 shares of common stock held by Steward Capital Holdings, LP ("Steward Capital") was exercised.  Steward Capital paid one exercise price of $1.41 per share for an aggregate purchase price of $500.  The shares were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. 

Stock-Based Compensation

Stock-Based Compensation

 

The Company adopted Accounting Standards Update (“ASU”) 2018-07, Stock-based Compensation: Improvements to Nonemployee Share-based Payment Accounting, effective July 1, 2018. Subsequent to the adoption of ASU 2018-07, the Company recognizes compensation costs resulting from the issuance of “service-based” awards to employees, non-employees and directors as an expense in the condensed consolidated statements of operations and comprehensive loss over the requisite service period based on a measurement of fair value for each stock award. The awards issued to date have primarily been stock options with service-based vesting periods over two or four years, restricted stock units with service-based vesting periods of one year, and shares of common stock. Prior to the adoption of ASU 2018-07, the Company recognized compensation costs resulting from the issuance of stock-based awards to non-employees as an expense in the condensed consolidated statements of operations and comprehensive loss over the service period based on a measurement of fair value for each stock award at each performance date and period end.

 

Upon vesting of the restricted stock units, the Company issues shares of its common stock which have a required holding period of 36 months from the date of grant of the restricted stock unit. As a result, the Company values the restricted stock units based on the closing price of the Company’s common stock on the date of grant less a discount for lack of marketability during the holding period.

 

During 2018, the Company issued certain stock-based awards that contain both market and service-based vesting conditions. Each of these stock-based awards is contingent on the recipient still providing services to the Company or its affiliates on the date of such achievement. Portions of the awards vest upon the Company’s stock price achieving certain targets for a period of at least twenty consecutive trading days at any time before May 31, 2021. The Company estimated the fair value of these market condition stock-based awards using a Monte Carlo simulation model, which involves a series of random scenarios that may take different future price paths over the award’s contractual life. The grant date fair value was determined by taking the average of the grant date fair values under each of many Monte Carlo simulations. The determination of the fair value is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables including its expected stock price volatility over the expected term of the awards, and risk-free interest rate. The total number of shares of common stock that are subject to issuance under these market condition stock-based awards is 5,183,322 shares. The Company records expense on these stock-based awards ratably over the expected term of the award. During the quarter ended June 30, 2019, the first market condition covering 1,295,830 shares was achieved and vested and the remaining unamortized cost of the vested portion of the grant was expensed.

 

Research and Development

Research and Development

 

Costs for research and development are expensed as incurred. Research and development expense consists primarily of salaries, salary related expenses and costs of contractors and materials. Cash receipts from collaboration agreements accounted for under ASC 808, Collaborative Arrangements, are netted against the related research and development expenses in the period received and totaled $0 and $347 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $492 for the six months ended June 30, 2019 and 2018, respectively.

Income Taxes

Income Taxes

 

The Company accounts for income taxes using the liability method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance to reduce deferred tax assets to amounts that are realizable. Consistent with all prior periods, the Company did not record any income tax benefit for its operating losses for the three and six months ended June 30, 2019 and 2018 due to the uncertainty regarding future taxable income.

 

Utilization of net operating losses and tax credit carryforwards may be subject to a substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986, and similar state provisions. The annual limitation may result in the expiration of net operating losses and tax credit carryforwards before utilization. Through December 31, 2018, the Company had completed several financings since its inception which it believed had not resulted in any changes in ownership as defined by Sections 382 and 383 of the Internal Revenue Code. If the financings caused an “ownership change”, generally defined as a greater than 50 percent change (by value) in its equity ownership of its “5-percent shareholders” over a three-year period, the Company’s attributes may be subject to an annual limitation. The Company is in the process of completing a Section 382 study for both federal and state. The federal portion of the study is substantially complete and indicates an ownership change has occurred. The study indicates that $1,790 of the federal net operating loss carryover and $1,581 of the federal research credit carryover would expire without being utilized. The reduction in these attributes have a corresponding adjustment to the valuation allowance and therefore there is no impact to the condensed consolidated statements of operation and comprehensive loss. Subsequent ownership changes may further affect the limitation in future years.

Net Loss per Share

Net Loss per Share

 

Basic net loss per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed using the sum of the weighted-average number of common shares outstanding during the period and, if dilutive, the weighted-average number of potential common shares, including the assumed exercise of share options.

 

The Company applies the two-class method to calculate its basic and diluted net loss per share attributable to common stockholders, as its Series A and Series A-1 preferred shares are participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. However, for the periods presented, the two-class method does not impact the net loss per common share as the Company was in a net loss position for each of the periods presented and holders of Series A and Series A-1 preferred shares do not participate in losses.

 

The Company’s Series A and Series A-1 preferred shares contractually entitle the holders of such shares to participate in dividends but do not contractually require the holders of such shares to participate in losses of the Company. Accordingly, for periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

 

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases (ASC 842), which was amended by ASU 2018-11, Leases (ASC 842): Targeted Improvements. The new guidance requires lessee recognition on the balance sheet of a right-of-use asset and a lease liability, initially measured at the present value of the lease payments. It further requires recognition in the income statement of a single lease cost, calculated so that the cost of the lease is allocated over the lease term generally on a straight-line basis. Finally, it requires classification of all cash payments within operating activities in the statement of cash flows. The standard is effective for public companies for fiscal years beginning after December 15, 2018.The Company adopted this standard on January 1, 2019 using the prospective adoption approach as described under ASC 842. Results for reporting periods beginning January 1, 2019 are presented under ASC 842 while prior periods were not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 840, Leases.

 

As allowed by ASC 842, the Company has elected the hindsight practical expedient to determine the lease term for existing leases. This practical expedient enables an entity to use hindsight in determining the lease term when considering options to extend and terminate leases as well as purchase the underlying assets. The Company also elected the package of practical expedients that provide no need to reassess whether any expired or existing contracts contain a lease, the related lease classification for such expired or expiring leases, and the initial direct costs for existing leases.

 

Adoption of this standard resulted in the recording of right-of-use asset and lease liabilities of approximately $1,164 and $1,267, respectively, as of January 1, 2019. The difference between the right-of-use asset and the operating lease liability represents the amount of deferred rent previously recorded in accrued expenses and other liabilities for $41 and $62, respectively, at December 31, 2018 which was removed from the condensed consolidated financial statements upon adoption of this standard. The adoption of the standard did not materially impact the Company’s condensed consolidated results of operations and had no impact on cash flows.

v3.19.2
Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
Schedule of customers that accounted for greater than 10% of revenues

The table below sets forth the Company's customers that accounted for greater than 10% of its revenues for the three and six months ended June 30, 2019 and 2018, respectively:

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Customer   2019   2018   2019   2018
A     14 %     1 %     8 %     23 %
B     12 %     22 %     9 %     12 %
C     11 %           7 %      
D     11 %           6 %      
E     10 %           6 %      
F     8 %     24 %     5 %     13 %
G                 10 %      
H           29 %           15 %
I           10 %           6 %
J                       16 %

 

Schedule of rollforward of warrant activity

The table below is a summary of the Company’s warrant activity during the six months ended June 30, 2019:

 

 

Number of
Warrants

  Weighted Average Exercise Price
Outstanding at December 31, 2018    9,246,315   $1.40 
 Granted    300,000   $1.38 
 Exercised    —      —   
 Expired    —      —   
Outstanding at June 30, 2019    9,546,315   $1.40 

 

v3.19.2
Inventories (Tables)
6 Months Ended
Jun. 30, 2019
Inventory Disclosure [Abstract]  
Schedule of inventories

Inventories are valued at the lower of cost or net realizable value using the FIFO method and consist of the following:

 

 

June 30,

2019

  December 31,
2018
Raw material  $926   $1,036 
Work in progress   382    348 
Finished goods   491    1,124 
     Total  $1,799   $2,508 

 

v3.19.2
Leases (Tables)
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Schedule of lease cost for operating and financing leases

The components of lease cost for operating and finance leases for the three and six months ended June 30, 2019 are as follows:

 

 

Three Months Ended

June 30,

2019

 

Six Months Ended

June 30,

2019

Operating leases:          
   Lease costs  $156   $312 
   Variable lease costs   4    5 
     Operating lease costs   160    317 
           
Finance lease:          
   Amortization of right-of-use asset   12    25 
   Interest on lease liability   3    6 
      Finance lease costs   15    31 
         Total lease costs  $175   $348 

 

Schedule of lease information

Other lease data is as follows:

 

  June 30, 2019
Weighted-average remaining lease term (years):     
   Operating lease   1.6 
   Finance lease   1.4 
Weighted-average discount rate:     
   Operating lease   10.6%
   Finance lease   13.6%
Schedule of supplemental cash flow information

Supplemental cash flow information related to the Company’s leases is as follows:

 

 

Three Months Ended

June 30,

2019

 

Six Months Ended

June 30,

2019

Operating lease payments classified as cash used in operating          
   activities, excluding variable lease costs  $172   $337 
Financing lease payments classified as cash used in financing          
   activity   14    27 
Financing lease payments classified as cash used in operating          
   activity   3    6 

 

Schedule of future minimum lease payments

Future minimum lease payments under non-cancellable leases as of June 30, 2019 are as follows:

 

  Operating
Leases
 

Finance

Lease

 

 

Total

 2019   $334   $33   $367 
 2020    683    48    731 
 2021    60    —      60 
 2022    3    —      3 
 Total lease payments    1,080    81    1,161 
 Less: Interest    (88)   (6)   (94)
 Present value of lease liabilities   $992    75   $1,067 

 

v3.19.2
Long-Term Debt (Tables)
6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Schedule of assumptions for the valuation of warrants

The Company used the following assumptions for the valuation of these Warrants at the issuance date:

 

Risk-free 2.6%
Dividend yield 0.0%
Expected volatility 79.4%
Expected term (years) 10.0

 

Schedule of future principal payments for loans

Future principal payments under the term loan facilities as of June 30, 2019 are as follows:

 

Year Ending
December 31,
 

 

Amount

 2019   $1,200 
 2020    5,831 
 2021    6,175 
 2022    1,544 
     $14,750 

 

v3.19.2
Stockholders' Equity (Deficit) (Tables)
6 Months Ended
Jun. 30, 2019
Equity [Abstract]  
Schedule of assumptions for fair value

The Company used the following assumptions for the valuation of these Warrants at the issuance date.

 

Risk-free interest rate 2.9%
Dividend yield 0.0%
Expected volatility 61.6%
Expected term (years) 10.0

 

The Company used the following assumptions utilized in the valuation of the Series A Preferred Stock at the issuance date:

 

Expected volatility of future equity 45.9%
Estimated timing of Series A Preferred Stock liquidity event (years) 3.8
Schedule of shares of Series A-1 preferred stock issued to fulfill the dividend payment obligation

The Company issued the following shares of Series A-1 Preferred Stock to the holders of Series A Preferred Stock to fulfill the dividend payment obligation:

 

Series A dividend
payment dates
Number of
shares
4/16/2018 10,400
7/16/2018 30,000
10/15/2018 30,000
1/15/2019 30,000
4/15/2019 30,000
7/15/2019 30,000

 

v3.19.2
Revenue (Tables)
6 Months Ended
Jun. 30, 2019
Revenue from Contract with Customer [Abstract]  
Schedule of revenue by revenue source

The following table summarizes the timing of revenue source by major products and service lines for:

 

  

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Major Products/Service Lines  2019  2018  2019  2018
Revenue:            
     Systems  $3,757   $1,190   $6,251   $2,182 
     Capital upgrades   217    150    217    326 
     Cassettes and accessories   358    198    649    411 
     Service revenue   243    127    494    231 
        Total  $4,575   $1,665   $7,611   $3,150 

 

 

  

Three Months Ended

June 30,

 

Six Months Ended

June 30,

Timing of Revenue Recognition  2019  2018  2019  2018
     Product transferred at a point in time  $4,332   $1,538   $7,117   $2,919 
     Service transferred over time   198    127    387    231 
     Service transferred at a point in time   45    —      107    —   
        Total  $4,575   $1,665   $7,611   $3,150 

 

Schedule of estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied)

The following table includes estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially satisfied) as of June 30, 2019:

 

  

Less than

1 year

 

Greater than

1 year

 

 

Total

     Product revenue  $368   $512   $880 
     Service and other revenue   751    710    1,461 
           Total  $1,119   $1,222   $2,341 

 

Schedule of change in contract asstes and contract liabilities

Contract assets consist of unbilled amounts at the reporting date and are transferred to accounts receivable when the rights become unconditional. Contract liabilities consist of deferred revenue. The following table presents changes in contract assets and contract liabilities during the six months ended June 30, 2019:

 

   Balance at
December 31,
2018
 

 

 

Additions

 

 

 

Subtractions

 

Balance at

June 30,

2019

             
Contract assets  $205   $47   $(45)  $207 
Contract acquisitions and fulfillment costs:                    
     Deferred contract costs  $64   $2   $(23)  $43 
Contract liabilities:                    
     Deferred revenue  $947   $713   $(409)  $1,251 

 

Schedule of revenues as a result of changes in the contract asset and the contract liability balances

During the three and six months ended June 30, 2019, the Company recognized the following revenues as a result of changes in the contract asset and the contract liability balances in the respective periods:

 

  

Three Months Ended

June 30,

 

Six Months Ended

June 30,

   2019  2018  2019  2018
Revenue recognized in the period from:                    
Amounts included in the contract liability at the beginning of the period  $207   $107   $346   $187 
Performance obligations satisfied in previous periods                
v3.19.2
Stock-based Compensation (Tables)
6 Months Ended
Jun. 30, 2019
Share-based Payment Arrangement [Abstract]  
Schedule of activity under stock option plans

Stock-based compensation expense was allocated based on the employees’ and non-employees’ functions as follows:

 

  

Three Months Ended

June 30,

 

Six Months Ended

June 30,

   2019  2018  2019  2018
Cost of revenue  $54   $31   $103   $59 
Research and development   127    56    240    117 
Selling, general and administrative   1,162    550    1,978    1,135 
     Total  $1,343   $637   $2,321   $1,311 

 

Schedule of activity unvested restricted stock units

The following assumptions were used to estimate the fair value of stock options granted using the Black-Scholes option-pricing model:

 

    

Six Months Ended

June 30,

 
    2019    2018 
Risk-free interest rate   2.39-2.56%    2.69-2.86% 
Expected term in years   6.25 years    6.25-10 years 
Expected volatility   80-81%    64-71% 
Expected dividend yield   -%    -% 

 

Schedule of stock-based compensation expense

The following table summarizes the activities for the Company’s unvested restricted stock units for the six months ended June 30, 2019:

 

     Unvested Restricted Stock Units 
    

Number of
Shares

    

Weighted-
average Grant
Date Fair Value

 
Unvested as of December 31, 2018    163,736   $0.63 
   Granted    165,894   $1.79 
   Vested    (163,736)  $0.63 
   Forfeited/Cancelled         
Unvested as of June 30, 2019    165,894   $1.79 

 

v3.19.2
Net Loss per Share (Tables)
6 Months Ended
Jun. 30, 2019
Earnings Per Share [Abstract]  
Schedule of securities excluded from the calculation of diluted net loss per share

The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated, because including them would have had an anti-dilutive effect:

 

   As of June 30,
   2019  2018
Options to purchase common stock   26,386,209    25,532,850 
Warrants to purchase common stock   9,546,315    9,246,315 
Restricted stock units   165,894    331,206 
Series A preferred stock   20,000,000    20,000,000 
Series A-1 preferred stock   2,608,000    208,000 
v3.19.2
Nature of Operations (Details Narrative)
$ / shares in Units, $ in Thousands
6 Months Ended
Mar. 12, 2019
USD ($)
shares
Feb. 26, 2019
$ / shares
shares
Jun. 30, 2019
USD ($)
$ / shares
shares
Dec. 31, 2018
USD ($)
$ / shares
shares
Aug. 07, 2019
$ / shares
Mar. 14, 2019
USD ($)
Number
Aug. 31, 2018
USD ($)
Jun. 30, 2018
USD ($)
Dec. 31, 2017
USD ($)
Cash and cash equivalents     $ 31,939 $ 23,849       $ 34,315 $ 17,458
Accumulated deficit     (235,728) (215,390)          
Working capital     26,474            
Net proceeds from sale of common stock     21,130            
Private Placement [Member]                  
Gross proceeds from sale of common stock $ 19,845                
Net proceeds from sale of common stock $ 19,531                
Number of shares issued | shares 3,512,124 10,872,716              
Price of stock issued (in dollars per share) | $ / shares   $ 1.3796              
Securities Purchase Agreement [Member] | Private Placement [Member]                  
Number of shares issued | shares 3,512,124 10,872,716              
Price of stock issued (in dollars per share) | $ / shares   $ 1.3796              
Financing Arrangement [Member]                  
Number of lenders | Number           2      
Principal amount outstanding     2,750     $ 2,750      
Sales Agreement [Member]                  
Net proceeds from sale of common stock     $ 1,518 $ 2,688          
Number of shares issued | shares     541,025 2,569,159          
Price of stock issued (in dollars per share) | $ / shares     $ 3.08 $ 1.19          
Offering price             $ 30,000    
Commission percentage of gross sales proceeds     3.00%            
Siemens Healthineers AG [Member] | Subsequent Event [Member]                  
Purchase price in acquisition (per share) | $ / shares         $ 4.28        
v3.19.2
Significant Accounting Policies (Details Narrative)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended 6 Months Ended
Aug. 05, 2019
USD ($)
$ / shares
shares
Jun. 30, 2019
USD ($)
$ / shares
shares
Jun. 30, 2019
USD ($)
$ / shares
shares
Jun. 30, 2019
USD ($)
$ / shares
shares
Jun. 30, 2018
USD ($)
Jun. 30, 2019
USD ($)
Number
$ / shares
shares
Jun. 30, 2018
USD ($)
Jan. 02, 2019
USD ($)
Dec. 31, 2018
USD ($)
$ / shares
Number of segments | Number           1      
Assets   $ 42,688 $ 42,688 $ 42,688   $ 42,688     $ 33,525
Liabilities   $ 24,850 $ 24,850 24,850   24,850     19,779
Revenue       $ 4,575 $ 1,665 $ 7,611 $ 3,150    
Right-of-use asset               $ 1,164  
Lease liabilities               $ 1,267  
Accrued expenses                 41
Other liabilities                 $ 62
Exercise price per warrant | $ / shares   $ 1.40 $ 1.40 $ 1.40   $ 1.40     $ 1.40
Subsequent Event [Member]                  
Warrant to purchase common stock exercised | shares 355,037                
Exercise price per warrant | $ / shares $ 1.41                
Exercise price of warrants $ 500                
Federal Net Operating Loss [Member]                  
Tax carryforwards to expire without being utilized   $ 1,790 $ 1,790 $ 1,790   $ 1,790      
Federal Research Credit [Member]                  
Tax carryforwards to expire without being utilized   1,581 1,581 1,581   1,581      
Fair Value, Level 1 [Member]                  
Cash equivalents   $ 31,888 31,888 31,888   31,888     $ 23,849
Collaborative Arrangement [Member] | Research and Development Expense [Member]                  
Collaborative arrangements       0 347 0 492    
Domestic Customers [Member]                  
Revenue       1,285 2,852 5,463 2,716    
International Customers [Member]                  
Revenue       1,723 380 2,148 434    
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer A [Member]                  
Concentration percentage   13.00%              
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer B [Member]                  
Concentration percentage   11.00%              
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer C [Member]                  
Concentration percentage   11.00%              
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer D [Member]                  
Concentration percentage   11.00%              
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer E [Member]                  
Concentration percentage   10.00%              
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer F [Member]                  
Concentration percentage   10.00%              
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Other [Member]                  
Concentration percentage   10.00%              
Not-For-Profit Subsidiary [Member]                  
Recognized expenses       3 6 9 11    
Other income       0 $ 40 0 $ 40    
Assets   $ 38 38 38   38     33
Liabilities   $ 11 $ 11 $ 11   $ 11     $ 1
Market-Based Vesting [Member]                  
Number of stock-based awards | shares   5,183,322 5,183,322 5,183,322   5,183,322      
Number of options vested | shares     1,295,830