SIENTRA, INC., 10-Q filed on 5/11/2020
Quarterly Report
v3.20.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2020
May 01, 2020
Cover [Abstract]    
Entity Registrant Name SIENTRA, INC.  
Entity Central Index Key 0001551693  
Document Type 10-Q  
Document Period End Date Mar. 31, 2020  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   50,033,442
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Trading Symbol SIEN  
Title of 12(b) Security Common Stock, par value $0.01 per share  
Security Exchange Name NASDAQ  
Entity Interactive Data Current Yes  
Entity Current Reporting Status Yes  
Entity Shell Company false  
Entity File Number 001-36709  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 20-5551000  
Entity Address, Address Line One 420 South Fairview Avenue  
Entity Address, Address Line Two Suite 200  
Entity Address, City or Town Santa Barbara  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 93117  
City Area Code 805  
Local Phone Number 562-3500  
Document Quarterly Report true  
Document Transition Report false  
v3.20.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 112,062 $ 87,608
Accounts receivable, net of allowances of $2,741 and $3,835 at March 31, 2020 and December 31, 2019, respectively 25,425 27,548
Inventories, net 42,118 39,612
Prepaid expenses and other current assets 2,264 2,489
Total current assets 181,869 157,257
Property and equipment, net 12,344 12,314
Goodwill 9,202 9,202
Other intangible assets, net 10,383 17,390
Other assets 9,048 8,241
Total assets 222,846 204,404
Current liabilities:    
Current portion of long-term debt 25,000 6,508
Accounts payable 5,835 9,352
Accrued and other current liabilities 26,402 32,551
Customer deposits 15,227 13,943
Sales return liability 8,707 8,116
Total current liabilities 81,171 70,470
Long-term debt 55,918 38,248
Derivative liability 16,230  
Deferred and contingent consideration 5,285 5,177
Warranty reserve and other long-term liabilities 9,375 8,627
Total liabilities 167,979 122,522
Commitments and contingencies (Note 15)
Stockholders’ equity:    
Preferred stock, $0.01 par value – Authorized 10,000,000 shares; none issued or outstanding
Common stock, $0.01 par value — Authorized 200,000,000 shares; issued 50,079,024 and 49,612,907 and outstanding 50,006,297 and 49,540,180 shares at March 31, 2020 and December 31, 2019, respectively 500 495
Additional paid-in capital 552,154 550,562
Treasury stock, at cost (72,727 shares at March 31, 2020 and December 31, 2019) (260) (260)
Accumulated deficit (497,527) (468,915)
Total stockholders’ equity 54,867 81,882
Total liabilities and stockholders’ equity $ 222,846 $ 204,404
v3.20.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Statement Of Financial Position [Abstract]    
Accounts receivable, allowances (in dollars) $ 2,741 $ 3,835
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 50,079,024 49,612,907
Common stock, shares outstanding 50,006,297 49,540,180
Treasury stock, shares 72,727 72,727
v3.20.1
Condensed Consolidated Statements of Operations - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Income Statement [Abstract]    
Net sales $ 16,932,000 $ 17,552,000
Cost of goods sold 6,792,000 6,474,000
Gross profit 10,140,000 11,078,000
Operating expenses:    
Sales and marketing 16,763,000 20,401,000
Research and development 2,908,000 3,054,000
General and administrative 9,304,000 13,474,000
Restructuring 1,739,000  
Impairment 6,432,000  
Total operating expenses 37,146,000 36,929,000
Loss from operations (27,006,000) (25,851,000)
Other income (expense), net:    
Interest income 180,000 304,000
Interest expense (1,623,000) (952,000)
Other income (expense), net (163,000) 15,000
Total other income (expense), net (1,606,000) (633,000)
Loss before income taxes (28,612,000) (26,484,000)
Income tax 0 0
Net loss $ (28,612,000) $ (26,484,000)
Basic and diluted net loss per share attributable to common stockholders $ (0.57) $ (0.91)
Weighted average outstanding common shares used for net loss per share attributable to common stockholders:    
Basic and diluted 49,916,412 29,099,382
v3.20.1
Condensed Consolidated Statement of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common stock
Treasury stock
Additional paid-in capital
Accumulated deficit
Balance, beginning of year at Dec. 31, 2018 $ 66,878 $ 286 $ (260) $ 428,949 $ (362,097)
Balance, beginning of year (in shares) at Dec. 31, 2018   28,701,494 72,727    
Stock-based compensation 3,772     3,772  
Stock option exercises 106     106  
Stock option exercises (in shares)   45,453      
Employee stock purchase program (ESPP) 683 $ 1   682  
Employee stock purchase program (ESPP) (in shares)   68,899      
Vested restricted stock   $ 7   (7)  
Vested restricted stock (in shares)   671,245      
Shares withheld for tax obligations on vested RSUs (2,725) $ (2)   (2,723)  
Shares withheld for tax obligations on vested RSUs, shares   (212,714)      
Net loss (26,484)       (26,484)
Balance, end of year at Mar. 31, 2019 42,230 $ 292 $ (260) 430,779 (388,581)
Balance, end of year (in shares) at Mar. 31, 2019   29,274,377 72,727    
Balance, beginning of year at Dec. 31, 2019 81,882 $ 495 $ (260) 550,562 (468,915)
Balance, beginning of year (in shares) at Dec. 31, 2019   49,612,907 72,727    
Issuance of common stock through ATM 264 $ 1   263  
Issuance of common stock through ATM (in shares)   37,000      
Stock-based compensation 2,000     2,000  
Employee stock purchase program (ESPP) 534 $ 1   533  
Employee stock purchase program (ESPP) (in shares)   113,615      
Vested restricted stock   $ 5   (5)  
Vested restricted stock (in shares)   472,914      
Shares withheld for tax obligations on vested RSUs (1,201) $ (2)   (1,199)  
Shares withheld for tax obligations on vested RSUs, shares   (157,412)      
Net loss (28,612)       (28,612)
Balance, end of year at Mar. 31, 2020 $ 54,867 $ 500 $ (260) $ 552,154 $ (497,527)
Balance, end of year (in shares) at Mar. 31, 2020   50,079,024 72,727    
v3.20.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Cash flows from operating activities:    
Net loss $ (28,612) $ (26,484)
Adjustments to reconcile net loss to net cash used in operating activities    
Impairment 6,432  
Depreciation and amortization 1,228 831
Provision for doubtful accounts 357 342
Provision for warranties 236 273
Provision for inventory 1,081 289
Fair value adjustments of liabilities held at fair value 91 98
Stock-based compensation expense 2,133 3,700
Payments of contingent consideration liability in excess of acquisition-date fair value   (630)
Other non-cash adjustments 397 56
Changes in operating assets and liabilities:    
Accounts receivable 1,766 (2,583)
Inventories (3,720) (3,373)
Prepaid expenses, other current assets and other assets (587) 396
Accounts payable, accrueds, and other liabilities (9,867) (75)
Customer deposits 1,284 956
Sales return liability 592 1,968
Legal settlement payable   (410)
Net cash used in operating activities (27,189) (24,646)
Cash flows from investing activities:    
Purchase of property and equipment (1,206) (610)
Net cash used in investing activities (1,206) (610)
Cash flows from financing activities:    
Proceeds from option exercises and employee stock purchase plan 534 789
Net proceeds from issuance of common stock 264  
Tax payments related to shares withheld for vested restricted stock units (RSUs) (1,201) (2,725)
Gross borrowings under the Revolving Loan   4,183
Repayment of the Revolving Loan (6,508) (1,565)
Net proceeds from issuance of the Convertible Note 60,000  
Payments of contingent consideration up to acquisition-date fair value   (370)
Deferred financing costs (240)  
Net cash provided by financing activities 52,849 312
Net increase in cash, cash equivalents and restricted cash 24,454 (24,944)
Cash, cash equivalents and restricted cash at:    
Beginning of period 87,951 87,242
End of period 112,405 62,298
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets    
Cash and cash equivalents 112,062 61,955
Restricted cash included in other assets $ 343 $ 343
Restricted Cash Noncurrent Asset Statement Of Financial Position Extensible List us-gaap:OtherNoncurrentAssetsMember us-gaap:OtherNoncurrentAssetsMember
End of period $ 112,405 $ 62,298
Supplemental disclosure of cash flow information:    
Interest paid 1,067 903
Supplemental disclosure of non-cash investing and financing activities:    
Property and equipment in accounts payable and accrued liabilities 222 $ 273
Deferred financing costs in accrued liabilities $ 1,275  
v3.20.1
Formation and Business of the Company
3 Months Ended
Mar. 31, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Formation and Business of the Company

1.

Formation and Business of the Company

 

a.

Formation

Sientra, Inc. (“Sientra”, the “Company,” “we,” “our” or “us”), was incorporated in the State of Delaware on August 29, 2003 under the name Juliet Medical, Inc. and subsequently changed its name to Sientra, Inc. in April 2007. The Company acquired substantially all the assets of Silimed, Inc. on April 4, 2007. The purpose of the acquisition was to acquire the rights to the silicone breast implant clinical trials, related product specifications and pre-market approval, or PMA, assets. Following this acquisition, the Company focused on completing the clinical trials to gain FDA approval to offer its silicone gel breast implants in the United States.

In March 2012, the Company announced it had received approval from the FDA for its portfolio of silicone gel breast implants, and in the second quarter of 2012 the Company began commercialization efforts to sell its products in the United States. The Company, based in Santa Barbara, California, is a medical aesthetics company that focuses on serving board-certified plastic surgeons and offers a portfolio of silicone shaped and round breast implants, scar management, tissue expanders, and body contouring products.

In November 2014, the Company completed an initial public offering, or IPO, and its common stock is listed on the Nasdaq Stock Exchange under the symbol “SIEN.”

 

b.

Acquisition of miraDry

On June 11, 2017, Sientra entered into an Agreement and Plan of Merger, or the Merger Agreement, with miraDry (formerly Miramar Labs), pursuant to which Sientra commenced a tender offer to purchase all of the outstanding shares of miraDry’s common stock for (i) $0.3149 per share, plus (ii) the contractual right to receive one or more contingent payments upon the achievement of certain future sales milestones. The total merger consideration was $18.7 million in upfront cash and the contractual rights represent potential contingent payments of up to $14 million. The transaction, which closed on July 25, 2017, added the miraDry System to Sientra’s aesthetics portfolio.

 

c.

Acquisition of certain assets from Vesta Intermediate Funding, Inc.

 

On November 7, 2019, the Company entered into an Asset Purchase Agreement, or the Purchase Agreement, with Vesta Intermediate Funding, Inc., or Vesta, pursuant to which the Company purchased certain assets and obtained a non-exclusive, royalty-free, perpetual, irrevocable, assignable, sublicensable, and worldwide license to certain intellectual property owned by Vesta, or the Vesta Acquisition. The total consideration was $ 19.1 million in cash, $3.2 million and $3.0 million in cash payable on November 7, 2021 and November 7, 2023, respectively, and two contingent share issuances of up to 303,721 shares each, of the Company’s common stock upon the achievement of certain price targets. The transaction, which closed on November 7, 2019, allows the Company to achieve a greater degree of vertical integration, obtaining direct control of breast implant manufacturing and product development activities and generating production-related cost synergies.

 

 

d.

Regulatory Review of Vesta Manufacturing

Prior to the asset acquisition on November 7, 2019, the Company engaged Vesta for the manufacture and supply of the Company’s breast implants. On March 14, 2017, the Company announced it had submitted a site-change pre-market approval, or PMA, supplement to the FDA for the manufacture of the Company’s PMA-approved breast implants at the Vesta manufacturing facility. On January 30, 2018, the Company announced the FDA has granted approval of the site-change supplement for the manufacture of its silicone gel breast implants at the Vesta manufacturing facility. In support of the move to the Vesta manufacturing facility, the Company also implemented new manufacturing process improvements which, in consultation with the FDA, required three (3) additional PMA submissions.  In addition to approving the manufacturing site-change PMA supplement, the FDA approved the Company’s three (3) process enhancement submissions on January 10, 2018, January 19, 2018 and April 17, 2018.

 

e.

Follow-On Offerings and At-The-Market Share Issuance

 

On May 7, 2018, the Company completed an underwritten follow-on public offering of 7,407,408 shares of its common stock at $13.50 per share, as well as 1,111,111 additional shares of its common stock pursuant to the full exercise of the over-allotment option granted to the underwriters. Net proceeds to the Company were approximately $107.6 million after deducting underwriting discounts and commissions of $6.9 million and offering expenses of approximately $0.5 million.

 

On June 7, 2019, the Company completed an underwritten follow-on public offering of 17,391,305 shares of its common stock at $5.75 per share, as well as 2,608,695 additional shares of its common stock pursuant to the full exercise of the over-allotment option granted to the underwriters. Net proceeds to the Company were approximately $107.7 million after deducting underwriting discounts and commissions of $6.9 million and offering expenses of approximately $0.4 million.

 

Further, during the first quarter of 2020, the Company sold 37,000 shares of its common stock under the At-The-Market Equity Offering Sales Agreement with Stifel, Nicolaus & Company, Incorporated which was entered into in February 2018. Net proceeds to the Company after commissions were approximately $0.3 million.

 

v3.20.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2.

Summary of Significant Accounting Policies

 

a.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and the rules and regulations of the U.S. Securities and Exchange Commission, or SEC. Accordingly, they do not include certain footnotes and financial presentations normally required under accounting principles generally accepted in the United States of America for complete financial reporting. The interim financial information is unaudited, but reflects all normal adjustments and accruals which are, in the opinion of management, considered necessary to provide a fair presentation for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 16, 2020, or the Annual Report. The results for the three months ended March 31, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020, any other interim periods, or any future year or period.

 

b.

Liquidity

Since the Company’s inception, it has incurred significant net operating losses and the Company anticipates that losses will continue in the near term. Although the Company expects its operating expenses will begin to decrease with the implementation of the organizational efficiency initiative announced on November 7, 2019, and other measures introduced as announced in the Company’s filing on Form 8-K on April 7, 2020, the Company will need to generate significant net sales to achieve profitability. To date, the Company has funded operations primarily with proceeds from the sales of preferred stock, borrowings under term loans and convertible note, sales of products since 2012, and the proceeds from the sale of common stock in public offerings.

 

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.  As of March 31, 2020, the Company had cash and cash equivalents of $112.1 million. Since inception, the Company has incurred recurring losses from operations and cash outflows from operating activities. The continuation of the Company as a going concern is dependent upon many factors including liquidity and the ability to raise capital. The Company received FDA approval of its PMA supplement on April 17, 2018 and was then able to access a $10.0 million term loan pursuant to an amendment to the credit agreement with MidCap Financial Trust, or MidCap. In addition, in February 2018, the Company entered into an At-The-Market Equity Offering Sales Agreement with Stifel, Nicolaus & Company, Incorporated, or Stifel, as sales agent pursuant to which the Company may sell, from time to time, through Stifel, shares of our common stock having an aggregate gross offering price of up to $50.0 million. As of March 31, 2020, the Company has sold 37,000 shares of its common stock pursuant to the sales agreement, resulting in net proceeds after commissions of approximately $0.3 million. Further, on May 7, 2018 and June 7, 2019, the Company completed public offerings of its common stock, raising approximately $107.6 million and $107.7 million, respectively, in net proceeds after deducting underwriting discounts and commissions and other offering expenses.

 

On July 1, 2019, the Company entered into certain credit agreements with Midcap Financial Trust pursuant to which the Company repaid its existing indebtedness under its Loan Agreement and the outstanding commitment fee was cancelled. On May 11, 2020, the Company amended certain credit agreements with Midcap Financial Trust pursuant to which the Company repaid certain amounts of its existing indebtedness. See Note 11 – Debt and Note 16 – Subsequent Events for further discussion.

 

On March 11, 2020, the Company entered into a facility agreement with Deerfield Partners, L.P., issuing $60.0 million in principal amount of 4.0% unsecured and subordinated convertible notes upon the terms and conditions set forth in the facility agreement. See Note 11 – Debt for further discussion.

The Company believes that its cash and cash equivalents will be sufficient to fund its operations for at least the next 12 months. To fund ongoing operating and capital needs, the Company may need to raise additional capital in the future through the sale of equity securities and incremental debt financing.

 

c.

Use of Estimates

The preparation of the condensed consolidated financial statements, in conformity with 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

d.

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The amendment modifies, removes, and adds certain disclosure requirements on fair value measurements. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption was permitted. The Company adopted the applicable amendments within ASU 2018-13 prospectively in the first quarter of 2020 and there was no material impact on its condensed consolidated financial statements from the adoption.

 

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendment. The ASU is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption was permitted. The Company adopted ASU 2018-15 prospectively in the first quarter of 2020 and there was no material impact on its condensed consolidated financial statements from the adoption.

 

Recently Issued Accounting Standards

 

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848)-Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendment provides optional expedients and exceptions for contract modifications that replace a reference rate affected by reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022, and entities may elect to apply by Topic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. The Company is currently evaluating the impact the election of the optional expedient will have on the consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendment removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation, and calculating income taxes in interim periods. The amendment also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact that adoption of the standard will have on the consolidated financial statements.

 

 

e.

Risks and Uncertainties

 

On March 11, 2020, the World Health Organization declared the outbreak of a novel strain of coronavirus, also known as COVID-19, a global pandemic. Due to the pandemic, there has been uncertainty and disruption in the global economy and significant volatility of financial markets. The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, and employee-related amounts, will depend on future developments that are highly uncertain. The Company continues to monitor and assess new information related to the COVID-19 pandemic, the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

 

As an aesthetics company, the Company's products are susceptible to local and national government restrictions, such as social distancing, “shelter in place” orders and business closures, due to the economic and logistical impacts these measures have on consumer demand as well as the practitioners’ ability to administer such procedures.  The inability to perform such non-emergency procedures has harmed the Company’s revenues for the period ending March 31, 2020 and will likely result in future harm while these or new restrictions remain in place. In addition, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that this can lead to a local and/or global economic recession, which may result in further harm to the aesthetics market. Such economic disruption could adversely affect the Company’s business.

 

The estimates used for, but not limited to, determining the collectability of accounts receivable, fair value of long-lived assets, and goodwill could be impacted by the pandemic. While the full impact of COVID-19 is unknown at this time, the Company has made appropriate estimates based on the facts and circumstances available as of the reporting date. These estimates may change as new events occur and additional information is obtained.

 

 

f.

Reclassifications

 

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

v3.20.1
Restructuring
3 Months Ended
Mar. 31, 2020
Restructuring And Related Activities [Abstract]  
Restructuring

3.

Restructuring

 

On November 7, 2019, the Company announced an organizational efficiency initiative, or the Plan, designed to reduce spending and simplify operations. Under the Plan, the Company will implement numerous initiatives to reduce spending, including closing the Santa Clara offices of miraDry, Inc. and consolidating a number of business support services via a shared services organization at the Company’s Santa Barbara headquarters.

 

Under the Plan, the Company intends to reduce its workforce by terminating approximately 70 employees. The Company expects to incur total charges of approximately $4.1 million in connection with one-time employee termination costs, retention costs and other benefits. In addition, the Company expects to incur estimated charges of approximately $0.7 million related to contract termination costs, duplicate operating costs, and other associated costs. In total, the Plan is estimated to cost approximately $4.8 million, excluding non-cash charges, with related cash payments expected to be substantially paid out with cash on hand by the end of 2020.

 

The following table details the amount of the liabilities related to the Plan included in "Accrued and other current liabilities" in the condensed consolidated balance sheet as of March 31, 2020 (amounts in thousands):

 

 

 

Severance costs

 

 

Other associated costs

 

Balance at December 31, 2019

 

$

894

 

 

$

 

Costs charged to expense

 

 

1,642

 

 

 

97

 

Costs paid or otherwise settled

 

 

(632

)

 

 

(97

)

Balance at March 31, 2020

 

$

1,904

 

 

$

 

 

During the three months ended March 31, 2020, the Company recorded $1.7 million of severance and other associated costs related to the Plan. The following table details the charges by reportable segment, recorded in "Restructuring" under operating expenses in the condensed consolidated statements of operations for the three months ended March 31, 2020 by segment (amounts in thousands):

 

 

 

Year Ended

 

 

Three Months

 

 

Cumulative Restructuring

 

 

 

December 31, 2019

 

 

Ended March 31, 2020

 

 

Charges

 

Breast Products

 

$

499

 

 

$

828

 

 

$

1,327

 

miraDry

 

 

584

 

 

 

911

 

 

 

1,495

 

Total

 

$

1,083

 

 

$

1,739

 

 

$

2,822

 

 

The Company has incurred cumulative restructuring charges of $2.8 million since the commencement of the restructuring plan through March 31, 2020. It is anticipated that the Company will additionally incur approximately $2.0 million of total restructuring costs during the remainder of 2020, of which $0.1 million would be attributable to the Breast Products segment and $1.9 million would be attributable to the miraDry segment. As the development of the Plan is completed, the Company will update its estimated costs by reportable segment as needed.

v3.20.1
Revenue
3 Months Ended
Mar. 31, 2020
Revenue From Contract With Customer [Abstract]  
Revenue

4.

Revenue

Revenue Recognition

The Company generates revenue primarily through the sale and delivery of promised goods or services to customers and recognizes revenue when control is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the goods or services. Performance obligations typically include the delivery of promised products, such as breast implants, tissue expanders, BIOCORNEUM, miraDry Systems and bioTips, along with service-type warranties and deliverables under certain marketing programs. Other deliverables are sometimes promised, but are ancillary and insignificant in the context of the contract as a whole. Sales prices are documented in the executed sales contract, purchase order or order acknowledgement prior to the transfer of control to the customer. Customers may enter into a separate extended service agreement to purchase an extended warranty for miraDry products from the Company whereby the payment is due at the inception of the agreement. Typical payment terms are 30 days for Breast Products and direct sales of consumable miraDry products, and tend to be longer for capital sales of miraDry Systems and sales to miraDry distributors, but do not extend beyond one year. For delivery of promised products, control transfers and revenue is recognized upon shipment, unless the contractual arrangement requires transfer of control when products reach their destination, for which revenue is recognized once the product arrives at its destination. Revenue for extended service agreements are recognized ratably over the term of the agreements.

For Breast Products, with the exception of the Company’s BIOCORNEUM scar management products, the Company allows for the return of products from customers within six months after the original sale, which is accounted for as variable consideration. Reserves are established for anticipated sales returns based on the expected amount calculated with historical experience, recent gross sales and any notification of pending returns. The estimated sales return is recorded as a reduction of revenue and as a sales return liability in the same period revenue is recognized. Actual sales returns in any future period are inherently uncertain and thus may differ from the estimates. If actual sales returns differ significantly from the estimates, an adjustment to revenue in the current or subsequent period would be recorded. The Company has established an allowance for sales returns of $8.7 million and $8.1 million as of March 31, 2020 and December 31, 2019 respectively, recorded as “sales return liability” on the condensed consolidated balance sheets.

The following table provides a rollforward of the sales return liability (in thousands):

 

 

 

Sales return liability

 

Balance as of December 31, 2019

 

$

8,116

 

Addition to reserve for sales activity

 

 

28,538

 

Actual returns

 

 

(28,074

)

Change in estimate of sales returns

 

 

127

 

Balance as of March 31, 2020

 

$

8,707

 

 

For Breast Products, a portion of the Company’s revenue is generated from the sale of consigned inventory of breast implants maintained at doctor, hospital, and clinic locations. For these products, revenue is recognized at the time the Company is notified by the customer that the product has been implanted, not when the consigned products are delivered to the customer’s location.

For miraDry, in addition to domestic and international direct sales, the Company leverages a distributor network for selling the miraDry System internationally. The Company recognizes revenue when control of the goods or services is transferred to the distributors. Standard terms in both direct sales agreements (domestic and international), and international distributor agreements do not allow for trial periods, right of return, refunds, payment contingent on obtaining financing or other terms that could impact the customer’s payment obligation.

Arrangements with Multiple Performance Obligations

The Company has determined that the delivery of each unit of product in the Company’s revenue contracts with customers is a separate performance obligation. The Company’s revenue contracts may include multiple products or services, each of which is considered a separate performance obligation. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on observable prices or using an expected cost plus margin approach when an observable price is not available. The Company invoices customers once products are shipped or delivered to customers depending on the negotiated shipping terms.

The Company introduced its Platinum20 Limited Warranty Program, or Platinum20, in May 2018 on all OPUS breast implants implanted in the United States or Puerto Rico on or after May 1, 2018.  Platinum20 provides for financial assistance for revision surgeries and no-charge contralateral replacement implants upon the occurrence of certain qualifying events. The Company considers Platinum20 to have an assurance warranty component and a service warranty component. The assurance component is recorded as a warranty liability at the time of sale (as discussed in Note 7). The Company considers the service warranty component as an additional performance obligation and defers revenue at the time of sale based on the relative estimated selling price, by estimating a standalone selling price using the expected cost plus margin approach for the performance obligation. Inputs into the expected cost plus margin approach include historical incidence rates, estimated replacement costs, estimated financial assistance payouts and an estimated margin. The liability for unsatisfied performance obligations under the service warranty as of March 31, 2020 and December 31, 2019 was $1.3 million and $1.2 million, respectively. The short-term obligation related to the service warranty as of both March 31, 2020 and December 31, 2019 was $0.5 million and is included in “accrued and other current liabilities” on the condensed consolidated balance sheets. The long-term obligation related to the service warranty as of March 31, 2020 and December 31, 2019 was $0.8 million and $0.7 million, respectively, and is included in “warranty reserve and other long-term liabilities” on the condensed consolidated balance sheets. The performance obligation is satisfied at the time that Platinum20 benefits are provided and are expected to be satisfied over the following 3 to 24 month period for financial assistance and 20 years for product replacement. Revenue recognized for the service warranty performance obligations for the three months ended March 31, 2020 was immaterial.

Practical Expedients and Policy Election

The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses.

The Company does not adjust accounts receivable for the effects of any significant financing components as customer payment terms are shorter than one year.

The Company has elected to account for shipping and handling activities performed after a customer obtains control of the products as activities to fulfill the promise to transfer the products to the customer. Shipping and handling activities are largely provided to customers free of charge for the Breast Products segment. The associated costs were $0.7 million and $0.4 million for the three months ended March 31, 2020 and 2019, respectively. These costs are viewed as part of the Company’s sales and marketing programs and are recorded as a component of sales and marketing expense in the condensed consolidated statement of operations as an accounting policy election. For the miraDry segment, shipping and handling charges are typically billed to customers and recorded as revenue. The shipping and handling costs incurred are recorded as a component of cost of goods sold in the condensed consolidated statement of operations. The associated costs were $0.1 million for both the three months ended March 31, 2020 and 2019.

v3.20.1
Fair Value of Financial Instruments
3 Months Ended
Mar. 31, 2020
Financial Instruments Owned At Fair Value [Abstract]  
Fair Value of Financial Instruments

5.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, customer deposits and sales return liability are reasonable estimates of their fair value because of the short maturity of these items. The fair value of the common stock warrant liability, contingent consideration, and the convertible feature related to the convertible note are discussed in Note 6. The fair value of debt is based on the amount of future cash flows associated with the instrument discounted using the Company’s estimated market rate. As of March 31, 2020, the carrying value of the long-term debt and convertible note was not materially different from the fair value.

v3.20.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements

6.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

 

Level 1 — Quoted prices in active markets for identical assets or liabilities.

 

Level 2 — Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

 

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Common Stock Warrants

The Company’s common stock warrant liabilities are carried at fair value determined according to the fair value hierarchy described above. The Company has utilized an option pricing valuation model to determine the fair value of its outstanding common stock warrant liabilities. The inputs to the model include fair value of the common stock related to the warrant, exercise price of the warrant, expected term, expected volatility, risk-free interest rate and dividend yield. The warrants are valued using the fair value of common stock as of the measurement date. The Company estimates its expected stock volatility based on company-specific historical and implied volatility information of its stock. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. The Company has estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends. As of March 31, 2020, the fair value of the warrants was immaterial as a result of the decline in the Company’s stock price.

Contingent Consideration

The Company assessed the fair value of the contingent consideration for future royalty payments related to the acquisition of BIOCORNEUM and the contingent consideration for the future milestone payments related to the acquisition of miraDry using a Monte-Carlo simulation model. The contingent consideration related to the acquisition of BIOCORNEUM consist of royalty obligations based on future net sales for a defined term, beginning in 2024. The significant assumption utilized in the fair value measurement was the revenue discount rate, which was 19.0%. The contingent consideration for future milestone payments related to the acquisition of miraDry is based on the timing of achievement of target net sales, which is estimated based on an internal management forecast. The significant assumption utilized in the fair value measurement was the miraDry company discount rate, which was 11.2%. As these inputs are not observable, the overall fair value measurement of the contingent consideration is classified as Level 3. During the quarter ended March 31, 2020, there were no material changes to the fair value of the contingent consideration.

Convertible note conversion feature

The Company assessed the fair value of the conversion feature related to the convertible note due in 2025. The conversion feature was bifurcated and recorded as a current derivative liability on the condensed consolidated balance sheet with a corresponding discount at the date of issuance that is netted against the principal amount of the note. The Company has utilized a binomial lattice method to determine the fair value of the conversion feature, which utilizes inputs including the common stock price, volatility of common stock, the risk-free interest rate and the probability of conversion to common shares at the Base Conversion Rate and in the event of a major transaction (e.g. a change in control). As the probability of conversion is a significant unobservable input, the overall fair value measurement of the conversion feature is classified as level 3.

The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 and indicate the level of the fair value hierarchy utilized to determine such fair value (in thousands):

 

 

 

Fair Value Measurements as of

 

 

 

March 31, 2020 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liability for contingent consideration

 

$

 

 

 

 

 

 

6,891

 

 

 

6,891

 

Liability for convertible note conversion feature

 

 

 

 

 

 

 

 

16,230

 

 

 

16,230

 

 

 

$

 

 

 

 

 

 

23,121

 

 

 

23,121

 

 

 

 

Fair Value Measurements as of

 

 

 

December 31, 2019 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liability for common stock warrants

 

$

 

 

 

 

 

 

38

 

 

 

38

 

Liability for contingent consideration

 

 

 

 

 

 

 

 

6,891

 

 

 

6,891

 

 

 

$

 

 

 

 

 

 

6,929

 

 

 

6,929

 

 

The liability for the current portion of contingent consideration is included in “accrued and other current liabilities” and the long-term portion is included in “deferred and contingent consideration” in the condensed consolidated balance sheet. The liability for the conversion feature related to the convertible note is included in “derivative liability” in the condensed consolidated balance sheet.

The Company recognizes changes in the fair value of the derivative liability in “other income (expense), net” in the condensed consolidated statement of operations and changes in the contingent consideration are recognized in “general and administrative” expense in the condensed consolidated statement of operations.

 

v3.20.1
Product Warranties
3 Months Ended
Mar. 31, 2020
Product Warranties Disclosures [Abstract]  
Product Warranties

7.

Product Warranties

The Company offers a product replacement and limited warranty program for the Company’s silicone gel breast implants, and a product warranty for the Company’s miraDry Systems and consumable bioTips. For silicone gel breast implant surgeries occurring prior to May 1, 2018, the Company provides lifetime replacement implants and up to $3,600 in financial assistance for revision surgeries, for covered rupture events that occur within ten years of the surgery date. The Company introduced its Platinum20 Limited Warranty Program in May 2018, covering OPUS silicone gel breast implants implanted in the United States or Puerto Rico on or after May 1, 2018. The Company considers the program to have an assurance warranty component and a service warranty component. The service warranty component is discussed in Note 4 above. The assurance component is related to the lifetime no-charge contralateral replacement implants and up to $5,000 in financial assistance for revision surgeries, for covered rupture events that occur within twenty years of the surgery date.  Under the miraDry warranty, the Company provides a standard product warranty for the miraDry System and bioTips, which the Company considers an assurance-type warranty.

The following table provides a rollforward of the accrued warranties (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Balance as of January 1

 

$

1,562

 

 

$

1,395

 

Warranty costs incurred during the period

 

 

(185

)

 

 

(139

)

Changes in accrual related to warranties issued during the period

 

 

242

 

 

 

244

 

Changes in accrual related to pre-existing warranties

 

 

(6

)

 

 

29

 

Balance as of March 31

 

$

1,613

 

 

$

1,529

 

 

 

v3.20.1
Net Loss Per Share
3 Months Ended
Mar. 31, 2020
Earnings Per Share [Abstract]  
Net Loss Per Share

8.

Net Loss Per Share

Basic net loss per share attributable to common stockholders is computed by dividing net loss by the weighted average number of common shares outstanding during each period. Diluted net loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares and dilutive potential common share equivalents then outstanding, to the extent they are dilutive. Potential common shares consist of shares issuable upon the exercise of stock options and warrants (using the treasury stock method). Dilutive net loss per share is the same as basic net loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive.

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

2019

 

Net loss (in thousands)

 

$

(28,612

)

 

$

(26,484

)

Weighted average common shares outstanding, basic and diluted

 

 

49,916,412

 

 

 

29,099,382

 

Net loss per share attributable to common stockholders

 

$

(0.57

)

 

$

(0.91

)

 

The Company excluded the following potentially dilutive securities, outstanding as of March 31, 2020 and 2019, from the computation of diluted net loss per share attributable to common stockholders for the three months ended March 31, 2020 and 2019 because they had an anti-dilutive impact due to the net loss attributable to common stockholders incurred for the periods.

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Stock options to purchase common stock

 

 

1,590,903

 

 

 

1,907,938

 

Warrants for the purchase of common stock

 

 

32,375

 

 

 

47,710

 

Equity contingent consideration

 

 

607,442

 

 

 

 

Stock issuable upon conversion of convertible note

 

 

19,733,352

 

 

 

 

 

 

 

21,964,072

 

 

 

1,955,648

 

 

 

The Company uses the if-converted method for calculating any potential dilutive effects of the convertible note. The Company did not adjust the net loss for the quarter ended March 31, 2020 to eliminate any interest expense or gain/loss for the derivative liability related to the note in the computation of diluted loss per share, as the effects would be anti-dilutive. Further, the Company excluded from diluted weighted average shares approximately 14.6 million shares issuable upon conversion for the quarter ended March 31, 2020, as the effects would be anti-dilutive.

v3.20.1
Balance Sheet Components
3 Months Ended
Mar. 31, 2020
Balance Sheet Related Disclosures [Abstract]  
Balance Sheet Components

9.

Balance Sheet Components

 

a.

Inventories

Inventories, net consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Raw materials

 

$

7,175

 

 

$

8,095

 

Work in progress

 

 

5,254

 

 

 

5,543

 

Finished goods

 

 

27,264

 

 

 

23,893

 

Finished goods - right of return

 

 

2,425

 

 

 

2,081

 

 

 

$

42,118

 

 

$

39,612

 

 

 

b.

Property and Equipment

Property and equipment, net consist of the following (in thousands): 

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Leasehold improvements

 

$

2,857

 

 

$

2,841

 

Manufacturing equipment and toolings

 

 

8,481

 

 

 

8,175

 

Computer equipment

 

 

1,524

 

 

 

1,250

 

Software

 

 

2,652

 

 

 

2,602

 

Office equipment

 

 

129

 

 

 

111

 

Furniture and fixtures

 

 

1,162

 

 

 

1,144

 

 

 

 

16,805

 

 

 

16,123

 

Less accumulated depreciation

 

 

(4,461

)

 

 

(3,809

)

 

 

$

12,344

 

 

$

12,314

 

 

Depreciation expense for the three months ended March 31, 2020 and 2019 was $0.7 million and $0.3 million, respectively.

 

 

c.

Goodwill and Other Intangible Assets, net

The Company has determined that it has two reporting units, Breast Products and miraDry, and evaluates goodwill for impairment at least annually on October 1st and whenever circumstances suggest that goodwill may be impaired.

The changes in the carrying amount of goodwill during the three months ended March 31, 2020 and the year ended December 31, 2019 were as follows (in thousands):

 

 

 

Breast Products

 

 

miraDry

 

 

Total

 

Balances as of December 31, 2018

 

$

4,878

 

 

$

7,629

 

 

$

12,507

 

Goodwill acquired

 

 

4,324

 

 

 

 

 

 

4,324

 

Accumulated impairment losses

 

 

 

 

 

(7,629

)

 

 

(7,629

)

Balances as of December 31, 2019

 

$

9,202

 

 

$

 

 

$

9,202

 

Goodwill acquired

 

 

 

 

 

 

 

 

 

Balances as of March 31, 2020

 

$

9,202

 

 

$

 

 

$

9,202

 

 

In the first quarter of 2020, the Company noted a decline in actual and forecasted earnings for the miraDry reporting unit due to the effects and uncertainty surrounding the COVID-19 pandemic. As a result, the Company performed a test of recoverability by comparing the carrying value of the reporting unit to the future undiscounted cash flows the reporting unit is expected to generate. As the future undiscounted cash flows attributable to the asset group were less than the carrying value, the Company performed a quantitative analysis to compare the fair value of the intangible assets in the reporting unit to their carrying amount.

 

The Company’s fair value analysis of intangible assets utilizes methods under various income approaches. The Company values its customer relationships using an excess earnings method, which assumes the value of the asset is the discounted future cash flows derived from existing customers and requires the use of customer attrition rates and discount rates to determine the estimated fair value. The future revenues and free cash flow from existing customers are determined based upon actual results giving effect to management’s expected changes in operating results in future years. The attrition rate is based on average historical levels of customer attrition and the discount rate is based upon market participant assumptions using a defined peer group. Tradenames and developed technology are valued using a relief from royalty method, which assumes the value of the asset is the discounted cash flows of the amount that would be paid by a hypothetical market participant had they not owned the asset and instead licensed the asset from another company. This method requires the use of royalty rates which are determined based on comparable third party license agreements involving similar assets and discount rates similar to the above to determine the estimated fair value.

 

After performing the impairment analysis as of March 31, 2020, the Company determined that the carrying values of all of the intangible assets in the miraDry reporting unit exceeded their estimated fair values. Consequently, the Company recorded total non-cash impairment charges of $1.1 million for trade names, $1.4 million for developed technology, and $3.9 million for customer relationships within impairment in the accompanying condensed consolidated statement of operations for the quarter ended March 31, 2020. As March 31, 2020, the remaining carrying value of the intangible assets are entirely associated with the Breast Products segment.

 

The components of the Company’s other intangible assets consist of the following (in thousands):

 

 

 

Average

 

 

 

 

 

 

Amortization

 

 

March 31, 2020

 

 

 

Period

 

 

Gross Carrying

 

 

Accumulated

 

 

Intangible

 

 

 

(in years)

 

 

Amount

 

 

Amortization

 

 

Assets, net

 

Intangibles with definite lives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

 

10

 

 

$

4,940

 

 

$

(3,470

)

 

$

1,470

 

Trade names - finite life

 

 

12

 

 

 

800

 

 

 

(272

)

 

 

528

 

Non-compete agreement

 

 

2

 

 

 

80

 

 

 

(80

)

 

 

 

Regulatory approvals

 

 

1

 

 

 

670

 

 

 

(670

)

 

 

 

Acquired FDA non-gel product approval

 

 

11

 

 

 

1,713

 

 

 

(1,713

)

 

 

 

Manufacturing know-how

 

 

19

 

 

 

8,240

 

 

 

(305

)

 

 

7,935

 

Total definite-lived intangible assets

 

 

 

 

 

$

16,443

 

 

$

(6,510

)

 

$

9,933

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intangibles with indefinite lives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names - indefinite life

 

 

 

 

450

 

 

 

 

 

 

450

 

Total indefinite-lived intangible assets

 

 

 

 

 

$

450

 

 

$

 

 

$

450

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization

 

 

December 31, 2019

 

 

 

Period

 

 

Gross Carrying

 

 

Accumulated

 

 

Intangible

 

 

 

(in years)

 

 

Amount

 

 

Amortization

 

 

Assets, net

 

Intangibles with definite lives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

 

11

 

 

$

9,540

 

 

$

(3,846

)

 

$

5,694

 

Trade names - finite life

 

 

14

 

 

 

2,000

 

 

 

(292

)

 

 

1,708

 

Developed technology

 

 

13

 

 

 

1,500

 

 

 

(84

)

 

 

1,416

 

Non-compete agreement

 

 

2

 

 

 

80

 

 

 

(80

)

 

 

 

Regulatory approvals

 

 

1

 

 

 

670

 

 

 

(670

)

 

 

 

Acquired FDA non-gel product approval

 

 

11

 

 

 

1,713

 

 

 

(1,713

)

 

 

 

Manufacturing know-how

 

 

19

 

 

 

8,240

 

 

 

(118

)

 

 

8,122

 

Total definite-lived intangible assets

 

 

 

 

 

$

23,743

 

 

$

(6,803

)

 

$

16,940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intangibles with indefinite lives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names - indefinite life

 

 

 

 

450

 

 

 

 

 

 

450

 

Total indefinite-lived intangible assets

 

 

 

 

 

$

450

 

 

$

 

 

$

450

 

 

Amortization expense for the three months ended March 31, 2020 and 2019 was $0.6 million. The following table summarizes the estimated amortization expense relating to the Company's definite-lived intangible assets as of March 31, 2020 (in thousands):

 

 

 

Amortization

 

Period

 

Expense

 

2020

 

$

997

 

2021

 

 

1,221

 

2022

 

 

1,163

 

2023

 

 

1,092

 

2024

 

 

948

 

Thereafter

 

 

4,512

 

 

 

$

9,933

 

 

 

d.

Accrued and Other Current Liabilities

Accrued and other current liabilities consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Payroll and related expenses

 

$

3,341

 

 

$

6,789

 

Accrued severance

 

 

1,904

 

 

 

894

 

Accrued commissions

 

 

3,830

 

 

 

4,984

 

Accrued equipment

 

 

116

 

 

 

400

 

Accrued inventory

 

 

525

 

 

 

2,216

 

Deferred and contingent consideration, current portion

 

 

6,830

 

 

 

6,830

 

Audit, consulting and legal fees

 

 

260

 

 

 

630

 

Accrued sales and marketing expenses

 

 

1,357

 

 

 

1,109

 

Operating lease liabilities

 

 

1,430

 

 

 

1,259

 

Finance lease liabilities

 

 

54

 

 

 

40

 

Other

 

 

6,755

 

 

 

7,400

 

 

 

$

26,402

 

 

$

32,551

 

v3.20.1
Leases
3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
Leases

10.

Leases

 

The Company leases certain office space, warehouses, distribution facilities and office equipment. The Company determines if an arrangement contains a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether the Company ob