INVITAE CORP, 10-K filed on 3/6/2018
Annual Report
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Mar. 2, 2018
Jun. 30, 2017
Document And Entity Information [Abstract]
 
 
 
Entity Registrant Name
Invitae Corp 
 
 
Entity Central Index Key
0001501134 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2017 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Trading Symbol
NVTA 
 
 
Entity Voluntary Filers
No 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Common Stock, Shares Outstanding
 
53,705,786 
 
Entity Public Float
 
 
$ 252.0 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
FY 
 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 12,053 
$ 66,825 
Marketable securities
52,607 
25,798 
Accounts receivable
10,422 
1,153 
Prepaid expenses and other current assets
11,599 
8,024 
Total current assets
86,681 
101,800 
Property and equipment, net
30,341 
23,793 
Restricted cash
5,406 
4,697 
Marketable securities, non-current
5,983 
 
Intangible assets, net
35,516 
 
Goodwill
46,575 
 
Other assets
576 
361 
Total assets
211,078 
130,651 
Current liabilities:
 
 
Accounts payable
8,606 
3,352 
Accrued liabilities
22,742 
6,711 
Capital lease obligation, current portion
2,039 
1,309 
Debt, current portion
 
3,381 
Total current liabilities
33,387 
14,753 
Capital lease obligation, net of current portion
3,373 
266 
Debt, net of current portion
39,084 
8,721 
Other long-term liabilities
13,440 
7,837 
Total liabilities
89,284 
31,577 
Commitments and contingencies (Note 7)
   
   
Stockholders’ equity:
 
 
Preferred stock, $0.0001 par value: Authorized: 20,000,000 shares; Issued and outstanding: 3,458,823 and 0 shares as of December 31, 2017 and December 31, 2016, respectively
   
   
Common stock, $0.0001 par value: Authorized: 400,000,000 shares; Issued and outstanding: 53,595,914 and 41,143,513 shares as of December 31, 2017 and December 31, 2016, respectively
Accumulated other comprehensive loss
(171)
 
Additional paid-in capital
520,558 
374,288 
Accumulated deficit
(398,598)
(275,218)
Total stockholders’ equity
121,794 
99,074 
Total liabilities and stockholders’ equity
$ 211,078 
$ 130,651 
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2017
Dec. 31, 2016
Statement Of Financial Position [Abstract]
 
 
Preferred stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
Preferred stock, authorized shares
20,000,000 
20,000,000 
Preferred stock, issued shares
3,458,823 
Preferred stock, outstanding shares
3,458,823 
Common stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
400,000,000 
400,000,000 
Common stock, shares issued
53,595,914 
41,143,513 
Common stock, shares outstanding
53,595,914 
41,143,513 
Consolidated Statements of Operations (USD $)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Revenue:
 
 
 
Test revenue
$ 65,169,000 
$ 24,840,000 
$ 8,378,000 
Other revenue
3,052,000 
208,000 
 
Total revenue
68,221,000 
25,048,000 
8,378,000 
Costs and operating expenses:
 
 
 
Cost of test revenue
50,142,000 
27,878,000 
16,523,000 
Research and development
46,469,000 
44,630,000 
42,806,000 
Selling and marketing
53,417,000 
28,638,000 
22,479,000 
General and administrative
39,472,000 
24,085,000 
16,047,000 
Total costs and operating expenses
189,500,000 
125,231,000 
97,855,000 
Loss from operations
(121,279,000)
(100,183,000)
(89,477,000)
Other income (expense), net
(303,000)
348,000 
(94,000)
Interest expense
(3,654,000)
(421,000)
(211,000)
Net loss before taxes
(125,236,000)
(100,256,000)
(89,782,000)
Income tax benefit
(1,856,000)
Net loss
$ (123,380,000)
$ (100,256,000)
$ (89,782,000)
Net loss per share, basic and diluted
$ (2.65)
$ (3.02)
$ (3.18)
Shares used in computing net loss per share, basic and diluted
46,511,739 
33,176,305 
28,213,324 
Consolidated Statements of Comprehensive Loss (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
Net loss
$ (123,380)
$ (100,256)
$ (89,782)
Other comprehensive income (loss):
 
 
 
Unrealized income (loss) on available-for-sale marketable securities, net of tax
(171)
15 
(15)
Comprehensive loss
$ (123,551)
$ (100,241)
$ (89,797)
Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Balance at the beginning of the period at Dec. 31, 2014
$ (83,576)
 
$ 1,604 
 
$ (85,180)
Balance at the beginning of the period (in shares) at Dec. 31, 2014
 
944,581 
 
 
 
Increase (Decrease) in Stockholders' Deficit
 
 
 
 
 
Conversion of preferred stock into common stock upon initial public offering
202,305 
202,302 
 
 
Conversion of preferred stock into common stock upon initial public offering costs (in shares)
 
23,521,889 
 
 
 
Issuance of common stock in connection with initial public offering, net of offering costs
105,668 
105,667 
 
 
Issuance of common stock in connection with initial public offering, net of offering costs (in shares)
 
7,302,500 
 
 
 
Common stock issued on exercise of stock options
288 
 
288 
 
 
Common stock issued on exercise of stock options (in shares)
 
148,870 
 
 
 
Vesting of common stock related to early exercise of options
11 
 
11 
 
 
Vesting of common stock related to early exercise of options (in shares)
 
17,281 
 
 
 
Stock-based compensation expense
3,477 
 
3,477 
 
 
Unrealized income (loss) on available-for-sale marketable securities, net of tax
(15)
 
 
(15)
 
Net loss
(89,782)
 
 
 
(89,782)
Balance at the end of the period at Dec. 31, 2015
138,376 
313,349 
(15)
(174,962)
Balance at the end of the period (in shares) at Dec. 31, 2015
 
31,935,121 
 
 
 
Increase (Decrease) in Stockholders' Deficit
 
 
 
 
 
Common stock issued pursuant to vesting of restricted stock units
(1)
(1)
 
 
 
Common stock issued pursuant to vesting of restricted stock units (in shares)
 
156,810 
 
 
 
Common stock issued pursuant to employee stock purchase plan
2,391 
 
2,391 
 
 
Common stock issued pursuant to employee stock purchase plan (in shares)
 
369,674 
 
 
 
Issuance of common stock in connection with initial public offering, net of offering costs
47,102 
47,101 
 
 
Issuance of common stock in connection with initial public offering, net of offering costs (in shares)
 
8,433,332 
 
 
 
Common stock issued on exercise of stock options
744 
 
744 
 
 
Common stock issued on exercise of stock options (in shares)
 
243,916 
 
 
 
Vesting of common stock related to early exercise of options
 
 
 
Vesting of common stock related to early exercise of options (in shares)
 
4,660 
 
 
 
Stock-based compensation expense
10,699 
 
10,699 
 
 
Unrealized income (loss) on available-for-sale marketable securities, net of tax
15 
 
 
15 
 
Net loss
(100,256)
 
 
 
(100,256)
Balance at the end of the period at Dec. 31, 2016
99,074 
374,288 
 
(275,218)
Balance at the end of the period (in shares) at Dec. 31, 2016
 
41,143,513 
 
 
 
Increase (Decrease) in Stockholders' Deficit
 
 
 
 
 
Common stock and convertible preferred stock issued in connection with private placement, net of offering costs
68,897 
68,896 
 
 
Common stock and convertible preferred stock issued in connectionwith private placement, net of offering costs (in shares)
 
5,188,235 
 
 
 
Common stock issued pursuant to vesting of restricted stock units (in shares)
 
924,591 
 
 
 
Common stock issued pursuant to acquisition-related transaction bonus (in shares)
 
4,284 
 
 
 
Common stock issued pursuant to exercises of warrants
1,381 
 
1,381 
 
 
Common stock issued pursuant to exercises of warrants (in shares)
 
232,038 
 
 
 
Common stock issued pursuant to employee stock purchase plan
2,635 
 
2,635 
 
 
Common stock issued pursuant to employee stock purchase plan (in shares)
 
378,583 
 
 
 
Common stock issued on exercise of stock options, net
1,706 
 
1,706 
 
 
Common stock issued on exercise of stock options (in shares)
 
386,868 
 
 
 
Common stock issued pursuant to business combinations
50,808 
 
50,808 
 
 
Common stock issued pursuant to business combinations (in shares)
 
5,175,931 
 
 
 
Common stock issued to settle assumed liabilities
1,272 
 
1,272 
 
 
Common stock issued to settle assumed liabilities (in shares)
 
161,871 
 
 
 
Warrants issued pursuant to Loan and Security Agreement
740 
 
740 
 
 
Stock-based compensation expense
18,832 
 
18,832 
 
 
Unrealized income (loss) on available-for-sale marketable securities, net of tax
(171)
 
 
(171)
 
Net loss
(123,380)
 
 
 
(123,380)
Balance at the end of the period at Dec. 31, 2017
$ 121,794 
$ 5 
$ 520,558 
$ (171)
$ (398,598)
Balance at the end of the period (in shares) at Dec. 31, 2017
 
53,595,914 
 
 
 
Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity 2 (Deficit) (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Convertible Preferred stock
Balance at the beginning of the period at Dec. 31, 2014
 
$ 202,305 
Balance at the beginning of the period (in shares) at Dec. 31, 2014
 
141,131,524 
Increase (Decrease) in Convertible Preferred Stock
 
 
Conversion of preferred stock into common stock upon initial public offering costs
(202,305)
(202,305)
Conversion of preferred stock into common stock upon initial public offering costs (in shares)
 
(141,131,524)
Balance at the end of the period at Dec. 31, 2015
 
Balance at the end of the period (in shares) at Dec. 31, 2015
 
Balance at the beginning of the period at Dec. 31, 2016
 
$ 0 
Balance at the beginning of the period (in shares) at Dec. 31, 2016
 
Increase (Decrease) in Convertible Preferred Stock
 
 
Common stock and convertible preferred stock issued in connection with private placement, net of offering costs (in shares)
 
3,458,823 
Balance at the end of the period (in shares) at Dec. 31, 2017
 
3,458,823 
Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement Of Stockholders Equity [Abstract]
 
 
 
Offering costs
$ 4,599 
$ 3,498 
$ 2,961 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Cash flows from operating activities:
 
 
 
Net loss
$ (123,380)
$ (100,256)
$ (89,782)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
9,181 
6,553 
5,321 
Stock-based compensation
19,221 
10,699 
3,477 
Amortization of premium on marketable securities
136 
311 
632 
Loss on disposal of assets
268 
1,030 
23 
Remeasurements of liabilities associated with business combinations
1,810 
 
 
Benefit from income taxes
(1,856)
 
 
Changes in operating assets and liabilities net of effects of business combination:
 
 
 
Accounts receivable
(1,963)
(843)
(309)
Prepaid expenses and other current assets
(641)
(1,149)
(1,367)
Other assets
(185)
1,465 
36 
Accounts payable
(535)
(111)
508 
Accrued expenses and other liabilities
(37)
5,984 
806 
Net cash used in operating activities
(97,981)
(76,317)
(80,655)
Cash flows from investing activities:
 
 
 
Purchases of marketable securities
(101,867)
(90,236)
(216,994)
Proceeds from sales of marketable securities
 
 
15,891 
Proceeds from maturities of marketable securities
68,768 
117,922 
146,676 
Acquisition of businesses, acquired cash
2,821 
 
 
Purchases of property and equipment
(6,675)
(11,625)
(6,464)
Net cash provided by (used in) investing activities
(36,953)
16,061 
(60,891)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of common stock upon initial public offering, net of issuance costs
 
 
107,120 
Proceeds from underwritten public offering of common stock, net of issuance costs
 
47,102 
 
Proceeds from issuance of common stock
74,619 
3,134 
288 
Proceeds from loan agreement
 
7,500 
7,500 
Proceeds from loan and security agreement
39,661 
 
 
Loan payments
(30,457)
(2,438)
(413)
Capital lease principal payments
(2,952)
(1,589)
(2,010)
Loan agreement financing costs
 
 
(47)
Net cash provided by financing activities
80,871 
53,709 
112,438 
Net decrease in cash, cash equivalents and restricted cash
(54,063)
(6,547)
(29,108)
Cash, cash equivalents and restricted cash at beginning of period
71,522 
78,069 
107,177 
Cash, cash equivalents and restricted cash at end of period
17,459 
71,522 
78,069 
Supplemental cash flow information:
 
 
 
Interest paid
2,852 
421 
211 
Supplemental cash flow information of non-cash investing and financing activities:
 
 
 
Equipment acquired through capital leases
6,789 
 
1,639 
Conversion of convertible preferred stock to common stock
 
 
202,305 
Purchases of property and equipment in accounts payable and accrued liabilities
200 
1,644 
603 
Warrants issued pursuant to loan and security agreement
740 
 
 
Common stock issued for acquisition of businesses
50,808 
 
 
Consideration payable for acquisition of businesses
13,276 
 
 
Common stock issued to settle assumed liabilities
$ 1,272 
 
 
Organization and description of business
Organization and description of business

1. Organization and description of business

Invitae Corporation (the “Company”) was incorporated in the State of Delaware on January 13, 2010, as Locus Development, Inc. and changed its name to Invitae Corporation in 2012. The Company utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. The Company’s production facility and headquarters is located in San Francisco, California. The Company currently has more than 20,000 genes in production and provides a variety of diagnostic tests that can be used in multiple indications. The Company’s tests include multiple genes associated with hereditary cancer, neurological disorders, cardiovascular disorders, pediatric disorders, metabolic disorders and other hereditary conditions. In addition, and as a result of the acquisitions of Good Start Genetics in August 2017 and CombiMatrix Corporation in November 2017, the Company’s tests also include preimplantation and carrier screening for inherited disorders, prenatal diagnosis, miscarriage analysis and pediatric developmental disorders. The Company operates in one segment.

The Company has incurred substantial losses since its inception and expects to continue to incur operating losses in the near-term. For the year ended December 31, 2017, the Company’s net loss was $123.4 million. At December 31, 2017, the Company’s accumulated deficit was $398.6 million. To date, the Company has generated only limited revenue, and it may never achieve revenue sufficient to offset its expenses. The Company believes its existing cash, cash equivalents and marketable securities as of December 31, 2017, revenue from the sale of its tests, and amounts available under a loan agreement will be sufficient to meet its anticipated cash requirements for its currently-planned operations for the 12-month period following the filing date of this report.

The Company may need to obtain additional funding to finance operations prior to achieving profitability. Company management regularly considers fundraising opportunities and will determine the timing, nature and size of future financings based upon various factors, including market conditions and management’s operating plans. The Company may in the future elect to finance operations by selling equity or debt securities or borrowing money. If additional funding is required, there can be no assurance that additional funds will be available to the Company on acceptable terms on a timely basis, if at all. If the Company is unable to obtain additional funding when needed, it will need to curtail planned activities to reduce costs. Doing so will likely have an unfavorable effect on the Company’s ability to execute on its business plan, and have an adverse effect on its business, results of operations and future prospects.

The Company has implemented the guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), and concluded that there are not conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year following the date that the December 31, 2017 financial statements are issued.

Summary of significant accounting policies
Summary of significant accounting policies

2. Summary of significant accounting policies

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of estimates

The preparation of 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 liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company believes judgment is involved in determining revenue recognition; the acquisition-date fair value of intangible assets; the fair value of contingent consideration associated with acquisitions; the recoverability of long-lived assets; impairment of goodwill and intangible assets; stock-based compensation expense; and income tax uncertainties. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ materially from those estimates and assumptions.

Concentrations of credit risk and other risks and uncertainties

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, marketable securities and accounts receivable. The Company’s cash and cash equivalents are held by financial institutions in the United States. Such deposits may exceed federally insured limits. The Company does not perform evaluations of customers’ financial condition and does not require collateral.

Significant customers are those that represent 10% or more of the Company’s total revenue for each year presented on the statements of operations. For each significant customer, revenue as a percentage of total revenue is as follows:

 

 

 

December 31,

 

Customers

 

2017

 

 

2016

 

 

2015

 

Customer A

 

 

13

%

 

 

11

%

 

*

 

Customer B

 

*

 

 

*

 

 

 

13

%

*    Less than 10% of total revenue

 

 

 

 

 

 

 

 

 

 

 

 

Customer A represented 13% of accounts receivable in the consolidated financial statements as of December 31, 2017. No single customer represented 10% or more of accounts receivable in the consolidated financial statements as of December 31, 2016.

Cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market funds and U.S. government agency securities.

Marketable securities

All marketable securities have been classified as “available-for-sale” and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its marketable debt securities at the time of purchase and reevaluates such designation at each balance sheet date. Short-term marketable securities have maturities less than 365 days at the balance sheet date. Unrealized gains and losses are excluded from earnings and are reported as a component of other comprehensive loss. Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in interest and other income (expense), net. The cost of securities sold is based on the specific-identification method. Interest on marketable securities is included in interest and other income (expense), net.

Accounts receivable

The Company receives payment for its tests from partners, patients, institutional customers and third-party payers. For most payers, the Company has not been able to demonstrate a predictable pattern of collectability, and therefore recognizes revenue when payment is received. For payers who have demonstrated a consistent pattern of payment of tests billed, the Company recognizes revenue, at estimated realizable amounts, upon delivery of test results. Accounts receivable balances primarily represent partner, patient, institutional customer and Medicare billings.

Restricted cash

Restricted cash consists of money market funds that serve as: collateral for a security deposit for the Company’s lease agreement for its production facility and headquarters; collateral for security deposits for facilities of the Company’s subsidiary Good Start; collateral for a credit card agreement at one of the Company’s financial institutions; and for securing a letter of credit as collateral for a facility sublease agreement.

Cash, cash equivalents and restricted cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the statements of cash flows (in thousands):

 

 

 

December 31, 2017

 

 

December 31, 2016

 

Cash and cash equivalents

 

$

12,053

 

 

$

66,825

 

Restricted cash

 

 

5,406

 

 

 

4,697

 

Total cash, cash equivalents and restricted cash

 

$

17,459

 

 

$

71,522

 

Business combinations

The tangible and identifiable intangible assets acquired and liabilities assumed in a business combination are recorded based on their estimated fair values as of the business combination date, including identifiable intangible assets which either arise from a contractual or legal right or are separable from goodwill. The Company bases the estimated fair value of identifiable intangible assets acquired in a business combination on independent valuations that use information and assumptions provided by management, which consider management’s estimates of inputs and assumptions that a market participant would use. Any excess purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets acquired and liabilities assumed is recorded to goodwill. The use of alternative valuation assumptions, including estimated revenue projections, growth rates, cash flows, discount rates, estimated useful lives and probabilities surrounding the achievement of contingent milestones could result in different purchase price allocations and amortization expense in current and future periods.

In circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under FASB Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of the acquisition date. The Company remeasures this liability each reporting period and records changes in the fair value as a component of operating expenses.

Transaction costs associated with acquisitions are expensed as incurred in general and administrative expenses. Results of operations and cash flows of acquired companies are included in the Company’s operating results from the date of acquisition.

 

Intangible assets

Amortizable intangible assets include trade names, non-compete agreements, developed technology and customer relationships acquired as part of business combinations. Customer relationships are amortized on an accelerated basis, utilizing free cash flows, over periods ranging from five years to eleven years. All other intangible assets subject to amortization are amortized using the straight-line method over their estimated useful lives ranging from two to 15 years. All intangible assets subject to amortization are reviewed for impairment in accordance with ASC 360, Property, Plant and Equipment.

Goodwill

In accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company’s goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Under ASC 350, the Company performs annual impairment reviews of its goodwill balance during the fourth fiscal quarter. In testing for impairment, the Company compares the fair value of its reporting unit to its carrying value including the goodwill of that unit. If the carrying value, including goodwill, exceeds the reporting unit’s fair value, the Company will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.

The Company performed its first annual impairment review of its goodwill balance as of October 1, 2017. The Company determined, after performing a quantitative review, that it is more likely than not that the fair value of its reporting unit is substantially in excess of its carrying amount. Accordingly, there was no impairment. The Company did not incur any goodwill impairment losses in any of the periods presented.

Leases

The Company rents its facilities under operating lease agreements and recognizes related rent expense on a straight-line basis over the term of the applicable lease agreement. Some of the lease agreements contain rent holidays, scheduled rent increases, lease incentives, and renewal options. Rent holidays and scheduled rent increases are included in the determination of rent expense to be recorded over the lease term. Lease incentives are recognized as a reduction of rent expense on a straight-line basis over the term of the lease. Renewals are not assumed in the determination of the lease term unless they are deemed to be reasonably assured at the inception of the lease. The Company recognizes rent expense beginning on the date it obtains the legal right to use and control the leased space.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight‑line method over the estimated useful lives of the assets, generally between three and seven years. Leasehold improvements are amortized using the straight‑line method over the shorter of the estimated useful life of the asset or the term of the lease. Amortization expense of assets acquired through capital leases is included in depreciation and amortization expense in the consolidated statements of operations. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in the statements of operations in the period realized.

The useful lives of the property and equipment are as follows:

 

Furniture and fixtures

 

7 years

Automobiles

 

7 years

Laboratory equipment

 

5 years

Computer equipment

 

3 years

Software

 

3 years

Leasehold improvements

 

Shorter of lease term or estimated useful life

 

Long‑lived assets

The Company reviews long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the total estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, is assessed using discounted cash flows or other appropriate measures of fair value. The Company recorded asset impairment losses of $1.0 million in 2016 relating to leasehold improvements and to the shutdown of the Company’s Chilean operations. All impairment losses were charged to general and administrative expense. There were no impairment losses recorded for any other period presented.

Fair value of financial instruments

The Company’s financial instruments consist principally of cash and cash equivalents, marketable securities, accounts payable, accrued liabilities, capital leases and debt. The carrying amounts of certain of these financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued and other current liabilities approximate their current fair value due to the relatively short-term nature of these accounts. Based on borrowing rates available to the Company, the carrying value of capital leases approximates fair value.

See Note 6, “Fair value measurements” for disclosure of the fair value of debt and further information on the fair value of the Company’s financial instruments.

Revenue recognition

Test revenue is generated primarily from the sale of tests that provide analysis and associated interpretation of the sequencing of parts of the genome. Revenue associated with subsequent re-requisition services and family variant tests was de minimis for all periods presented.

Test revenue is recognized when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. The criterion for whether the fee is fixed or determinable and whether collectability is reasonably assured are based on management’s judgments. When evaluating collectability, in situations where contracted reimbursement coverage does not exist, the Company considers whether the Company has sufficient history to reliably estimate a payer’s individual payment patterns. The Company reviews the number of tests paid against the number of tests billed over at least six months of payment history and the payer’s outstanding balance for unpaid tests to determine whether payments are being made at a consistently high percentage of tests billed and at appropriate amounts given the amount billed. For most payers, the Company has not been able to demonstrate a predictable pattern of collectability, and therefore recognizes revenue when payment is received. For payers who have demonstrated a consistent pattern of payment of tests billed at appropriate amounts, the Company recognizes revenue, at estimated realizable amounts, upon delivery of test results.

Other revenue consists primarily of revenue from genome network subscription services which is recognized on a straight-line basis over the subscription term, and revenue from collaboration agreements.

Cost of test revenue

Cost of test revenue reflects the aggregate costs incurred in delivering the genetic testing results to clinicians and includes expenses for personnel costs including stock-based compensation, materials and supplies, equipment and infrastructure expenses associated with testing and allocated overhead including rent, equipment depreciation and utilities. Costs associated with performing the Company’s test are recorded as the test is processed regardless of whether and when revenue is recognized with respect to that test.

Income taxes

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Stock-based compensation

The Company measures its stock-based payment awards made to employees and directors based on the estimated fair values of the awards and recognizes the compensation expense over the requisite service period. The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and employee stock purchase plan (“ESPP”) purchases. The fair value of restricted stock unit (“RSU”) awards with time-based vesting terms is based on the grant date share price. The Company grants performance-based restricted stock unit (“PRSU”) awards to certain employees which vest upon the achievement of certain performance conditions, subject to the employees’ continued service relationship with the Company. The probability of vesting is assessed at each reporting period and compensation cost is adjusted based on this probability assessment. The Company recognizes such compensation expense on an accelerated vesting method.

Stock-based compensation expense for awards without a performance condition is recognized using the straight-line method. Stock-based compensation expense is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, the Company’s stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company accounts for compensation expense related to stock options granted to non-employees based on fair values estimated using the Black-Scholes option-pricing model. Stock options granted to non-employees are re-measured at each reporting date until the award is vested.

The Company accounts for stock issued as compensation in connection with business combinations based on the fair value of the Company’s common stock on the date of issuance.

Advertising

Advertising expenses are expensed as incurred. The Company recorded advertising expenses of $0.6 million, $0.5 million and $0.4 million in 2017, 2016 and 2015, respectively.

Comprehensive loss

Comprehensive loss is composed of two components: net loss and other comprehensive loss. Other comprehensive loss refers to gains and losses that under U.S. GAAP are recorded as an element of stockholders’ equity (deficit), but are excluded from net loss. The Company’s other comprehensive loss consists of unrealized losses on investments in available-for-sale securities.

Net loss per common share

Basic net loss per common share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method. Potentially dilutive securities, consisting of preferred stock, options to purchase common stock, common stock warrants, RSUs and PRSUs, are considered to be common stock equivalents and were excluded from the calculation of diluted net loss per share because their effect would be antidilutive for all periods presented.

Recent accounting pronouncements

Recently issued accounting pronouncements not yet adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. Lessor accounting under ASU 2016-02 is largely unchanged. ASU 2016-02 is effective for annual and interim periods beginning on or after December 15, 2018 and early adoption is permitted. Under ASU 2016-02, lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Lessees and lessors may not apply a full retrospective transition approach. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements, related disclosures and ongoing financial reporting. The Company has not yet selected an implementation date for ASU 2016-02.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), which requires an entity to recognize the amount of revenue to which it expects to be entitled upon the transfer of control of the promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.

Topic 606 provides for the use of either of two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company implemented Topic 606 effective January 1, 2018 using the modified retrospective method.

Based upon its work performed to date, the Company expects the implementation of Topic 606 will have a significant impact on its accounts receivable at January 1, 2018, and the timing of revenue recognition for its diagnostic test revenue thereafter. Under current GAAP, the Company recognizes test revenue generated from the majority of third-party payers on a cash basis, while under Topic 606, the Company will recognize the vast majority of test revenue on an accrual basis at the time of delivery of genetic test results to its customers. The accrual amounts to be recognized under Topic 606 in periods subsequent to the date of transition will be based on an estimate of the consideration that the Company expects to receive, and such estimates will be updated and subsequently adjusted as necessary until fully settled. This policy change will result in earlier revenue recognition under ASC 606 relative to the cash-basis revenue recognition policy utilized by the Company through December 31, 2017 for many of its payers.

The Company has not completed the work required to implement Topic 606 as of January 1, 2018. The work required to complete the implementation primarily relates to the determination of estimated variable consideration, including such consideration arising from recently acquired businesses, as of the date of transition.

Recently adopted accounting pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350). The amendments in this ASU simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a quantitative assessment. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments in this ASU should be applied on a prospective basis. The Company early adopted ASU 2017-04 effective January 1, 2017 and the adoption of this standard did not have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. ASU 2017-01 is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company early adopted ASU 2017-01 effective January 1, 2017, and the adoption of this standard did not have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.

In December 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. ASU 2016-18 is effective for annual and interim periods beginning on or after December 15, 2018 and early adoption is permitted. The Company early adopted ASU 2016-18 effective January 1, 2017, and the adoption of this standard did not have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments. The ASU is intended to improve financial reporting by reducing diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual and interim periods beginning on or after December 15, 2016. The Company adopted ASU 2016-15 effective January 1, 2017, and the adoption of this standard did not have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies accounting for share-based payment award transactions. ASU 2016-09 is effective for annual and interim periods beginning on or after December 15, 2016. The Company adopted ASU 2016-09 effective January 1, 2017, and, upon adoption of this standard, recorded a deferred tax asset for unrecorded excess tax benefits of approximately $0.4 million related to share-based payments through a cumulative effect adjustment to retained earnings, and a corresponding offset of the deferred tax asset with a 100% valuation allowance. In addition, under ASU 2016-09 the Company can elect a policy to account for forfeitures as they occur rather than on an estimated basis. The Company elected to continue its current policy of estimating forfeitures. The adoption of ASU 2016-09 did not have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.

The Company has determined there are no other recently adopted or issued accounting standards that had, or will have, a material impact on its consolidated financial statements.

Prior period reclassifications

Revenue amounts in prior periods have been reclassified to conform with current period presentation, which separates test revenue from other revenue, which consists principally of revenue from genome network subscription services and collaboration arrangements.

Business combinations
Business combinations

3. Business combinations

AltaVoice

 

On January 6, 2017, the Company acquired AltaVoice (formerly Patient Crossroads, Inc.), a privately-owned patient-centered data company with a global platform for collecting, curating, coordinating, and delivering safeguarded data from patients and clinicians. The acquisition, complemented by several other strategic partnerships, will expand the Company's genome network, designed to connect patients, clinicians, advocacy organizations, researchers and therapeutic developers to accelerate the understanding, diagnosis, and treatment of hereditary disease. Pursuant to the terms of the Stock Purchase Agreement entered into on January 6, 2017, the Company acquired all of the outstanding shares of AltaVoice for total purchase consideration of $12.4 million, payable in the Company’s common stock, as follows:

 

(a)

payment of $5.5 million through the issuance of 641,126 shares of the Company’s common stock;

 

(b)

payment of $5.0 million in the Company’s common stock, payable on March 31, 2018, with the common shares deliverable equal to $5.0 million divided by the trailing average share price of the Company’s common stock for the 30 days preceding March 31, 2018;

 

(c)

payment of $5.0 million in the Company’s common stock, contingently payable on March 31, 2018 if a milestone based on a certain threshold of revenue is achieved during 2017, with the shares deliverable equal to $5.0 million divided by the trailing average share price of the Company’s common stock for the 30 days preceding March 31, 2018; or should the foregoing milestone not be achieved, then there is a new contingent milestone based on achieving a revenue target during 2017 and 2018. Should the new milestone revenue target be achieved, then on March 31, 2019, a payment of up to $5.0 million in the Company’s common stock would be payable. The actual payout is dependent upon the 2017 and 2018 revenue target (capped at $14.0 million) times 75% less $5.5 million. This formula in effect caps the possible payout amount at $5.0 million in the Company’s common shares. The number of shares to be issued will be equal to the payout amount divided by the trailing average share price of the Company’s common stock for the 30 days preceding March 31, 2019.

The first payment of $5.5 million was classified as equity. The second payment was discounted to $4.7 million and recorded as a liability, and will be accreted to fair value at each reporting date until the extinguishment of the liability on March 31, 2018. The third payment, representing contingent consideration, was determined to have a fair value of $2.2 million and was recorded as a liability. The Company’s calculation of this fair value was based on a Monte Carlo simulation, as well as estimates of the 30-day trailing price of the Company’s stock at certain dates, its volatility assumptions and its revenue forecast. In accordance with ASC Topic 805, Business Combinations, the contingent consideration of $2.2 million will be remeasured to fair value at each reporting date until the contingency is resolved, with changes in fair value recognized in earnings.

For the second payment, whose acquisition-date fair value was $4.7 million, the Company recorded an accretion loss of $0.2 million in other income (expense), net, for the year ended December 31, 2017. This accretion loss resulted from adjustments to the discounted value of the second payment, reflecting the passage of time. For the third payment, whose contingent acquisition-date fair value was $2.2 million, the Company recorded remeasurement losses of $1.6 million in operating expense for the year ended December 31, 2017. This remeasurement loss reflects an updated estimation of fair value of the third payment, based upon achieving a revenue target during 2017 and 2018, as the milestone based on a certain threshold of revenue to be achieved during 2017 was not met. The principal inputs affecting that estimation were updates to the Company’s revenue forecasts and the passage of time.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

 

Cash

 

$

54

 

Accounts receivable

 

 

274

 

Prepaid expense and other assets

 

 

52

 

Non-compete agreement

 

 

286

 

Developed technology

 

 

570

 

Customer relationships

 

 

3,389

 

Total identifiable assets acquired

 

 

4,625

 

Accounts payable

 

 

(28

)

Deferred revenue

 

 

(202

)

Accrued expenses

 

 

(21

)

Deferred tax liability

 

 

(1,422

)

Total liabilities assumed

 

 

(1,673

)

Net identifiable assets acquired

 

 

2,952

 

Goodwill

 

 

9,432

 

Net assets acquired

 

$

12,384

 

Acquisition-related intangibles included in the above table are finite-lived. Customer relationships are being amortized on an accelerated basis, utilizing free cash flows, over a period of ten years. All other acquisition-related intangibles are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

 

 

 

Gross

Purchased

Intangible

Assets

 

 

Estimated

Useful

Life

(in Years)

 

Non-compete agreement

 

$

286

 

 

 

5

 

Developed technology

 

 

570

 

 

 

6

 

Customer relationships

 

 

3,389

 

 

 

10

 

 

 

$

4,245

 

 

 

 

 

 

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of AltaVoice resulted in $9.4 million of goodwill. The Company believes this goodwill consists principally of expected synergies to be realized by combining capabilities, technology and data to accelerate the use of genetic information for the diagnosis and treatment of hereditary diseases. In accordance with ASC 350, goodwill will not be amortized but will be tested for impairment at least annually. Goodwill created as a result of the acquisition is not deductible for tax purposes. Concurrent with the acquisition, the Company recorded additional goodwill of $1.4 million relating to the tax consequence of recognizing the fair value of the acquisition-related intangibles, with an equal offset to deferred tax liability.

The results of operations of AltaVoice for the period from the acquisition date through December 31, 2017 are included in the accompanying consolidated statements of operations. Pursuant to ASC 805, the Company incurred and expensed approximately $159,000 in acquisition and transitional costs associated with the acquisition of AltaVoice during the year ended December 31, 2016 and the three months ended March 31, 2017, which were primarily general and administrative related.

 

Ommdom

On June 11, 2017, the Company acquired Ommdom, Inc. (“Ommdom”), a privately-held company that develops, commercializes and sells hereditary risk assessment and management software, including CancerGene Connect, a cancer genetic counseling platform. The acquisition expands Invitae’s suite of genome management offerings designed to help patients and clinicians use genetic information as part of mainstream medical care. CancerGene Connect is a platform for collecting and managing genetic family histories. The platform uses a cloud-based, mobile friendly patient interface to gather family history information from patients prior to a clinician appointment. Then, analysis tools analyze patients’ predisposition to disease and provide actionable analysis to inform therapeutic decisions, such as genetic testing or treatment approaches. In addition, the platform provides clinicians with the ability to look beyond the individual to understand trends across all of their patients.

Pursuant to the terms of the Stock Exchange Agreement entered into on June 11, 2017, the Company acquired all of the outstanding shares of Ommdom for consideration of $6.1 million, payable entirely in the Company’s common stock. There was no cash consideration nor any contingent payments associated with the acquisition, other than a hold-back amount of $613,000. Per the terms of the agreement, the Company will issue shares of its common stock as follows:

 

(a)

payment of $5.5 million through the issuance of 600,108 shares of the Company’s common stock; and

 

(b)

payment of $0.6 million through the issuance of 66,582 shares of the Company’s common stock, representing a hold-back amount, and payable on the twelve-month anniversary of the acquisition date.

The first payment of $5.5 million was classified as equity. The second payment of $0.6 million was recorded as a stock payable liability and will be reclassified to equity upon the issuance of the Company’s common stock on the twelve-month anniversary of the acquisition date.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

 

Cash

 

$

53

 

Accounts receivable

 

 

10

 

Prepaid expense and other assets

 

 

4

 

Trade name

 

 

13

 

Developed technology

 

 

2,335

 

Customer relationships

 

 

147

 

Total identifiable assets acquired

 

 

2,562

 

Accounts payable

 

 

(16

)

Accrued expenses

 

 

(17

)

Deferred tax liability

 

 

(434

)

Total liabilities assumed

 

 

(467

)

Net identifiable assets acquired

 

 

2,095

 

Goodwill

 

 

4,045

 

Net assets acquired

 

$

6,140

 

 

Finite-lived intangibles included in the above table are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

 

 

 

Gross

Purchased

Intangible

Assets

 

 

Estimated

Useful

Life

(in Years)

 

Trade name

 

$

13

 

 

 

5

 

Developed technology

 

 

2,335

 

 

 

5

 

Customer relationships

 

 

147

 

 

 

5

 

 

 

$

2,495

 

 

 

 

 

 

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of Ommdom resulted in the recognition of $4.0 million of goodwill. The Company believes this goodwill consists principally of expected synergies to be realized by expanding the Company’s suites of genome management offerings designed to help patients and clinicians use genetic information as part of mainstream medical care. In accordance with ASC 350, goodwill will not be amortized but rather will be tested for impairment at least annually. Goodwill created as a result of the acquisition is not deductible for tax purposes. Concurrent with the acquisition, the Company recorded additional goodwill of $434,000 relating to the tax consequence of recognizing the fair value of the acquisition-related intangibles, with an equal offset to deferred tax liability.

The results of operations of Ommdom for the period from the acquisition date through December 31, 2017 are included in the accompanying consolidated statements of operations. Pursuant to ASC 805, during the year ended December 31, 2017, the Company incurred and expensed approximately $164,000 in acquisition and transitional costs associated with the acquisition of Ommdom, which were primarily general and administrative related.

Good Start Genetics

On August 4, 2017, the Company acquired 100% of the fully diluted equity of Good Start, a privately-held molecular diagnostics company focused on preimplantation and carrier screening for inherited disorders. The acquisition of Good Start is intended to further Invitae’s intention to create a comprehensive genetic information platform providing high-quality, affordable genetic information coupled with world-class clinical expertise to inform healthcare decisions throughout every stage of an individual’s life. The purchase consideration for the Good Start acquisition consisted of the assumption of the net liabilities of Good Start of $24.4 million at the acquisition date, August 4, 2017.

Immediately subsequent to the acquisition of Good Start, the Company paid $18.4 million in cash to settle the outstanding notes payable, accrued interest and related costs. In addition, and immediately subsequent to the acquisition, the Company settled the outstanding convertible promissory notes payable through:

 

(a)

payment of $11.9 million through the issuance of 1,148,283 shares of the Company’s common stock; and

 

(b)

payment of $3.6 million through the issuance of 343,986 shares of the Company’s common stock, representing a hold-back amount payable on the one-year anniversary of the acquisition date.

Also in connection with the acquisition of Good Start and immediately subsequent to the acquisition, the Company paid bonuses to certain members of Good Start’s management team through:

 

(a)

payment of $0.9 million through the issuance of 83,025 shares of the Company’s common stock; and

 

(b)

payment of $0.4 million through the issuance of 37,406 shares of the Company’s common stock, representing a hold-back amount payable on the one-year anniversary of the acquisition date.

These bonus payments were recorded as general and administrative expense.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. The amount recorded as accounts receivable is provisional as the Company expects to receive future cash collections pertaining to Good Start revenue activities completed but not recognized at the acquisition date. The amount recorded as deferred tax liability, zero as of December 31, 2017, is provisional because certain information and analysis related to Good Start’s historical net operating losses that may affect the Company’s valuation is still being obtained or reviewed. Thus, the provisional measurement of fair value discussed above is subject to change. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill.

At acquisition date, the Company also recorded $4.8 million as a provisional amount for a deferred tax liability because certain information and analysis related to Good Start’s historical net operating losses that may affect the Company’s initial valuation was still being obtained or reviewed at that time. This provisional amount for the deferred tax liability was subsequently reversed during the fourth quarter of 2017 based on the results of further analysis of Good Start’s historical net operating losses.

The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

 

Cash and restricted cash

 

$

1,381

 

Accounts receivable

 

 

2,904

 

Prepaid expense and other assets

 

 

1,579

 

Property and equipment

 

 

1,320

 

Trade name

 

 

460

 

Developed technology

 

 

5,896

 

Customer relationships

 

 

7,830

 

Total identifiable assets acquired

 

 

21,370

 

Accounts payable

 

 

(5,418

)

Accrued expenses

 

 

(6,802

)

Notes payable

 

 

(17,904

)

Convertible promissory notes payable

 

 

(15,430

)

Other liabilities

 

 

(222

)

Total liabilities assumed

 

 

(45,776

)

Net identifiable assets acquired

 

 

(24,406

)

Goodwill

 

 

24,406

 

Net assets acquired

 

$

 

 

Customer relationships are being amortized on an accelerated basis, utilizing free cash flows, over a period of eight years. All other finite-lived intangibles included in the above table are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

 

 

 

Gross

Purchased

Intangible

Assets

 

 

Estimated

Useful

Life

(in Years)

 

Trade name

 

$

460

 

 

 

3

 

Developed technology

 

 

5,896

 

 

 

5

 

Customer relationships

 

 

7,830

 

 

 

8

 

 

 

$

14,186

 

 

 

 

 

 

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of Good Start resulted in the recognition of $24.4 million of goodwill. The Company believes this goodwill consists principally of expected synergies to be realized by expanding the Company’s suite of genome management offerings designed to help patients and clinicians use genetic information as part of mainstream medical care. In accordance with ASC 350, goodwill will not be amortized but rather will be tested for impairment at least annually. Goodwill created as a result of the acquisition is not deductible for tax purposes.

The results of operations of Good Start for the period from the acquisition date through December 31, 2017 are included in the accompanying consolidated statements of operations. Pursuant to ASC 805, the Company incurred and expensed approximately $1.7 million in acquisition and transitional costs associated with the acquisition of Good Start during the year ended December 31, 2017, which were recorded as general and administrative expense.

CombiMatrix

On November 14, 2017, the Company completed its acquisition of CombiMatrix in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of July 31, 2017 (the “Merger Agreement”), by and among the Company, Coronado Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), and CombiMatrix, pursuant to which Merger Sub merged with and into CombiMatrix, with CombiMatrix surviving as a wholly owned subsidiary of the Company (the “Merger”).

At the closing of the Merger, the Company issued shares of its common stock to (i) CombiMatrix’s common stockholders, at an exchange ratio of 0.8692 of a share of the Company’s common stock (the “Merger Exchange Ratio”) for each share of CombiMatrix common stock outstanding immediately prior to the Merger, (ii) CombiMatrix’s Series F preferred stockholders, at the Merger Exchange Ratio for each share of CombiMatrix common stock underlying Series F preferred stock outstanding immediately prior to the Merger, (iii) holders of outstanding and unexercised in-the-money CombiMatrix stock options, which were fully accelerated to the extent of any applicable vesting period and converted into the right to receive the number of shares of the Company’s common stock equal to the Merger Exchange Ratio multiplied by the number of shares of CombiMatrix common stock issuable upon exercise of such option, minus the number of shares of the Company’s common stock determined by dividing the aggregate exercise price for such option by $9.491 (the “Invitae Trailing Average Share Value”), and (iv) holders of outstanding and unsettled CombiMatrix restricted stock units, which were fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of the Company’s common stock determined by multiplying the number of shares of CombiMatrix common stock that were subject to such restricted stock unit by the Merger Exchange Ratio.

In addition, at the closing of the Merger, (a) all outstanding and unexercised out-of-the money CombiMatrix stock options were cancelled and terminated without the right to receive any consideration, (b) all CombiMatrix Series D Warrants and Series F Warrants outstanding and unexercised immediately prior to the closing of the Merger were assumed by the Company and converted into warrants to purchase the number of shares of the Company’s common stock determined by multiplying the number of shares of CombiMatrix common stock subject to such warrants by the Merger Exchange Ratio, and with the exercise price adjusted by dividing the per share exercise price of the CombiMatrix common stock subject to such warrants by the Merger Exchange Ratio, and (c) certain entitlements under CombiMatrix’s executive compensation transaction bonus plan (the “Transaction Bonus Plan”) were paid in shares of the Company’s common stock or RSUs to be settled in shares of the Company’s common stock. All outstanding and unexercised CombiMatrix Series A, Series B, Series C, Series E, and PIPE warrants were repurchased by CombiMatrix prior to closing pursuant to that certain CombiMatrix Common Stock Purchase Warrants Repurchase Agreement dated July 11, 2016.

Pursuant to the Merger Agreement, the Company issued an aggregate of 2,703,389 shares of its common stock as follows:

 

(a)

payment of $20.5 million through the issuance of 2,611,703 shares of the Company’s common stock to holders of CombiMatrix common stock outstanding;

 

(b)

payment of $0.7 million through the issuance of 85,219 shares of the Company’s RSUs to holders of outstanding and unsettled CombiMatrix restricted stock units.

 

(c)

payment of $26,000 through the issuance of 3,323 shares of the Company’s common stock to holders of outstanding and unexercised in-the-money CombiMatrix stock options; and

 

(d)

payment of $25,000 through the issuance of 3,144 shares of the Company’s common stock to holders of CombiMatrix Series F preferred stock.

In addition, and pursuant to the Merger Agreement, the Company issued warrants to purchase an aggregate of 2,077,273 shares of its common stock as follows:

 

(a)

payment of $7.4 million through the issuance of warrants to purchase a total of 1,739,689 shares of the Company’s common stock in exchange for all outstanding CombiMatrix Series F warrants; and

 

(b)

payment of $1,000 through the issuance of warrants to purchase a total of 337,584 shares of the Company’s common stock in exchange for all outstanding CombiMatrix Series D warrants.

In connection with the acquisition of CombiMatrix, the Company paid bonuses to certain members of CombiMatrix’s management team through:

 

(a)

payment of $1.7 million through the issuance of common stock and RSUs totaling 214,976 shares of the Company’s common stock to settle payments pursuant to CombiMatrix’s executive compensation transaction bonus plan (the “Transaction Bonus Plan”), recorded as post-combination compensation expense and included in general and administrative expense; and

 

(b)

payment of $0.2 million through the issuance of 22,966 shares of the Company’s common stock to settle payments pursuant to the Transaction Bonus Plan, recorded as an assumed liability at the acquisition date.

Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. The amount recorded as deferred tax liability, zero at December 31, 2017, is provisional because certain information and analysis related to CombiMatrix’s tax attributes and ownership change history that may affect the Company’s valuation is still being obtained or reviewed. Thus, the provisional measurement of fair value discussed above is subject to change. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

 

Cash and restricted cash

 

$

1,333

 

Accounts receivable

 

 

4,118

 

Prepaid expense and other assets

 

 

1,299

 

Property and equipment

 

 

437

 

Other assets - non current

 

 

30

 

Favorable leases

 

 

247

 

Trade name

 

 

103

 

Patent licensing agreement

 

 

496

 

Developed technology

 

 

3,162

 

Customer relationships

 

 

12,397

 

Total identifiable assets acquired

 

 

23,622

 

Accounts payable

 

 

(276

)

Accrued expenses

 

 

(3,925

)

Other liabilities

 

 

(180

)

Total liabilities assumed

 

 

(4,381

)

Net identifiable assets acquired

 

 

19,241

 

Goodwill

 

 

8,692

 

Net assets acquired

 

$

27,933

 

 

Customer relationships are being amortized on an accelerated basis, utilizing free cash flows, over a period of eleven years. All other finite-lived intangibles included in the above table are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

 

 

 

Gross

Purchased

Intangible

Assets

 

 

Estimated

Useful

Life

(in Years)

 

Favorable leases

 

$

247

 

 

 

2

 

Trade name

 

 

103

 

 

 

1

 

Patent licensing agreement

 

 

496

 

 

 

15

 

Developed technology

 

 

3,162

 

 

 

4

 

Customer relationships

 

 

12,397

 

 

 

11

 

 

 

$

16,405

 

 

 

 

 

 

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The acquisition of CombiMatrix resulted in the recognition of $8.7 million of goodwill. The Company believes this goodwill consists principally of expected synergies to be realized by expanding the Company’s suite of genome management offerings designed to help patients and clinicians use genetic information as part of mainstream medical care. In accordance with ASC 350, goodwill will not be amortized but rather will be tested for impairment at least annually. Goodwill created as a result of the acquisition is not deductible for tax purposes.

The results of operations of CombiMatrix for the period from the acquisition date through December 31, 2017 are included in the accompanying consolidated statements of operations. Pursuant to ASC 805, the Company incurred and expensed approximately $1.8 million in acquisition and transitional costs associated with the acquisition of CombiMatrix during the year ended December 31, 2017, which were recorded as general and administrative expense.

Pro Forma Financial Information  

 

The financial information in the table below summarizes the combined results of operations of the Company, AltaVoice, Ommdom, Good Start and CombiMatrix on an unaudited pro forma basis, as though the companies had been combined as of the beginning of each of the periods presented. The unaudited pro forma financial information has been calculated after adjusting the results of the Company, AltaVoice, Ommdom, Good Start and CombiMatrix to reflect the business combination accounting effects resulting from the acquisitions. These accounting effects consist of income tax benefits relating to the tax consequences of recognizing fair value of acquired intangible assets, amortization expense from acquired intangible assets and stock-based compensation expense relating to acquisitions.

The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of each of the periods presented. The pro forma financial information for the year ended December 31, 2017 combines the adjusted results of the Company for the year ended December 31, 2017, which include the adjusted results of AltaVoice subsequent to January 6, 2017, the adjusted results of Ommdom subsequent to June 11, 2017, the adjusted results of Good Start subsequent to August 4, 2017 and the adjusted results of CombiMatrix for the period subsequent to November 14, 2017 (the acquisition dates for AltaVoice, Ommdom, Good Start and CombiMatrix, respectively), with the adjusted historical results for AltaVoice for the period from January 1, 2017 to January 6, 2017, the adjusted historical results for Ommdom for the period from January 1, 2017 to June 11, 2017, the adjusted historical results of Good Start for the period from January 1, 2017 to August 4, 2017, and the adjusted historical results of CombiMatrix for the period from January 1, 2017 to November 14, 2017. The pro forma financial information for the year ended December 31, 2016 combines the adjusted historical results for the Company for those periods, with the adjusted historical results for AltaVoice, Ommdom, Good Start and CombiMatrix for the same periods.

The following table summarizes the pro forma financial information for the years ended December 31, 2017 and 2016 (in thousands):

 

 

 

Year Ended

December 31,

 

 

 

2017

 

 

2016

 

Total revenue

 

$

94,001

 

 

$

62,991

 

Net loss

 

$

(149,596

)

 

$

(123,148

)

 

Revenue attributable to AltaVoice, Good Start and CombiMatrix since their acquisition dates and recognized in the year ended December 31, 2017 was $2.7 million, $6.2 million and $2.0 million, respectively. As the Company combined operations with AltaVoice, Ommdom, Good Start and CombiMatrix at the acquisition dates, net loss attributable to AltaVoice, Ommdom, Good Start and CombiMatrix since their acquisition dates cannot be practically calculated.

Goodwill and intangible assets
Goodwill and intangible assets

4. Goodwill and intangible assets

Goodwill

Details of the Company’s goodwill for the year ended December 31, 2017 are as follows (in thousands):

 

 

 

AltaVoice

 

 

Ommdom

 

 

Good Start

 

 

CombiMatrix

 

 

Total

 

Balance as of December 31, 2016

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Goodwill acquired

 

 

9,432

 

 

 

4,045

 

 

 

29,366

 

 

 

8,692

 

 

 

51,535

 

Goodwill adjustment

 

 

 

 

 

 

 

 

(4,960

)

 

 

 

 

 

(4,960

)

Balance as of December 31, 2017

 

$

9,432

 

 

$

4,045

 

 

$

24,406

 

 

$

8,692

 

 

$

46,575

 

The goodwill adjustment was principally due to the reversal, in the fourth quarter of 2017, of a provisional deferred tax liability of $4.8 million recorded in August 2017. The reversal of this deferred tax liability resulted from the completion of the Company’s analysis of Good Start’s historical net operating losses.

Intangible assets

The following table presents details of the Company’s finite-lived intangible assets as of December 31, 2017 (in thousands):

 

 

 

Cost

 

 

Accumulated

Amortization

 

 

Net

 

 

Weighted Average

Useful Life

(in Years)

 

 

Weighted Average

Estimated Remaining

Useful Life

(in Years)

 

Customer relationships

 

$

23,763

 

 

$

(717

)

 

$

23,046

 

 

 

10.0

 

 

 

9.6

 

Developed technology

 

 

11,963

 

 

 

(949

)

 

 

11,014

 

 

 

4.8

 

 

 

4.4

 

Non-compete agreement

 

 

286

 

 

 

(57

)

 

 

229

 

 

 

5.0

 

 

 

4.0

 

Trade name

 

 

576

 

 

 

(78

)

 

 

498

 

 

 

2.7

 

 

 

2.3

 

Patent licensing agreement

 

 

496

 

 

 

(4

)

 

 

492

 

 

 

15.0

 

 

 

14.9

 

Favorable leases

 

 

247

 

 

 

(10

)

 

 

237

 

 

 

2.2

 

 

 

2.1

 

 

 

$

37,331

 

 

$

(1,815

)

 

$

35,516

 

 

 

8.2

 

 

 

7.8

 

 

Acquisition-related intangibles included in the above table are finite-lived. Customer relationships are being amortized on an accelerated basis, in proportion to estimated cash flows, over periods ranging from five to eleven years. All other acquisition-related intangibles are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are realized. Amortization expense was $1.8 million for the year ended December 31, 2017. As all acquisition-related intangible assets were acquired in 2017, no amortization was recorded for year ended December 31, 2016. Intangible assets are carried at cost less accumulated amortization. Amortization expense is recorded to research and development, sales and marketing and general and administrative expense.

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of December 31, 2017 (in thousands):

 

 

 

Amount

 

2018

 

$

5,059

 

2019

 

 

5,250

 

2020

 

 

5,525

 

2021

 

 

5,829

 

2022

 

 

4,123

 

Thereafter

 

 

9,730

 

 

 

$

35,516

 

 

Balance sheet components
Balance sheet components

5. Balance sheet components

Cash equivalents and marketable securities

The following is a summary of cash equivalents and marketable securities (in thousands):

 

 

 

December 31, 2017

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

Money market funds

 

$

5,998

 

 

$

 

 

$

 

 

$

5,998

 

Certificates of deposit

 

 

300

 

 

 

 

 

 

 

 

 

300

 

U.S. treasury notes

 

 

12,010

 

 

 

 

 

 

(19

)

 

 

11,991

 

U.S. government agency securities

 

 

46,451

 

 

 

 

 

 

(152

)

 

 

46,299

 

 

 

$

64,759

 

 

$

 

 

$

(171

)

 

$

64,588

 

Reported as:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

$

592

 

Restricted cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,406

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

58,590

 

Total cash equivalents, restricted cash and

   marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

$

64,588

 

 

 

 

December 31, 2016

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

Money market funds

 

$

19,457

 

 

$

 

 

$

 

 

$

19,457

 

U.S. treasury notes

 

 

11,515

 

 

 

2

 

 

 

 

 

 

11,517

 

U.S. government agency securities

 

 

14,283

 

 

 

 

 

 

(2

)

 

 

14,281

 

 

 

$

45,255

 

 

$

2

 

 

$

(2

)

 

$

45,255

 

Reported as:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

$

14,760

 

Restricted cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,697

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,798

 

Total cash equivalents, restricted cash and

   marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

$

45,255

 

 

The total amount of unrealized losses at December 31, 2017 was $171,000. The total fair value of investments with unrealized losses at December 31, 2017 was $58.3 million. None of the available-for-sale securities held as of December 31, 2017 has been in a continuous unrealized loss position for more than one year. At December 31, 2017, unrealized losses on available-for-sale investments are not attributed to credit risk and are considered to be temporary. The Company believes it is more likely than not that investments in an unrealized loss position will be held until maturity or the recovery of the cost basis of the investment. To date, the Company has not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value.

 

At December 31, 2017, the remaining contractual maturities of available-for-sale securities ranged from less than one to 13 months. For the years ended December 31, 2017, 2016 and 2015, there were no realized gains or losses on available-for-sale securities.

 

Property and equipment, net

Property and equipment consisted of the following (in thousands):

 

 

 

December 31,

2017

 

 

December 31,

2016

 

Leasehold improvements

 

$

12,623

 

 

$

1,256

 

Laboratory equipment

 

 

17,705

 

 

 

13,644

 

Equipment under capital lease

 

 

11,446

 

 

 

5,871

 

Computer equipment

 

 

4,023

 

 

 

2,514

 

Software

 

 

2,520

 

 

 

2,489

 

Furniture and fixtures

 

 

569

 

 

 

238

 

Automobiles

 

 

20

 

 

 

20

 

Construction-in-progress

 

 

965

 

 

 

12,229

 

Total property and equipment, gross

 

 

49,871

 

 

 

38,261

 

Accumulated depreciation and amortization

 

 

(19,530

)

 

 

(14,468

)

Total property and equipment, net

 

$

30,341

 

 

$

23,793

 

 

Depreciation expense was $7.2 million, $6.6 million and $5.3 million for the years ended December 31, 2017, 2016 and 2015, respectively.

 

 

Accrued liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

 

December 31,

2017

 

 

December 31,

2016

 

Accrued compensation and related expenses

 

$

7,406

 

 

$

3,072

 

Accrued laboratory materials purchases

 

 

1,242

 

 

 

338

 

Accrued outsourced services

 

 

142

 

 

 

 

Accrued professional services

 

 

1,077

 

 

 

446

 

Accrued construction in progress

 

 

 

 

 

1,215

 

Lease incentive obligation, current

 

 

489

 

 

 

468

 

Liabilities associated with business combinations

 

 

9,497

 

 

 

 

Other

 

 

2,889

 

 

 

1,172

 

Total accrued liabilities

 

$

22,742

 

 

$

6,711

 

 

 

Other long-term liabilities

Other long-term liabilities consisted of the following (in thousands):

 

 

 

December 31,

2017

 

 

December 31,

2016

 

Lease incentive obligation, non-current

 

$

3,831

 

 

$

4,243

 

Deferred rent, non-current

 

 

5,153

 

 

 

3,419

 

Liabilities associated with business combination

 

 

3,779

 

 

 

 

Other non-current liabilities

 

 

677

 

 

 

175

 

Total other long-term liabilities

 

$

13,440

 

 

$

7,837

 

 

Fair value measurements
Fair value measurements

6. Fair value measurements

 

Financial assets and liabilities are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The authoritative guidance establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.

The three-level hierarchy for the inputs to valuation techniques is summarized as follows:

Level 1—Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets.

Level 2—Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-derived valuations whose significant inputs are observable.

Level 3—Unobservable inputs that reflect the reporting entity’s own assumptions.

The following tables set forth the fair value of the Company’s consolidated financial instruments that were measured at fair value on a recurring basis as of December 31, 2017 and December 31, 2016 (in thousands):

 

 

 

December 31, 2017

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

5,998

 

 

$

 

 

$

 

 

$

5,998

 

Certificates of deposit

 

 

300

 

 

 

 

 

 

 

 

 

300

 

U.S. treasury notes

 

 

11,991

 

 

 

 

 

 

 

 

 

11,991

 

U.S. government agency securities

 

 

 

 

 

46,299

 

 

 

 

 

 

46,299

 

Total financial assets

 

$

18,289

 

 

$

46,299

 

 

$

 

 

$

64,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

 

 

$

 

 

$

3,779

 

 

$

3,779

 

Total financial liabilities

 

$

 

 

$

 

 

$

3,779

 

 

$

3,779

 

 

 

 

December 31, 2016

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

19,457

 

 

$

 

 

$

 

 

$

19,457

 

U.S. treasury notes

 

 

11,517

 

 

 

 

 

 

 

 

 

11,517

 

U.S. government agency securities

 

 

 

 

 

14,281

 

 

 

 

 

 

14,281

 

Total financial assets

 

$

30,974

 

 

$

14,281

 

 

$

 

 

$

45,255

 

There were no transfers between Level 1, Level 2 and Level 3 during the periods presented.

 

The following table presents the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis (in thousands):

 

 

 

Level 3

 

 

 

Contingent

Consideration

Liability

 

Balance as of December 31, 2016

 

$

 

Contingent consideration

 

 

2,200

 

Change in estimate of fair value

 

 

1,579

 

Balance as of December 31, 2017

 

$

3,779

 

 

The Company’s debt securities of U.S. government agency entities are classified as Level 2 as they are valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs obtained from various third party data providers, including but not limited to benchmark yields, interest rate curves, reported trades, broker/dealer quotes and reference data.

As of December 31, 2017, the Company had a contingent obligation of up to $5.0 million payable in the Company’s common stock to the former owners of AltaVoice in conjunction with the Company’s acquisition of AltaVoice in January 2017. The contingency is dependent upon future revenues attributable to AltaVoice. If the revenue attributable to AltaVoice for the combined period of 2017 and 2018 is at least $10 million, the Company will make a payment of up to $5.0 million in the Company’s common stock on March 31, 2019. The Company estimated the fair value of the contingent consideration at $2.2 million at the acquisition date of January 6, 2017, based on a Monte Carlo simulation, as well as estimates of the 30-day trailing price of its stock at certain dates, its volatility assumptions and its revenue forecasts, all of which were significant inputs in the Level 3 measurement not supported by market activity. The value of the liability will be subsequently remeasured to fair value at each reporting date. Changes to revenue forecasts can significantly affect the estimated fair value of the contingent consideration. Changes in estimated fair value will be recorded as a component of operating expenses until the contingency is paid or expires. The change in the fair value of the contingent consideration between the acquisition date and December 31, 2017 was an increase of $1.6 million.

The fair value of the Company’s outstanding debt is estimated using the net present value of future debt payments, discounted at an interest rate that is consistent with market interest rates, which is a Level 2 input. The carrying amount and the estimated fair value of the Company’s outstanding debt at December 31, 2017 and December 31, 2016, are as follows (in thousands):

 

 

 

 

December 31, 2017

 

 

December 31, 2016

 

 

 

Carrying

Amount

 

 

Fair

Value

 

 

Carrying

Amount

 

 

Fair

Value

 

Debt

 

$

39,084

 

 

$

40,526

 

 

$

12,102

 

 

$

11,905

 

 

Commitments and contingencies
Commitments and contingencies

7. Commitments and contingencies

Operating leases

In September 2015, the Company entered into a lease agreement for a production facility and headquarters in San Francisco, California. This lease expires in July 2026 and the Company may renew the lease for an additional ten years. The Company has determined the lease term to be a ten-year period expiring in 2026. The lease term commenced when the Company took occupancy of the facility in February 2016. In connection with the execution of the lease, the Company provided a security deposit of approximately $4.6 million which is included in restricted cash in the Company’s consolidated balance sheets. Minimum annual rent under the lease is subject to increases based on stated rental adjustment terms. In addition, per the terms of the lease, the Company received a $5.2 million lease incentive in the form of reimbursement from the landlord for a portion of the costs of leasehold improvements the Company has made to the facility. The assets purchased with the lease incentive are included in property and equipment, net, in the Company’s consolidated balance sheets and the lease incentive is recognized as a reduction of rental expense on a straight-line basis over the term of the lease. At December 31, 2017, all of the lease incentive had been utilized by the Company and all related reimbursements had been received from the landlord. Aggregate future minimum lease payments for this facility at December 31, 2017 were approximately $64.2 million.

In addition to the security deposit of $4.6 million for its production facility and headquarters, the Company has provided, as collateral for other leases, security deposits of $0.4 million and $0.8 million at December 31, 2017 and December 31, 2016, respectively, which are included in other assets in the Company’s consolidated balance sheets. Security deposits relating to Good Start facilities were $0.4 million at December 31, 2017 and are included in restricted cash in the Company’s consolidated balance sheet as of that date.

Future minimum payments under non-cancelable operating leases as of December 31, 2017 are as follows (in thousands):

 

 

 

Amounts

 

2018

 

$

9,707

 

2019

 

 

9,633

 

2020

 

 

9,512

 

2021

 

 

9,727

 

2022

 

 

9,676

 

Thereafter

 

 

29,846

 

Total minimum lease payments

 

$

78,101

 

 

Rent expense was $8.6 million, $8.6 million and $3.7 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Debt financing

In July 2015, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with a bank under which term loans were available for purchases of equipment up to an aggregate of $15.0 million. As of December 31, 2016, obligations under the Loan Agreement were $12.1 million.

On March 15, 2017, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with a lender pursuant to which the Company borrowed an initial term loan of $40.0 million, and received net proceeds of approximately $39.7 million. Subject to certain conditions, the Company will also be eligible to borrow a second term loan of $20.0 million in the first quarter of 2018. In connection with entering into the Loan and Security Agreement, the Company terminated the Loan Agreement and repaid in full the balance of its obligations under such agreement, approximately $12.1 million. The payment to the lender under the Loan Agreement included a prepayment premium of $670,000, which was classified as extinguishment of debt and included in other income (expense), net.

Term loans under the Loan and Security Agreement bear interest at a floating rate equal to an index rate plus 7.73%, where the index rate is the greater of 0.77% or the 30-day U.S. Dollar London Interbank Offered Rate “LIBOR” as reported in The Wall Street Journal, with the floating rate resetting monthly subject to a floor of 8.5%. The Company is required to make monthly interest-only payments until May 1, 2019 (or, subject to certain conditions, May 1, 2020), and thereafter monthly payments of principal and interest are required to fully amortize the borrowed amount by a final maturity date of March 1, 2022. A fee of 5% of each funded draw is due at the earlier of prepayment or loan maturity, a facility fee of 0.5% is due upon funding for each draw, and a prepayment fee of between 1% and 3% of the outstanding balance will apply in the event of a prepayment. Concurrent with each term loan, the Company will grant to the lender a warrant to acquire shares of the Company’s common stock equal to the quotient of 3% of the funded amount divided by a per share exercise price equal to the lower of the average closing price for the previous ten days of trading (calculated on the day prior to funding) or the closing price on the day prior to funding. In connection with the initial term loan, the Company granted the lender a warrant to purchase 116,845 shares of common stock at an exercise price of $10.27 per share. The Company classified the warrant as equity and determined the fair value of the warrant to be $740,000. The warrant has a term of ten years from the date of issuance and includes a cashless exercise provision.

The Company’s obligations under the Loan and Security Agreement are subject to quarterly covenants to achieve certain revenue levels as well as additional covenants, including limits on the Company’s ability to dispose of assets, undergo a change in control, merge with or acquire other entities, incur debt, incur liens, pay dividends or other distributions to holders of its capital stock, repurchase stock and make investments, in each case subject to certain exceptions. The Company’s obligations under the Loan and Security Agreement are secured by a security interest on substantially all the Company’s assets, excluding its intellectual property.

At December 31, 2017, obligations under the Loan and Security Agreement were $40.0 million. Debt issuance costs related to the Loan and Security Agreement of $339,000 and the warrant fair value of $740,000 were recorded as a direct deduction from the debt liability and are being amortized to interest expense over the term of the Loan and Security Agreement. Future payments under the Loan and Security Agreement as of December 31, 2017 are as follows (in thousands):

 

 

 

Amounts

 

2018

 

$

3,691

 

2019

 

 

12,587

 

2020

 

 

15,988

 

2021

 

 

14,716

 

2022

 

 

5,482

 

Thereafter

 

 

 

Total remaining debt payments

 

 

52,464

 

Less: amount representing debt discount

 

 

(916

)

Less: amount representing interest

 

 

(12,464

)

Present value of remaining debt payments

 

 

39,084

 

Less: current portion

 

 

 

Total non-current debt obligation

 

$

39,084

 

 

Interest expense related to the Loan and Security Agreement and the Loan Agreement was $3.5 million, $315,000 and $58,000 for the years ended December 31, 2017, 2016 and 2015, respectively.

 

On February 26, 2018, the Company and the lender amended the Loan and Security Agreement (see note 14).

Capital leases

The Company has entered into various capital lease agreements to obtain laboratory equipment. The terms of the capital leases are typically three years with interest rates ranging from 4.3% to 6.4%. The leases are secured by the underlying equipment. The portion of the future payments designated as principal repayment was classified as a capital lease obligation on the consolidated balance sheets.

Future payments under capital leases at December 31, 2017 are as follows (in thousands):

 

 

 

Amounts

 

2018

 

$

2,369

 

2019

 

 

2,087

 

2020

 

 

1,394

 

2021

 

 

21

 

Total capital lease obligations

 

 

5,871

 

Less: amount representing interest

 

 

(459

)

Present value of net minimum capital lease

   payments

 

 

5,412

 

Less: current portion

 

 

(2,039

)

Total non-current capital lease obligations

 

$

3,373

 

 

Interest expense related to capital leases was $163,000, $103,000 and $141,000 for the years ended December 31, 2017, 2016 and 2015, respectively.

Property and equipment under capital leases was $11.4 million and $5.9 million as of December 31, 2017 and December 31, 2016, respectively. Accumulated depreciation and amortization, collectively, on these assets was $3.0 million and $2.4 million at December 31, 2017 and December 31, 2016, respectively.

Guarantees and indemnifications

As permitted under Delaware law and in accordance with the Company’s bylaws, the Company indemnifies its directors and officers for certain events or occurrences while the officer or director is or was serving in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company maintains director and officer liability insurance. This insurance allows the transfer of the risk associated with the Company’s exposure and may enable it to recover a portion of any future amounts paid. The Company believes the fair value of these indemnification agreements is minimal. Accordingly, the Company did not record any liabilities associated with these indemnification agreements at December 31, 2017 or December 31, 2016.

Contingencies

The Company was not a party to any material legal proceedings at December 31, 2017, or at the date of this report. The Company may from time to time become involved in various legal proceedings arising in the ordinary course of business, and the resolution of any such claims could be material.

 

Stockholders' Equity
Stockholders’ Equity

8. Stockholders’ Equity

Common stock

As of December 31, 2017 and 2016, the Company had reserved shares of common stock, on an as‑if converted basis, for issuance as follows:

 

 

 

As of December 31,

 

 

 

2017

 

 

2016

 

Options issued and outstanding

 

 

4,114,874

 

 

 

4,490,662

 

RSU awards issued and outstanding

 

 

2,387,120

 

 

 

1,421,757

 

Shares available for grant under stock option plan

 

 

2,397,234

 

 

 

1,375,766

 

Shares reserved for issuance under the 2015

   Employee Stock Purchase Plan

 

 

307,538

 

 

 

274,686

 

Common stock underlying warrants

 

 

1,962,074

 

 

 

 

Common stock issuable upon conversion of

   preferred stock

 

 

3,458,823

 

 

 

 

Common stock underlying stock payable liabilities

 

 

689,347

 

 

 

 

Common stock payable as contingent consideration

 

 

550,660

 

 

 

 

Total

 

 

15,867,670

 

 

 

7,562,871

 

 

Private placement

On August 3, 2017, in a private placement to certain accredited investors, the Company sold 5,188,235 shares of its common stock at a price of $8.50 per share, and 3,458,823 shares of its Series A convertible preferred stock at a price of $8.50 per share, for gross proceeds of approximately $73.5 million and net proceeds of $68.9 million. The Series A preferred stock is a non-voting common stock equivalent and conversion of the Series A preferred stock is prohibited if the holder exceeds a specified threshold of voting security ownership. The Series A preferred stock is convertible into common stock on a one-for-one basis, subject to adjustment for events such as stock splits, combinations and the like. The Series A Preferred Stock has the right to receive dividends first or simultaneously with payment of dividends on common stock, in an amount equal to the product of (i) the dividend payable on each share of common stock and (ii) the number of shares of common stock issuable upon conversion of a share of Series A Preferred Stock. The Series A Preferred Stock has no voting rights except as required by law, as modified by the Company’s Amended and Restated Certificate of Incorporation. In the event of any liquidation or dissolution of the Company, the Series A Preferred Stock is entitled to receive $0.001 per share prior to the payment of any amount to any holders of capital stock of the Company ranking junior to the Series A Preferred Stock and thereafter shall participate pari passu with the holders of the Company’s common stock (on an as-if-converted-to-common-stock basis).

 

Common stock warrants

As of December 31, 2017, the Company had outstanding warrants to purchase common stock as follows:

 

Warrant

 

Issuance Date

 

Expiration Date

 

Exercise

Price

Per Share

 

 

Number of

Warrants

Outstanding

 

Warrants issued in exchange for

   CombiMatrix Series D warrants

 

November 14, 2017

 

December 19, 2018

 

$

53.84

 

 

 

337,584

 

Warrants issued in exchange for

   CombiMatrix Series F warrants

 

November 14, 2017

 

March 24, 2021

 

$

5.95

 

 

 

1,507,645

 

Warrants issued to lender under

   Loan and Security Agreement

 

March 15, 2017

 

March 15, 2027

 

$

10.27

 

 

 

116,845

 

 

 

 

 

 

 

 

 

 

 

 

1,962,074

 

 

The exercise price of warrants issued in exchange for CombiMatix Series D and Series F warrants was determined pursuant to the terms of the Merger Agreement (See Note 3). The exercise price of the warrants issued to the lender under the Loan and Security Agreement was the closing price of the Company’s common stock on the date of the agreement.

 

Stock incentive plans
Stock incentive plans

9. Stock incentive plans

Stock incentive plans

In 2010, the Company adopted the 2010 Incentive Plan (the “2010 Plan”). The 2010 Plan provides for the granting of stock-based awards to employees, directors, and consultants under terms and provisions established by the Board of Directors. Under the terms of the 2010 Plan, options may be granted at an exercise price not less than fair market value. For employees holding more than 10% of the voting rights of all classes of stock, the exercise prices for incentive and nonstatutory stock options must be at least 110% of fair market of the common stock on the grant date, as determined by the Board of Directors. The terms of options granted under the 2010 Plan may not exceed ten years.

In January 2015, the Company adopted the 2015 Stock Incentive Plan (the “2015 Plan”), which became effective upon the closing of the Company’s initial public offering (“IPO”). The 2015 Plan had 4,370,452 shares of common stock reserved for future issuance at the time of its effectiveness, which included 120,452 shares under the 2010 Plan which were transferred to the 2015 Plan upon effectiveness of the 2015 Plan. The 2015 Plan provides for automatic annual increases in shares available for grant, beginning on January 1, 2016 through January 1, 2025. In addition, shares subject to awards under the 2010 Plan that are forfeited or terminated will be added to the 2015 Plan. The 2015 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, stock units, stock appreciation rights and other forms of equity compensation, all of which may be granted to employees, including officers, non-employee directors and consultants. Additionally, the 2015 Plan provides for the grant of cash-based awards.

Options granted generally vest over a period of four years. Typically, the vesting schedule for options granted to newly hired employees provides that 1/4 of the award vests upon the first anniversary of the employee’s date of hire, with the remainder of the award vesting monthly thereafter at a rate of 1/48 of the total shares subject to the option. All other options typically vest in equal monthly installments over the four-year vesting schedule.

RSUs generally vest over a period of three years. Typically, the vesting schedule for RSUs provides that one third of the award vests upon each anniversary of the grant date.

In February 2016, the Company granted PRSUs under the 2015 Plan, which PRSUs could be earned based on the achievement of specified performance conditions measured over a period of approximately 12 months. In February 2017, upon the Audit Committee’s determination of the level of achievement, 352,045 fully vested stock units were awarded to holders of PRSUs.

Based on its evaluations of the probability of achieving performance conditions, the Company recorded stock-based compensation expense of $0.4 million and $1.9 million for the years ended December 31, 2017 and 2016, respectively, related to the PRSUs.

Activity under the 2010 Plan and the 2015 Plan is set forth below (in thousands, except share and per share amounts and years):

 

 

 

Shares

Available

For Grant

 

 

Stock

Options

Outstanding

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted-

Average

Remaining

Contractual

Life (years)

 

 

Aggregate

Intrinsic

Value (000's)

 

Balances at December 31, 2016

 

 

1,375,766

 

 

 

4,490,662

 

 

$

8.21

 

 

 

8.11

 

 

$

5,312

 

Additional shares reserved

 

 

2,923,183

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options granted

 

 

(607,398

)

 

 

607,398

 

 

$

9.20

 

 

 

 

 

 

 

 

 

Options cancelled

 

 

595,763

 

 

 

(595,763

)

 

$

9.67

 

 

 

 

 

 

 

 

 

Options exercised

 

 

 

 

 

 

(387,423

)

 

$

4.38

 

 

 

 

 

 

 

 

 

RSUs granted

 

 

(2,360,511

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RSUs cancelled

 

 

292,471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PRSUs cancelled

 

 

177,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2017

 

 

2,397,234

 

 

 

4,114,874

 

 

$

8.51

 

 

 

7.63

 

 

$

5,128

 

Options exercisable at December 31, 2017

 

 

 

 

 

 

2,213,417

 

 

$

7.75

 

 

 

7.09

 

 

$

4,411

 

Options vested and expected to vest at

   December 31, 2017

 

 

 

 

 

 

3,861,828

 

 

$

8.45

 

 

 

7.59

 

 

$

5,043

 

 

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock for stock options that were in-the-money.

The weighted-average fair value of options to purchase common stock granted was $5.82, $6.18 and $6.26 in the years ended December 31, 2017, 2016 and 2015, respectively. The weighted-average fair value of RSUs granted was $10.03, $9.80 and $10.72 in the years ended December 31, 2017, 2016 and 2015, respectively. No PRSUs were granted in the year ended December 31, 2017 and the weighted average fair value of PRSUs granted in the year ended December 31, 2016 was $6.50.

The total grant-date fair value of options to purchase common stock vested was $6.9 million, $5.6 million and $2.1 million in the year ended December 31, 2017 and 2016, respectively.

The intrinsic value of options to purchase common stock exercised was $2.1 million, $1.4 million and $1.2 million in the years ended December 31, 2017, 2016 and 2015, respectively.

The following table summarizes RSU and PRSU activity for the year ended December 31, 2017:

 

 

 

Number of

Shares

 

 

Weighted-

Average

Grant Date

Fair Value

 

Balance at December 31, 2016

 

 

1,421,757

 

 

$

8.77

 

RSUs granted

 

 

2,360,511

 

 

$

10.03

 

RSUs vested

 

 

(572,672

)

 

$

10.51

 

PRSUs vested

 

 

(352,045

)

 

$

6.54

 

RSUs cancelled

 

 

(292,471

)

 

$

10.17

 

PRSUs cancelled

 

 

(177,960

)

 

$

6.53

 

Balance at December 31, 2017

 

 

2,387,120

 

 

$

9.91

 

 

 

2015 employee stock purchase plan

In January 2015, the Company adopted the 2015 Employee Stock Purchase Plan (the “ESPP”), which became effective upon the closing of the IPO. Employees participating in the ESPP may purchase common stock at 85% of the lesser of the fair market value of common stock on the purchase date or last trading day preceding the offering date. At December 31, 2017, cash received from payroll deductions pursuant to the ESPP was $0.4 million.

The ESPP provides for automatic annual increases in shares available for grant, beginning on January 1, 2016 and continuing through January 1, 2025. At December 31, 2017, a total of 307,538 shares of common stock are reserved for issuance under the ESPP.

 

 

Stock-based compensation

The Company uses the grant date fair value of its common stock to value both employee and non-employee options when granted. The Company revalues non-employee options each reporting period using the fair market value of the Company’s common stock as of the last day of each reporting period.

In determining the fair value of stock options and ESPP purchases, the Company uses the Black-Scholes option-pricing model and, for stock options, the assumptions discussed below. Each of these inputs is subjective and its determination generally requires significant judgment. The fair value of RSU and PRSU awards is based on the grant date share price. Compensation cost is recognized as expense on a straight-line basis over the vesting period for options and RSUs and on an accelerated basis for PRSUs.

In 2016, the Company modified certain stock options and RSU awards. The terms of the stock option modifications included acceleration of vesting and extensions of post-termination exercise periods. The terms of the RSU award modifications included acceleration of vesting. A total of 14 employees were affected by the stock option and RSU modifications and the total incremental compensation cost relating to these modifications was $323,000.

Expected term—The expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined using the simplified method (based on the midpoint between the vesting date and the end of the contractual term).

Expected volatility—Because the Company was privately held until February 2015 and did not have any trading history for its common stock prior to its IPO, the expected volatility was estimated based on the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of stock option grants and restricted stock units. When selecting comparable companies on which it has based its expected stock price volatility, the Company selected companies with comparable characteristics to it, including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. Historical volatility data has been computed using the daily closing prices for the selected companies’ common stock during the equivalent period of the calculated expected term of the stock-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available. The Company estimates expected volatility for ESPP purchases using its own stock price volatility over the expected, six-month term ESPP purchase periods.

Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.

Dividend yield—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.

The fair value of share-based payments for stock options granted to employees and directors was estimated on the date of grant using the Black-Scholes option-pricing model based on the following assumptions:

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Expected term (in years)

 

6.03

 

 

6.03

 

 

6.03

 

Expected volatility

 

72.64%

 

 

71.42%

 

 

 

68.2 – 79.7%

 

Risk-free interest rate

 

2.01%

 

 

1.37%

 

 

 

1.28 – 1.86%

 

Dividend yield

 

 

 

 

 

 

 

 

 

 

Stock-based compensation related to stock options granted to non-employees is recognized as the stock options vest. The fair value of the stock options granted is calculated at each reporting date using the Black-Scholes option-pricing model based on the following assumptions:

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Expected term (in years)

 

 

8.41 – 8.83

 

 

 

6.25 – 10.00

 

 

 

7.25 – 9.82

 

Expected volatility

 

 

69.9 – 78.70%

 

 

 

76.92%

 

 

 

69.9 – 78.70%

 

Risk-free interest rate

 

 

1.83 – 2.04%

 

 

 

1.55 – 2.37%

 

 

 

1.86 – 2.25%

 

Dividend yield

 

 

 

 

 

 

 

 

 

 

The fair value of shares purchased pursuant to the ESPP is estimated using the Black‑Scholes option pricing model. For the years ended December 31, 2017, 2016 and 2015, the weighted average grant date fair value per share for the ESPP was $2.51, $2.66 and $2.17, respectively and stock‑based compensation expense for the ESPP was $1.1 million, $0.9 million and $102,000, respectively.

 

The fair value of the shares purchased pursuant to the ESPP was estimated using the following assumptions:

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Expected term (in years)

 

 

0.50

 

 

 

0.50

 

 

 

0.50

 

Expected volatility

 

 

52.50

%

 

 

66.31

%

 

 

74.13

%

Risk-free interest rate

 

 

1.23

%

 

 

0.50

%

 

 

0.33

%

Dividend yield

 

 

 

 

 

 

 

The following table summarizes stock-based compensation expense for the years ended December 31, 2017, 2016 and 2015, included in the consolidated statements of operations (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Cost of test revenue

 

$

2,093

 

 

$

1,353

 

 

$

368

 

Research and development

 

 

6,158

 

 

 

4,976

 

 

 

1,545

 

Selling and marketing

 

 

3,956

 

 

 

1,709

 

 

 

688

 

General and administrative

 

 

7,014

 

 

 

2,661

 

 

 

876

 

Total stock-based compensation expense

 

$

19,221

 

 

$

10,699

 

 

$

3,477

 

 

At December 31, 2017, unrecognized compensation expense related to unvested stock options, net of estimated forfeitures, was $9.0 million, which the Company expects to recognize on a straight-line basis over a weighted-average period of 2.2 years. Unrecognized compensation expense related to RSUs at December 31, 2017, net of estimated forfeitures, was $14.6 million, which the Company expects to recognize on a straight-line basis over a weighted-average period of 2.1 years. At December 31, 2017, there was no unrecognized compensation expense related to PRSUs and no capitalized stock-based employee compensation.

Income taxes
Income taxes

10. Income taxes

The Company recorded a benefit for income taxes in the year ended December 31, 2017. The Company did not record a provision or benefit for income taxes during the years ended December 31, 2016 and 2015. The components of loss before income taxes by U.S. and foreign jurisdictions are as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

United States

 

$

124,108

 

 

$

99,793

 

 

$

88,112

 

Foreign

 

 

1,128

 

 

 

463

 

 

 

1,670

 

Total

 

$

125,236

 

 

$

100,256

 

 

$

89,782

 

 

The components of the provision for income taxes are as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Current

 

$

 

 

$

 

 

$

 

Federal

 

 

 

 

 

 

 

 

 

State

 

 

 

 

 

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

 

Total Current

 

 

 

 

 

 

 

 

 

Deferred

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

(1,704

)

 

 

 

 

 

 

State

 

 

(152

)

 

 

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

 

Total Deferred

 

 

(1,856

)

 

 

 

 

 

 

Tax Provision

 

$

(1,856

)

 

$

 

 

$

 

 

The following table presents a reconciliation of the tax expense computed at the statutory federal rate and the Company’s tax expense for the periods presented:

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

U.S. federal taxes at statutory rate

 

 

34.0

%

 

 

34.0

%

 

 

34.0

%

State taxes (net of federal benefit)

 

 

3.3

%

 

 

1.4

%

 

 

0.8

%

Stock-based compensation

 

 

(1.1

)%

 

 

(1.7

)%

 

 

(—

)%

Non-deductible expenses

 

 

(—

)%

 

 

0.2

%

 

 

(0.8

)%

Foreign tax differential

 

 

(0.3

)%

 

 

(0.2

)%

 

 

(0.2

)%

Other

 

 

(—

)%

 

 

1.1

%

 

 

(—

)%

Change in valuation allowance

 

 

(34.4

)%

 

 

(34.8

)%

 

 

(33.8

)%

Change in deferred—Tax Reform

 

 

(39.0

)%

 

 

(—

)%

 

 

(—

)%

Change in valuation allowance—Tax Reform

 

 

39.0

%

 

 

(—

)%

 

 

(—

)%

Total

 

 

1.5

%

 

 

(—

)%

 

 

(—

)%

 

The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets are as follows (in thousands):

 

 

 

As of December 31,

 

 

 

2017

 

 

2016

 

Deferred tax assets:

 

 

 

 

 

 

 

 

Net operating loss carryforwards

 

$

70,825

 

 

$

76,353

 

Tax credits

 

 

15

 

 

 

13

 

Revenue recognition reserves

 

 

29,819

 

 

 

14,291

 

Accruals and other

 

 

5,544

 

 

 

3,405

 

Gross deferred tax assets

 

 

106,203

 

 

 

94,062

 

Valuation allowance

 

 

(95,687

)

 

 

(93,666

)

Net deferred tax assets

 

 

10,516

 

 

 

396

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Property and equipment

 

 

(10,516

)

 

 

(396

)

Total deferred tax liabilities

 

 

(10,516

)

 

 

(396

)

Net deferred tax assets

 

$

 

 

$

 

 

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes including among other items, a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%. Although the Tax Act is generally effective January 1, 2018, GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date, which was December 22, 2017. As a result of the lower corporate tax rate enacted as part of the Tax Act, the Company recorded a provisional estimate to reduce deferred tax assets by $48.8. The reduction in deferred tax assets was offset by a corresponding reduction in the valuation allowance resulting in no net impact to tax expense.

 

On December 22, 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, the Company has been able to make a reasonable estimate of the impact to deferred taxes as a result of Tax Reform. The Company has recorded a provisional estimate which resulted in a $48.8 million reduction in deferred tax assets as of December 31, 2017. The provisional amount will be updated as IRS, Treasury and state tax guidance is issued and as the Company finalizes its deferred tax accounting for the GSG and CombiMatrix acquisitions.

 

The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding realization of such assets. During 2017, the change in the valuation allowance of $2.0 million consisted of a $50.8 million increase as result of operations with an offsetting $48.8 million reduction due to the Tax Act. The valuation allowance increased by $33.4 million during the year ended December 31, 2016 as a result of operations.

As of December 31, 2017, the Company had net operating loss carryforwards of approximately $292.2 million and $145.6 million available to reduce future taxable income, if any, for Federal and state income tax purposes, respectively. The U.S. Federal and California state net operating loss carryforwards will begin to expire in 2018.

As of December 31, 2017, the Company had research and development credit carryforwards of approximately $5.5 million and $5.1 million available to reduce its future tax liability, if any, for Federal and California state income tax purposes, respectively. The Federal credit carryforwards begin to expire in 2030. California credit carryforwards have no expiration date.

Internal Revenue Code section 382 places a limitation (the “Section 382 limitation” or “annual limitation”) on the amount of taxable income that can be offset by net operating loss (“NOL”) carryforwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. Similar provisions exist for states. In addition, and as a result of the acquisitions of Good Start Genetics in August 2017 and CombiMatrix in November 2017, tax loss carryforwards from acquired entities are also subject to the Section 382 limitation due to the change in control in the acquired entities in the current year.

The Company performed an IRC Section 382 analysis for Good Start Genetics and CombiMatrix and concluded that a substantial portion of the acquired operating loss and credit carryovers would expire unused as a result of annual limitations under IRC sections 382 and 383. As a result, the federal and state operating loss and credit carryforwards acquired in connection with the Good Start Genetics and CombiMatrix acquisitions were reduced by the amount of tax attributes estimated to expire during their respective carryforward periods. In addition, as a result of equity issued in connection with its 2017 acquisitions, the Company also performed an IRC section 382 analysis through December 31, 2017 with respect to its legacy operating loss and credit carryforwards. The Company concluded while an ownership change occurred in 2017 as defined under IRC section 382, none of the Company’s legacy carryforwards would expire unused solely as a result of annual limitations imposed on the use of the carryforwards under IRC sections 382 and 383.

As of December 31, 2017, the Company had unrecognized tax benefits of $10.6 million, none of which would currently affect the Company’s effective tax rate if recognized due to the Company’s deferred tax assets being fully offset by a valuation allowance. Unrecognized tax benefits are not expected to change in the next 12 months.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

 

 

 

Year ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Unrecognized tax benefits, beginning of period

 

$

7,791

 

 

$

11,429

 

 

$

5,661

 

Gross increases—current period tax positions

 

 

2,552

 

 

 

782

 

 

 

2,993

 

Gross increases—prior period tax positions

 

 

218

 

 

 

(4,420

)

 

 

2,775

 

Unrecognized tax benefits, end of period

 

$

10,561

 

 

$

7,791

 

 

$

11,429

 

 

The Company’s policy is to include penalties and interest expense related to income taxes as a component of tax expense. The Company has not accrued interest and penalties related to the unrecognized tax benefits reflected in the financial statements for the years ended December 31, 2017, 2016 and 2015.

 

The Company’s major tax jurisdictions are the United States and California. All of the Company’s tax years will remain open for examination by the Federal and state tax authorities for three and four years, respectively, from the date of utilization of the net operating loss or research and development credit. The Company does not have any tax audits pending.

 

Net loss per common share
Net loss per common share

11. Net loss per common share

The following table presents the calculation of basic and diluted net loss per common share for the years ended December 31, 2017, 2016 and 2015 (in thousands, except share and per share amounts):

 

 

 

Year ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Net loss

 

$

(123,380

)

 

$

(100,256

)

 

$

(89,782

)

Shares used in computing net loss per

   share, basic and diluted

 

 

46,511,739

 

 

 

33,176,305

 

 

 

28,213,324

 

Net loss per share, basic and diluted

 

$

(2.65

)

 

$

(3.02

)

 

$

(3.18

)

 

The following common stock equivalents have been excluded from diluted net loss per share for the years ended December 31, 2017, 2016 and 2015 because their inclusion would be anti-dilutive:

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Shares of common stock subject to outstanding

   options

 

 

4,114,874

 

 

 

4,490,662

 

 

 

3,659,713

 

Shares of common stock subject to outstanding

   warrants

 

 

1,962,074

 

 

 

 

 

 

 

Shares of common stock subject to outstanding

   RSUs

 

 

2,387,120

 

 

 

891,752

 

 

 

482,818

 

Shares of common stock subject to outstanding

   PRSUs

 

 

 

 

 

530,005

 

 

 

 

Shares of common stock pursuant to ESPP

 

 

59,259

 

 

 

55,078

 

 

 

45,963

 

Shares of common stock underlying Series A

   convertible preferred stock

 

 

3,458,823

 

 

 

 

 

 

 

Shares of common stock subject to unvested

   early exercise of outstanding options subject

   to repurchase

 

 

 

 

 

 

 

 

4,659

 

Total shares of common stock equivalents

 

 

11,982,150

 

 

 

5,967,497

 

 

 

4,193,153

 

 

Geographic information
Geographic information

12. Geographic information

Revenue by country is determined based on the billing address of the customer and is summarized as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

United States

 

$

62,446

 

 

$

20,758

 

 

$

5,432

 

Canada

 

 

3,226

 

 

 

2,526

 

 

 

2,112

 

Rest of world

 

 

2,549

 

 

 

1,764

 

 

 

834

 

Total revenue

 

$

68,221

 

 

$

25,048

 

 

$

8,378

 

 

 

Long-lived assets (net) by location are summarized as follows (in thousands):

 

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

United States

 

$

30,341

 

 

$

23,793

 

 

$

17,180

 

Chile

 

 

 

 

 

 

 

 

1,529

 

Total long-lived assets, net

 

$

30,341

 

 

$

23,793

 

 

$

18,709

 

 

Selected Quarterly Data (Unaudited)
Selected Quarterly Data (Unaudited)

13. Selected quarterly data (unaudited)

The following table contains quarterly financial information for 2017 and 2016. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair statement of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.

 

 

 

Three Months Ended

 

(In thousands,

except per share amounts)

 

Dec 31,

2017

 

 

Sept 30,

2017

 

 

June 30,

2017

 

 

Mar 31,

2017

 

 

Dec 31,

2016

 

 

Sept 30,

2016

 

 

June 30,

2016

 

 

Mar 31,

2016

 

Revenue

 

$

25,399

 

 

$

18,148

 

 

$

14,336

 

 

$

10,338

 

 

$

9,236

 

 

$

6,276

 

 

$

5,581

 

 

$

3,955

 

Loss from operations

 

$

(34,891

)

 

$

(30,976

)

 

$

(28,075

)

 

$

(27,337

)

 

$

(24,952

)

 

$

(24,906

)

 

$

(24,835

)

 

$

(25,490

)

Net loss

 

$

(40,493

)

 

$

(27,402

)

 

$

(28,557

)

 

$

(26,928

)

 

$

(24,848

)

 

$

(24,971

)

 

$

(24,847

)

 

$

(25,590

)

Net loss per share, basic and

   diluted

 

$

(0.78

)

 

$

(0.57

)

 

$

(0.66

)

 

$

(0.64

)

 

$

(0.69

)

 

$

(0.77

)

 

$

(0.77

)

 

$

(0.80

)

 

Subsequent Event
Subsequent Event

14. Subsequent event

On February 26, 2018, the Company entered into an agreement (the “Amended 2017 Loan Agreement”) to modify the Loan and Security Agreement pursuant to which the Company is eligible to borrow a third term loan of $20.0 million in the second quarter of 2018.

If the third term loan becomes available and is not fully drawn, a line fee of 1% will be applied to the difference between $20.0 million and the amount drawn. The Amended 2017 Loan Agreement adds a quarterly covenant to achieve certain accession volumes. Substantially all other terms of the Amended 2017 Loan Agreement are consistent with the terms of the Loan and Security Agreement.

Summary of significant accounting policies (Policies)

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of estimates

The preparation of 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 liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company believes judgment is involved in determining revenue recognition; the acquisition-date fair value of intangible assets; the fair value of contingent consideration associated with acquisitions; the recoverability of long-lived assets; impairment of goodwill and intangible assets; stock-based compensation expense; and income tax uncertainties. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ materially from those estimates and assumptions.

Concentrations of credit risk and other risks and uncertainties

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, marketable securities and accounts receivable. The Company’s cash and cash equivalents are held by financial institutions in the United States. Such deposits may exceed federally insured limits. The Company does not perform evaluations of customers’ financial condition and does not require collateral.

Significant customers are those that represent 10% or more of the Company’s total revenue for each year presented on the statements of operations. For each significant customer, revenue as a percentage of total revenue is as follows:

 

 

 

December 31,

 

Customers

 

2017

 

 

2016

 

 

2015

 

Customer A

 

 

13

%

 

 

11

%

 

*

 

Customer B

 

*

 

 

*

 

 

 

13

%

*    Less than 10% of total revenue

 

 

 

 

 

 

 

 

 

 

 

 

Customer A represented 13% of accounts receivable in the consolidated financial statements as of December 31, 2017. No single customer represented 10% or more of accounts receivable in the consolidated financial statements as of December 31, 2016.

Cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market funds and U.S. government agency securities.

Marketable securities

All marketable securities have been classified as “available-for-sale” and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its marketable debt securities at the time of purchase and reevaluates such designation at each balance sheet date. Short-term marketable securities have maturities less than 365 days at the balance sheet date. Unrealized gains and losses are excluded from earnings and are reported as a component of other comprehensive loss. Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in interest and other income (expense), net. The cost of securities sold is based on the specific-identification method. Interest on marketable securities is included in interest and other income (expense), net.

Accounts receivable

The Company receives payment for its tests from partners, patients, institutional customers and third-party payers. For most payers, the Company has not been able to demonstrate a predictable pattern of collectability, and therefore recognizes revenue when payment is received. For payers who have demonstrated a consistent pattern of payment of tests billed, the Company recognizes revenue, at estimated realizable amounts, upon delivery of test results. Accounts receivable balances primarily represent partner, patient, institutional customer and Medicare billings.

Restricted cash

Restricted cash consists of money market funds that serve as: collateral for a security deposit for the Company’s lease agreement for its production facility and headquarters; collateral for security deposits for facilities of the Company’s subsidiary Good Start; collateral for a credit card agreement at one of the Company’s financial institutions; and for securing a letter of credit as collateral for a facility sublease agreement.

Cash, cash equivalents and restricted cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the statements of cash flows (in thousands):

 

 

 

December 31, 2017

 

 

December 31, 2016

 

Cash and cash equivalents

 

$

12,053

 

 

$

66,825

 

Restricted cash

 

 

5,406

 

 

 

4,697

 

Total cash, cash equivalents and restricted cash

 

$

17,459

 

 

$

71,522

 

 

Business combinations

The tangible and identifiable intangible assets acquired and liabilities assumed in a business combination are recorded based on their estimated fair values as of the business combination date, including identifiable intangible assets which either arise from a contractual or legal right or are separable from goodwill. The Company bases the estimated fair value of identifiable intangible assets acquired in a business combination on independent valuations that use information and assumptions provided by management, which consider management’s estimates of inputs and assumptions that a market participant would use. Any excess purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets acquired and liabilities assumed is recorded to goodwill. The use of alternative valuation assumptions, including estimated revenue projections, growth rates, cash flows, discount rates, estimated useful lives and probabilities surrounding the achievement of contingent milestones could result in different purchase price allocations and amortization expense in current and future periods.

In circumstances where an acquisition involves a contingent consideration arrangement that meets the definition of a liability under FASB Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of the acquisition date. The Company remeasures this liability each reporting period and records changes in the fair value as a component of operating expenses.

Transaction costs associated with acquisitions are expensed as incurred in general and administrative expenses. Results of operations and cash flows of acquired companies are included in the Company’s operating results from the date of acquisition.

Intangible assets

Amortizable intangible assets include trade names, non-compete agreements, developed technology and customer relationships acquired as part of business combinations. Customer relationships are amortized on an accelerated basis, utilizing free cash flows, over periods ranging from five years to eleven years. All other intangible assets subject to amortization are amortized using the straight-line method over their estimated useful lives ranging from two to 15 years. All intangible assets subject to amortization are reviewed for impairment in accordance with ASC 360, Property, Plant and Equipment.

Goodwill

In accordance with ASC 350, Intangibles-Goodwill and Other (“ASC 350”), the Company’s goodwill is not amortized but is tested for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Under ASC 350, the Company performs annual impairment reviews of its goodwill balance during the fourth fiscal quarter. In testing for impairment, the Company compares the fair value of its reporting unit to its carrying value including the goodwill of that unit. If the carrying value, including goodwill, exceeds the reporting unit’s fair value, the Company will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.

The Company performed its first annual impairment review of its goodwill balance as of October 1, 2017. The Company determined, after performing a quantitative review, that it is more likely than not that the fair value of its reporting unit is substantially in excess of its carrying amount. Accordingly, there was no impairment. The Company did not incur any goodwill impairment losses in any of the periods presented.

Leases

The Company rents its facilities under operating lease agreements and recognizes related rent expense on a straight-line basis over the term of the applicable lease agreement. Some of the lease agreements contain rent holidays, scheduled rent increases, lease incentives, and renewal options. Rent holidays and scheduled rent increases are included in the determination of rent expense to be recorded over the lease term. Lease incentives are recognized as a reduction of rent expense on a straight-line basis over the term of the lease. Renewals are not assumed in the determination of the lease term unless they are deemed to be reasonably assured at the inception of the lease. The Company recognizes rent expense beginning on the date it obtains the legal right to use and control the leased space.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight‑line method over the estimated useful lives of the assets, generally between three and seven years. Leasehold improvements are amortized using the straight‑line method over the shorter of the estimated useful life of the asset or the term of the lease. Amortization expense of assets acquired through capital leases is included in depreciation and amortization expense in the consolidated statements of operations. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in the statements of operations in the period realized.

The useful lives of the property and equipment are as follows:

 

Furniture and fixtures

 

7 years

Automobiles

 

7 years

Laboratory equipment

 

5 years

Computer equipment

 

3 years

Software

 

3 years

Leasehold improvements

 

Shorter of lease term or estimated useful life

 

Long‑lived assets

The Company reviews long‑lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the total estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, is assessed using discounted cash flows or other appropriate measures of fair value. The Company recorded asset impairment losses of $1.0 million in 2016 relating to leasehold improvements and to the shutdown of the Company’s Chilean operations. All impairment losses were charged to general and administrative expense. There were no impairment losses recorded for any other period presented.

Fair value of financial instruments

The Company’s financial instruments consist principally of cash and cash equivalents, marketable securities, accounts payable, accrued liabilities, capital leases and debt. The carrying amounts of certain of these financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued and other current liabilities approximate their current fair value due to the relatively short-term nature of these accounts. Based on borrowing rates available to the Company, the carrying value of capital leases approximates fair value.

See Note 6, “Fair value measurements” for disclosure of the fair value of debt and further information on the fair value of the Company’s financial instruments.

Revenue recognition

Test revenue is generated primarily from the sale of tests that provide analysis and associated interpretation of the sequencing of parts of the genome. Revenue associated with subsequent re-requisition services and family variant tests was de minimis for all periods presented.

Test revenue is recognized when persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the fee is fixed or determinable; and collectability is reasonably assured. The criterion for whether the fee is fixed or determinable and whether collectability is reasonably assured are based on management’s judgments. When evaluating collectability, in situations where contracted reimbursement coverage does not exist, the Company considers whether the Company has sufficient history to reliably estimate a payer’s individual payment patterns. The Company reviews the number of tests paid against the number of tests billed over at least six months of payment history and the payer’s outstanding balance for unpaid tests to determine whether payments are being made at a consistently high percentage of tests billed and at appropriate amounts given the amount billed. For most payers, the Company has not been able to demonstrate a predictable pattern of collectability, and therefore recognizes revenue when payment is received. For payers who have demonstrated a consistent pattern of payment of tests billed at appropriate amounts, the Company recognizes revenue, at estimated realizable amounts, upon delivery of test results.

Other revenue consists primarily of revenue from genome network subscription services which is recognized on a straight-line basis over the subscription term, and revenue from collaboration agreements.

Cost of test revenue

Cost of test revenue reflects the aggregate costs incurred in delivering the genetic testing results to clinicians and includes expenses for personnel costs including stock-based compensation, materials and supplies, equipment and infrastructure expenses associated with testing and allocated overhead including rent, equipment depreciation and utilities. Costs associated with performing the Company’s test are recorded as the test is processed regardless of whether and when revenue is recognized with respect to that test.

Income taxes

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Stock-based compensation

The Company measures its stock-based payment awards made to employees and directors based on the estimated fair values of the awards and recognizes the compensation expense over the requisite service period. The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards and employee stock purchase plan (“ESPP”) purchases. The fair value of restricted stock unit (“RSU”) awards with time-based vesting terms is based on the grant date share price. The Company grants performance-based restricted stock unit (“PRSU”) awards to certain employees which vest upon the achievement of certain performance conditions, subject to the employees’ continued service relationship with the Company. The probability of vesting is assessed at each reporting period and compensation cost is adjusted based on this probability assessment. The Company recognizes such compensation expense on an accelerated vesting method.

Stock-based compensation expense for awards without a performance condition is recognized using the straight-line method. Stock-based compensation expense is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. As such, the Company’s stock-based compensation is reduced for the estimated forfeitures at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company accounts for compensation expense related to stock options granted to non-employees based on fair values estimated using the Black-Scholes option-pricing model. Stock options granted to non-employees are re-measured at each reporting date until the award is vested.

The Company accounts for stock issued as compensation in connection with business combinations based on the fair value of the Company’s common stock on the date of issuance.

Advertising

Advertising expenses are expensed as incurred. The Company recorded advertising expenses of $0.6 million, $0.5 million and $0.4 million in 2017, 2016 and 2015, respectively.

Comprehensive loss

Comprehensive loss is composed of two components: net loss and other comprehensive loss. Other comprehensive loss refers to gains and losses that under U.S. GAAP are recorded as an element of stockholders’ equity (deficit), but are excluded from net loss. The Company’s other comprehensive loss consists of unrealized losses on investments in available-for-sale securities.

Net loss per common share

Basic net loss per common share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method. Potentially dilutive securities, consisting of preferred stock, options to purchase common stock, common stock warrants, RSUs and PRSUs, are considered to be common stock equivalents and were excluded from the calculation of diluted net loss per share because their effect would be antidilutive for all periods presented.

Recent accounting pronouncements

Recently issued accounting pronouncements not yet adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. Lessor accounting under ASU 2016-02 is largely unchanged. ASU 2016-02 is effective for annual and interim periods beginning on or after December 15, 2018 and early adoption is permitted. Under ASU 2016-02, lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Lessees and lessors may not apply a full retrospective transition approach. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements, related disclosures and ongoing financial reporting. The Company has not yet selected an implementation date for ASU 2016-02.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), which requires an entity to recognize the amount of revenue to which it expects to be entitled upon the transfer of control of the promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.

Topic 606 provides for the use of either of two methods of adoption: retrospectively to each prior reporting period presented (the full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company implemented Topic 606 effective January 1, 2018 using the modified retrospective method.

Based upon its work performed to date, the Company expects the implementation of Topic 606 will have a significant impact on its accounts receivable at January 1, 2018, and the timing of revenue recognition for its diagnostic test revenue thereafter. Under current GAAP, the Company recognizes test revenue generated from the majority of third-party payers on a cash basis, while under Topic 606, the Company will recognize the vast majority of test revenue on an accrual basis at the time of delivery of genetic test results to its customers. The accrual amounts to be recognized under Topic 606 in periods subsequent to the date of transition will be based on an estimate of the consideration that the Company expects to receive, and such estimates will be updated and subsequently adjusted as necessary until fully settled. This policy change will result in earlier revenue recognition under ASC 606 relative to the cash-basis revenue recognition policy utilized by the Company through December 31, 2017 for many of its payers.

The Company has not completed the work required to implement Topic 606 as of January 1, 2018. The work required to complete the implementation primarily relates to the determination of estimated variable consideration, including such consideration arising from recently acquired businesses, as of the date of transition.

Recently adopted accounting pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350). The amendments in this ASU simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a quantitative assessment. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments in this ASU should be applied on a prospective basis. The Company early adopted ASU 2017-04 effective January 1, 2017 and the adoption of this standard did not have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. ASU 2017-01 is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company early adopted ASU 2017-01 effective January 1, 2017, and the adoption of this standard did not have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.

In December 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. ASU 2016-18 is effective for annual and interim periods beginning on or after December 15, 2018 and early adoption is permitted. The Company early adopted ASU 2016-18 effective January 1, 2017, and the adoption of this standard did not have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments. The ASU is intended to improve financial reporting by reducing diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for annual and interim periods beginning on or after December 15, 2016. The Company adopted ASU 2016-15 effective January 1, 2017, and the adoption of this standard did not have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies accounting for share-based payment award transactions. ASU 2016-09 is effective for annual and interim periods beginning on or after December 15, 2016. The Company adopted ASU 2016-09 effective January 1, 2017, and, upon adoption of this standard, recorded a deferred tax asset for unrecorded excess tax benefits of approximately $0.4 million related to share-based payments through a cumulative effect adjustment to retained earnings, and a corresponding offset of the deferred tax asset with a 100% valuation allowance. In addition, under ASU 2016-09 the Company can elect a policy to account for forfeitures as they occur rather than on an estimated basis. The Company elected to continue its current policy of estimating forfeitures. The adoption of ASU 2016-09 did not have a material effect on the Company’s consolidated financial statements, related disclosures and ongoing financial reporting.

The Company has determined there are no other recently adopted or issued accounting standards that had, or will have, a material impact on its consolidated financial statements.

Prior period reclassifications

Revenue amounts in prior periods have been reclassified to conform with current period presentation, which separates test revenue from other revenue, which consists principally of revenue from genome network subscription services and collaboration arrangements.

Summary of significant accounting policies (Tables)

 

 

 

December 31,

 

Customers

 

2017

 

 

2016

 

 

2015

 

Customer A

 

 

13

%

 

 

11

%

 

*

 

Customer B

 

*

 

 

*

 

 

 

13

%

*    Less than 10% of total revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the statements of cash flows (in thousands):

 

 

 

December 31, 2017

 

 

December 31, 2016

 

Cash and cash equivalents

 

$

12,053

 

 

$

66,825

 

Restricted cash

 

 

5,406

 

 

 

4,697

 

Total cash, cash equivalents and restricted cash

 

$

17,459

 

 

$

71,522

 

 

The useful lives of the property and equipment are as follows:

 

Furniture and fixtures

 

7 years

Automobiles

 

7 years

Laboratory equipment

 

5 years

Computer equipment

 

3 years

Software

 

3 years

Leasehold improvements

 

Shorter of lease term or estimated useful life

 

Business combinations (Tables)

The following table summarizes the pro forma financial information for the years ended December 31, 2017 and 2016 (in thousands):

 

 

 

Year Ended

December 31,

 

 

 

2017

 

 

2016

 

Total revenue

 

$

94,001

 

 

$

62,991

 

Net loss

 

$

(149,596

)

 

$

(123,148

)

 

The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Cash

 

$

54

 

Accounts receivable

 

 

274

 

Prepaid expense and other assets

 

 

52

 

Non-compete agreement

 

 

286

 

Developed technology

 

 

570

 

Customer relationships

 

 

3,389

 

Total identifiable assets acquired

 

 

4,625

 

Accounts payable

 

 

(28

)

Deferred revenue

 

 

(202

)

Accrued expenses

 

 

(21

)

Deferred tax liability

 

 

(1,422

)

Total liabilities assumed

 

 

(1,673

)

Net identifiable assets acquired

 

 

2,952

 

Goodwill

 

 

9,432

 

Net assets acquired

 

$

12,384

 

 

Acquisition-related intangibles included in the above table are finite-lived. Customer relationships are being amortized on an accelerated basis, utilizing free cash flows, over a period of ten years. All other acquisition-related intangibles are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

 

 

 

Gross

Purchased

Intangible

Assets

 

 

Estimated

Useful

Life

(in Years)

 

Non-compete agreement

 

$

286

 

 

 

5

 

Developed technology

 

 

570

 

 

 

6

 

Customer relationships

 

 

3,389

 

 

 

10

 

 

 

$

4,245

 

 

 

 

 

 

The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Cash

 

$

53

 

Accounts receivable

 

 

10

 

Prepaid expense and other assets

 

 

4

 

Trade name

 

 

13

 

Developed technology

 

 

2,335

 

Customer relationships

 

 

147

 

Total identifiable assets acquired

 

 

2,562

 

Accounts payable

 

 

(16

)

Accrued expenses

 

 

(17

)

Deferred tax liability

 

 

(434

)

Total liabilities assumed

 

 

(467

)

Net identifiable assets acquired

 

 

2,095

 

Goodwill

 

 

4,045

 

Net assets acquired

 

$

6,140

 

 

Finite-lived intangibles included in the above table are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

 

 

 

Gross

Purchased

Intangible

Assets

 

 

Estimated

Useful

Life

(in Years)

 

Trade name

 

$

13

 

 

 

5

 

Developed technology

 

 

2,335

 

 

 

5

 

Customer relationships

 

 

147

 

 

 

5

 

 

 

$

2,495

 

 

 

 

 

 

The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Cash and restricted cash

 

$

1,381

 

Accounts receivable

 

 

2,904

 

Prepaid expense and other assets

 

 

1,579

 

Property and equipment

 

 

1,320

 

Trade name

 

 

460

 

Developed technology

 

 

5,896

 

Customer relationships

 

 

7,830

 

Total identifiable assets acquired

 

 

21,370

 

Accounts payable

 

 

(5,418

)

Accrued expenses

 

 

(6,802

)

Notes payable

 

 

(17,904

)

Convertible promissory notes payable

 

 

(15,430

)

Other liabilities

 

 

(222

)

Total liabilities assumed

 

 

(45,776

)

Net identifiable assets acquired

 

 

(24,406

)

Goodwill

 

 

24,406

 

Net assets acquired

 

$

 

 

Customer relationships are being amortized on an accelerated basis, utilizing free cash flows, over a period of eight years. All other finite-lived intangibles included in the above table are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

 

 

 

Gross

Purchased

Intangible

Assets

 

 

Estimated

Useful

Life

(in Years)

 

Trade name

 

$

460

 

 

 

3

 

Developed technology

 

 

5,896

 

 

 

5

 

Customer relationships

 

 

7,830

 

 

 

8

 

 

 

$

14,186

 

 

 

 

 

 

The following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Cash and restricted cash

 

$

1,333

 

Accounts receivable

 

 

4,118

 

Prepaid expense and other assets

 

 

1,299

 

Property and equipment

 

 

437

 

Other assets - non current

 

 

30

 

Favorable leases

 

 

247

 

Trade name

 

 

103

 

Patent licensing agreement

 

 

496

 

Developed technology

 

 

3,162

 

Customer relationships

 

 

12,397

 

Total identifiable assets acquired

 

 

23,622

 

Accounts payable

 

 

(276

)

Accrued expenses

 

 

(3,925

)

Other liabilities

 

 

(180

)

Total liabilities assumed

 

 

(4,381

)

Net identifiable assets acquired

 

 

19,241

 

Goodwill

 

 

8,692

 

Net assets acquired

 

$

27,933

 

 

Customer relationships are being amortized on an accelerated basis, utilizing free cash flows, over a period of eleven years. All other finite-lived intangibles included in the above table are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):

 

 

 

Gross

Purchased

Intangible

Assets

 

 

Estimated

Useful

Life

(in Years)

 

Favorable leases

 

$

247

 

 

 

2

 

Trade name

 

 

103

 

 

 

1

 

Patent licensing agreement

 

 

496

 

 

 

15

 

Developed technology

 

 

3,162

 

 

 

4

 

Customer relationships

 

 

12,397

 

 

 

11

 

 

 

$

16,405

 

 

 

 

 

 

Goodwill and intangible assets (Tables)

Details of the Company’s goodwill for the year ended December 31, 2017 are as follows (in thousands):

 

 

 

AltaVoice

 

 

Ommdom

 

 

Good Start

 

 

CombiMatrix

 

 

Total

 

Balance as of December 31, 2016

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Goodwill acquired

 

 

9,432

 

 

 

4,045

 

 

 

29,366

 

 

 

8,692

 

 

 

51,535

 

Goodwill adjustment

 

 

 

 

 

 

 

 

(4,960

)

 

 

 

 

 

(4,960

)

Balance as of December 31, 2017

 

$

9,432

 

 

$

4,045

 

 

$

24,406

 

 

$

8,692

 

 

$

46,575

 

 

The following table presents details of the Company’s finite-lived intangible assets as of December 31, 2017 (in thousands):

 

 

 

Cost

 

 

Accumulated

Amortization

 

 

Net

 

 

Weighted Average

Useful Life

(in Years)

 

 

Weighted Average

Estimated Remaining

Useful Life

(in Years)

 

Customer relationships

 

$

23,763

 

 

$

(717

)

 

$

23,046

 

 

 

10.0

 

 

 

9.6

 

Developed technology

 

 

11,963

 

 

 

(949

)

 

 

11,014

 

 

 

4.8

 

 

 

4.4

 

Non-compete agreement

 

 

286

 

 

 

(57

)

 

 

229

 

 

 

5.0

 

 

 

4.0

 

Trade name

 

 

576

 

 

 

(78

)

 

 

498

 

 

 

2.7

 

 

 

2.3

 

Patent licensing agreement

 

 

496

 

 

 

(4

)

 

 

492

 

 

 

15.0

 

 

 

14.9

 

Favorable leases

 

 

247

 

 

 

(10

)

 

 

237

 

 

 

2.2

 

 

 

2.1

 

 

 

$

37,331

 

 

$

(1,815

)

 

$

35,516

 

 

 

8.2

 

 

 

7.8

 

 

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of December 31, 2017 (in thousands):

 

 

 

Amount

 

2018

 

$

5,059

 

2019

 

 

5,250

 

2020

 

 

5,525

 

2021

 

 

5,829

 

2022

 

 

4,123

 

Thereafter

 

 

9,730

 

 

 

$

35,516

 

 

Balance sheet components (Tables)

The following is a summary of cash equivalents and marketable securities (in thousands):

 

 

 

December 31, 2017

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

Money market funds

 

$

5,998

 

 

$

 

 

$

 

 

$

5,998

 

Certificates of deposit

 

 

300

 

 

 

 

 

 

 

 

 

300

 

U.S. treasury notes

 

 

12,010

 

 

 

 

 

 

(19

)

 

 

11,991

 

U.S. government agency securities

 

 

46,451

 

 

 

 

 

 

(152

)

 

 

46,299

 

 

 

$

64,759

 

 

$

 

 

$

(171

)

 

$

64,588

 

Reported as:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

$

592

 

Restricted cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,406

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

58,590

 

Total cash equivalents, restricted cash and

   marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

$

64,588

 

 

 

 

December 31, 2016

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

Money market funds

 

$

19,457

 

 

$

 

 

$

 

 

$

19,457

 

U.S. treasury notes

 

 

11,515

 

 

 

2

 

 

 

 

 

 

11,517

 

U.S. government agency securities

 

 

14,283

 

 

 

 

 

 

(2

)

 

 

14,281

 

 

 

$

45,255

 

 

$

2

 

 

$

(2

)

 

$

45,255

 

Reported as:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

$

14,760

 

Restricted cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,697

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,798

 

Total cash equivalents, restricted cash and

   marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

$

45,255

 

 

Property and equipment consisted of the following (in thousands):

 

 

 

December 31,

2017

 

 

December 31,

2016

 

Leasehold improvements

 

$

12,623

 

 

$

1,256

 

Laboratory equipment

 

 

17,705

 

 

 

13,644

 

Equipment under capital lease

 

 

11,446

 

 

 

5,871

 

Computer equipment

 

 

4,023

 

 

 

2,514

 

Software

 

 

2,520

 

 

 

2,489

 

Furniture and fixtures

 

 

569

 

 

 

238

 

Automobiles

 

 

20

 

 

 

20

 

Construction-in-progress

 

 

965

 

 

 

12,229

 

Total property and equipment, gross

 

 

49,871

 

 

 

38,261

 

Accumulated depreciation and amortization

 

 

(19,530

)

 

 

(14,468

)

Total property and equipment, net

 

$

30,341

 

 

$

23,793

 

 

Accrued liabilities consisted of the following (in thousands):

 

 

 

December 31,

2017

 

 

December 31,

2016

 

Accrued compensation and related expenses

 

$

7,406

 

 

$

3,072

 

Accrued laboratory materials purchases

 

 

1,242

 

 

 

338

 

Accrued outsourced services

 

 

142

 

 

 

 

Accrued professional services

 

 

1,077

 

 

 

446

 

Accrued construction in progress

 

 

 

 

 

1,215

 

Lease incentive obligation, current

 

 

489

 

 

 

468

 

Liabilities associated with business combinations

 

 

9,497

 

 

 

 

Other

 

 

2,889

 

 

 

1,172

 

Total accrued liabilities

 

$

22,742

 

 

$

6,711

 

 

Other long-term liabilities consisted of the following (in thousands):

 

 

 

December 31,

2017

 

 

December 31,

2016

 

Lease incentive obligation, non-current

 

$

3,831

 

 

$

4,243

 

Deferred rent, non-current

 

 

5,153

 

 

 

3,419

 

Liabilities associated with business combination

 

 

3,779

 

 

 

 

Other non-current liabilities

 

 

677

 

 

 

175

 

Total other long-term liabilities

 

$

13,440

 

 

$

7,837

 

 

Fair value measurements (Tables)

The following tables set forth the fair value of the Company’s consolidated financial instruments that were measured at fair value on a recurring basis as of December 31, 2017 and December 31, 2016 (in thousands):

 

 

 

December 31, 2017

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

5,998

 

 

$

 

 

$

 

 

$

5,998

 

Certificates of deposit

 

 

300

 

 

 

 

 

 

 

 

 

300

 

U.S. treasury notes

 

 

11,991

 

 

 

 

 

 

 

 

 

11,991

 

U.S. government agency securities

 

 

 

 

 

46,299

 

 

 

 

 

 

46,299

 

Total financial assets

 

$

18,289

 

 

$

46,299

 

 

$

 

 

$

64,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

 

 

$

 

 

$

3,779

 

 

$

3,779

 

Total financial liabilities

 

$

 

 

$

 

 

$

3,779

 

 

$

3,779

 

 

 

 

December 31, 2016

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

19,457

 

 

$

 

 

$

 

 

$

19,457

 

U.S. treasury notes

 

 

11,517

 

 

 

 

 

 

 

 

 

11,517

 

U.S. government agency securities

 

 

 

 

 

14,281

 

 

 

 

 

 

14,281

 

Total financial assets

 

$

30,974

 

 

$

14,281

 

 

$

 

 

$

45,255

 

 

The following table presents the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis (in thousands):

 

 

 

Level 3

 

 

 

Contingent

Consideration

Liability

 

Balance as of December 31, 2016

 

$

 

Contingent consideration

 

 

2,200

 

Change in estimate of fair value

 

 

1,579

 

Balance as of December 31, 2017

 

$

3,779

 

 

The carrying amount and the estimated fair value of the Company’s outstanding debt at December 31, 2017 and December 31, 2016, are as follows (in thousands):

 

 

 

 

December 31, 2017

 

 

December 31, 2016

 

 

 

Carrying

Amount

 

 

Fair

Value

 

 

Carrying

Amount

 

 

Fair

Value

 

Debt

 

$

39,084

 

 

$

40,526

 

 

$

12,102

 

 

$

11,905

 

 

Commitments and Contingencies (Tables)

Future minimum payments under non-cancelable operating leases as of December 31, 2017 are as follows (in thousands):

 

 

 

Amounts

 

2018

 

$

9,707

 

2019

 

 

9,633

 

2020

 

 

9,512

 

2021

 

 

9,727

 

2022

 

 

9,676

 

Thereafter

 

 

29,846

 

Total minimum lease payments

 

$

78,101

 

 

Future payments under the Loan and Security Agreement as of December 31, 2017 are as follows (in thousands):

 

 

 

Amounts

 

2018

 

$

3,691

 

2019

 

 

12,587

 

2020

 

 

15,988

 

2021

 

 

14,716

 

2022

 

 

5,482

 

Thereafter

 

 

 

Total remaining debt payments

 

 

52,464

 

Less: amount representing debt discount

 

 

(916

)

Less: amount representing interest

 

 

(12,464

)

Present value of remaining debt payments

 

 

39,084

 

Less: current portion

 

 

 

Total non-current debt obligation

 

$

39,084

 

 

Future payments under capital leases at December 31, 2017 are as follows (in thousands):

 

 

 

Amounts

 

2018

 

$

2,369

 

2019

 

 

2,087

 

2020

 

 

1,394

 

2021

 

 

21

 

Total capital lease obligations

 

 

5,871

 

Less: amount representing interest

 

 

(459

)

Present value of net minimum capital lease

   payments

 

 

5,412

 

Less: current portion

 

 

(2,039

)

Total non-current capital lease obligations

 

$

3,373

 

 

Stockholders' Equity (Tables)

 

 

 

As of December 31,

 

 

 

2017

 

 

2016

 

Options issued and outstanding

 

 

4,114,874

 

 

 

4,490,662

 

RSU awards issued and outstanding

 

 

2,387,120

 

 

 

1,421,757

 

Shares available for grant under stock option plan

 

 

2,397,234

 

 

 

1,375,766

 

Shares reserved for issuance under the 2015

   Employee Stock Purchase Plan

 

 

307,538

 

 

 

274,686

 

Common stock underlying warrants

 

 

1,962,074

 

 

 

 

Common stock issuable upon conversion of

   preferred stock

 

 

3,458,823

 

 

 

 

Common stock underlying stock payable liabilities

 

 

689,347

 

 

 

 

Common stock payable as contingent consideration

 

 

550,660

 

 

 

 

Total

 

 

15,867,670

 

 

 

7,562,871

 

 

As of December 31, 2017, the Company had outstanding warrants to purchase common stock as follows:

 

Warrant

 

Issuance Date

 

Expiration Date

 

Exercise

Price

Per Share

 

 

Number of

Warrants

Outstanding

 

Warrants issued in exchange for

   CombiMatrix Series D warrants

 

November 14, 2017

 

December 19, 2018

 

$

53.84

 

 

 

337,584

 

Warrants issued in exchange for

   CombiMatrix Series F warrants

 

November 14, 2017

 

March 24, 2021

 

$

5.95

 

 

 

1,507,645

 

Warrants issued to lender under

   Loan and Security Agreement

 

March 15, 2017

 

March 15, 2027

 

$

10.27

 

 

 

116,845

 

 

 

 

 

 

 

 

 

 

 

 

1,962,074

 

 

Stock incentive plans (Tables)

Activity under the 2010 Plan and the 2015 Plan is set forth below (in thousands, except share and per share amounts and years):

 

 

 

Shares

Available

For Grant

 

 

Stock

Options

Outstanding

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted-

Average

Remaining

Contractual

Life (years)

 

 

Aggregate

Intrinsic

Value (000's)

 

Balances at December 31, 2016

 

 

1,375,766

 

 

 

4,490,662

 

 

$

8.21

 

 

 

8.11

 

 

$

5,312

 

Additional shares reserved

 

 

2,923,183

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options granted

 

 

(607,398

)

 

 

607,398

 

 

$

9.20

 

 

 

 

 

 

 

 

 

Options cancelled

 

 

595,763

 

 

 

(595,763

)

 

$

9.67

 

 

 

 

 

 

 

 

 

Options exercised

 

 

 

 

 

 

(387,423

)

 

$

4.38

 

 

 

 

 

 

 

 

 

RSUs granted

 

 

(2,360,511

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RSUs cancelled

 

 

292,471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PRSUs cancelled

 

 

177,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2017

 

 

2,397,234

 

 

 

4,114,874

 

 

$

8.51

 

 

 

7.63

 

 

$

5,128

 

Options exercisable at December 31, 2017

 

 

 

 

 

 

2,213,417

 

 

$

7.75

 

 

 

7.09

 

 

$

4,411

 

Options vested and expected to vest at

   December 31, 2017

 

 

 

 

 

 

3,861,828

 

 

$

8.45

 

 

 

7.59

 

 

$

5,043

 

 

The following table summarizes RSU and PRSU activity for the year ended December 31, 2017:

 

 

 

Number of

Shares

 

 

Weighted-

Average

Grant Date

Fair Value

 

Balance at December 31, 2016

 

 

1,421,757

 

 

$

8.77

 

RSUs granted

 

 

2,360,511

 

 

$

10.03

 

RSUs vested

 

 

(572,672

)

 

$

10.51

 

PRSUs vested

 

 

(352,045

)

 

$

6.54

 

RSUs cancelled

 

 

(292,471

)

 

$

10.17

 

PRSUs cancelled

 

 

(177,960

)

 

$

6.53

 

Balance at December 31, 2017

 

 

2,387,120

 

 

$

9.91

 

 

The following table summarizes stock-based compensation expense for the years ended December 31, 2017, 2016 and 2015, included in the consolidated statements of operations (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Cost of test revenue

 

$

2,093

 

 

$

1,353

 

 

$

368

 

Research and development

 

 

6,158

 

 

 

4,976

 

 

 

1,545

 

Selling and marketing

 

 

3,956

 

 

 

1,709

 

 

 

688

 

General and administrative

 

 

7,014

 

 

 

2,661

 

 

 

876

 

Total stock-based compensation expense

 

$

19,221

 

 

$

10,699

 

 

$

3,477

 

 

The fair value of the shares purchased pursuant to the ESPP was estimated using the following assumptions:

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Expected term (in years)

 

 

0.50

 

 

 

0.50

 

 

 

0.50

 

Expected volatility

 

 

52.50

%

 

 

66.31

%

 

 

74.13

%

Risk-free interest rate

 

 

1.23

%

 

 

0.50

%

 

 

0.33

%

Dividend yield

 

 

 

 

 

 

 

The fair value of share-based payments for stock options granted to employees and directors was estimated on the date of grant using the Black-Scholes option-pricing model based on the following assumptions:

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Expected term (in years)

 

6.03

 

 

6.03

 

 

6.03

 

Expected volatility

 

72.64%

 

 

71.42%

 

 

 

68.2 – 79.7%

 

Risk-free interest rate

 

2.01%

 

 

1.37%

 

 

 

1.28 – 1.86%

 

Dividend yield

 

 

 

 

 

 

 

 

 

 

The fair value of the stock options granted is calculated at each reporting date using the Black-Scholes option-pricing model based on the following assumptions:

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Expected term (in years)

 

 

8.41 – 8.83

 

 

 

6.25 – 10.00

 

 

 

7.25 – 9.82

 

Expected volatility

 

 

69.9 – 78.70%

 

 

 

76.92%

 

 

 

69.9 – 78.70%

 

Risk-free interest rate

 

 

1.83 – 2.04%

 

 

 

1.55 – 2.37%

 

 

 

1.86 – 2.25%

 

Dividend yield

 

 

 

 

 

 

 

 

 

 

Income Taxes (Tables)

The components of loss before income taxes by U.S. and foreign jurisdictions are as follows (in thousands):

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

United States

 

$

124,108

 

 

$

99,793

 

 

$

88,112

 

Foreign

 

 

1,128

 

 

 

463

 

 

 

1,670

 

Total

 

$

125,236

 

 

$

100,256

 

 

$

89,782

 

 

The components of the provision for income taxes are as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Current

 

$

 

 

$

 

 

$

 

Federal

 

 

 

 

 

 

 

 

 

State

 

 

 

 

 

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

 

Total Current

 

 

 

 

 

 

 

 

 

Deferred

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

 

(1,704

)

 

 

 

 

 

 

State

 

 

(152

)

 

 

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

 

Total Deferred

 

 

(1,856

)

 

 

 

 

 

 

Tax Provision

 

$

(1,856

)

 

$

 

 

$

 

 

The following table presents a reconciliation of the tax expense computed at the statutory federal rate and the Company’s tax expense for the periods presented:

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

U.S. federal taxes at statutory rate

 

 

34.0

%

 

 

34.0

%

 

 

34.0

%

State taxes (net of federal benefit)

 

 

3.3

%

 

 

1.4

%

 

 

0.8

%

Stock-based compensation

 

 

(1.1

)%

 

 

(1.7

)%

 

 

(—

)%

Non-deductible expenses

 

 

(—

)%

 

 

0.2

%

 

 

(0.8

)%

Foreign tax differential

 

 

(0.3

)%

 

 

(0.2

)%

 

 

(0.2

)%

Other

 

 

(—

)%

 

 

1.1

%

 

 

(—

)%

Change in valuation allowance

 

 

(34.4

)%

 

 

(34.8

)%

 

 

(33.8

)%

Change in deferred—Tax Reform

 

 

(39.0

)%

 

 

(—

)%

 

 

(—

)%

Change in valuation allowance—Tax Reform

 

 

39.0

%

 

 

(—

)%

 

 

(—

)%

Total

 

 

1.5

%

 

 

(—

)%

 

 

(—

)%

 

The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets are as follows (in thousands):

 

 

 

As of December 31,

 

 

 

2017

 

 

2016

 

Deferred tax assets:

 

 

 

 

 

 

 

 

Net operating loss carryforwards

 

$

70,825

 

 

$

76,353

 

Tax credits

 

 

15

 

 

 

13

 

Revenue recognition reserves

 

 

29,819

 

 

 

14,291

 

Accruals and other

 

 

5,544

 

 

 

3,405

 

Gross deferred tax assets

 

 

106,203

 

 

 

94,062

 

Valuation allowance

 

 

(95,687

)

 

 

(93,666

)

Net deferred tax assets

 

 

10,516

 

 

 

396

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Property and equipment

 

 

(10,516

)

 

 

(396

)

Total deferred tax liabilities

 

 

(10,516

)

 

 

(396

)

Net deferred tax assets

 

$

 

 

$

 

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

 

 

 

Year ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Unrecognized tax benefits, beginning of period

 

$

7,791

 

 

$

11,429

 

 

$

5,661

 

Gross increases—current period tax positions

 

 

2,552

 

 

 

782

 

 

 

2,993

 

Gross increases—prior period tax positions

 

 

218

 

 

 

(4,420

)

 

 

2,775

 

Unrecognized tax benefits, end of period

 

$

10,561

 

 

$

7,791

 

 

$

11,429

 

 

Net loss per common share (Tables)

The following table presents the calculation of basic and diluted net loss per common share for the years ended December 31, 2017, 2016 and 2015 (in thousands, except share and per share amounts):

 

 

 

Year ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Net loss

 

$

(123,380

)

 

$

(100,256

)

 

$

(89,782

)

Shares used in computing net loss per

   share, basic and diluted

 

 

46,511,739

 

 

 

33,176,305

 

 

 

28,213,324

 

Net loss per share, basic and diluted

 

$

(2.65

)

 

$

(3.02

)

 

$

(3.18

)

 

The following common stock equivalents have been excluded from diluted net loss per share for the years ended December 31, 2017, 2016 and 2015 because their inclusion would be anti-dilutive:

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Shares of common stock subject to outstanding

   options

 

 

4,114,874

 

 

 

4,490,662

 

 

 

3,659,713

 

Shares of common stock subject to outstanding

   warrants

 

 

1,962,074

 

 

 

 

 

 

 

Shares of common stock subject to outstanding

   RSUs

 

 

2,387,120

 

 

 

891,752

 

 

 

482,818

 

Shares of common stock subject to outstanding

   PRSUs

 

 

 

 

 

530,005

 

 

 

 

Shares of common stock pursuant to ESPP

 

 

59,259

 

 

 

55,078

 

 

 

45,963

 

Shares of common stock underlying Series A

   convertible preferred stock

 

 

3,458,823

 

 

 

 

 

 

 

Shares of common stock subject to unvested

   early exercise of outstanding options subject

   to repurchase

 

 

 

 

 

 

 

 

4,659

 

Total shares of common stock equivalents

 

 

11,982,150

 

 

 

5,967,497

 

 

 

4,193,153

 

 

Geographic information (Tables)

Revenue by country is determined based on the billing address of the customer and is summarized as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

United States

 

$

62,446

 

 

$

20,758

 

 

$

5,432

 

Canada

 

 

3,226

 

 

 

2,526

 

 

 

2,112

 

Rest of world

 

 

2,549

 

 

 

1,764

 

 

 

834

 

Total revenue

 

$

68,221

 

 

$

25,048

 

 

$

8,378

 

 

Long-lived assets (net) by location are summarized as follows (in thousands):

 

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

United States

 

$

30,341

 

 

$

23,793

 

 

$

17,180

 

Chile

 

 

 

 

 

 

 

 

1,529

 

Total long-lived assets, net

 

$

30,341

 

 

$

23,793

 

 

$

18,709

 

 

Selected Quarterly Data (Unaudited) (Tables)
Schedule of selected quarterly data

 

 

Three Months Ended

 

(In thousands,

except per share amounts)

 

Dec 31,

2017

 

 

Sept 30,

2017

 

 

June 30,

2017

 

 

Mar 31,

2017

 

 

Dec 31,

2016

 

 

Sept 30,

2016

 

 

June 30,

2016

 

 

Mar 31,

2016

 

Revenue

 

$

25,399

 

 

$

18,148

 

 

$

14,336

 

 

$

10,338

 

 

$

9,236

 

 

$

6,276

 

 

$

5,581

 

 

$

3,955

 

Loss from operations

 

$

(34,891

)

 

$

(30,976

)

 

$

(28,075

)

 

$

(27,337

)

 

$

(24,952

)

 

$

(24,906

)

 

$

(24,835

)

 

$

(25,490

)

Net loss

 

$

(40,493

)

 

$

(27,402

)

 

$

(28,557

)

 

$

(26,928

)

 

$

(24,848

)

 

$

(24,971

)

 

$

(24,847

)

 

$

(25,590

)

Net loss per share, basic and

   diluted

 

$

(0.78

)

 

$

(0.57

)

 

$

(0.66

)

 

$

(0.64

)

 

$

(0.69

)

 

$

(0.77

)

 

$

(0.77

)

 

$

(0.80

)

 

Organization and description of business - Additional Information (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
segment
Dec. 31, 2016
Dec. 31, 2015
Organization Consolidation And Presentation Of Financial Statements [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Number of operating segments
 
 
 
 
 
 
 
 
 
 
Net loss
$ 40,493 
$ 27,402 
$ 28,557 
$ 26,928 
$ 24,848 
$ 24,971 
$ 24,847 
$ 25,590 
$ 123,380 
$ 100,256 
$ 89,782 
Accumulated deficit
$ 398,598 
 
 
 
$ 275,218 
 
 
 
$ 398,598 
$ 275,218 
 
Summary of significant accounting policies - Additional Information (Details) (USD $)
12 Months Ended 1 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Mar. 31, 2016
ASU 2016-09
Dec. 31, 2016
Leasehold improvements
General and Administrative Expense
Dec. 31, 2017
Customer relationships
Dec. 31, 2017
Minimum
Dec. 31, 2017
Minimum
Customer relationships
Dec. 31, 2017
Maximum
Dec. 31, 2017
Maximum
Customer relationships
Dec. 31, 2017
Customer A
Dec. 31, 2016
Customer A
Dec. 31, 2015
Customer A
Maximum
Dec. 31, 2017
Revenue
Customer Concentration Risk
Dec. 31, 2016
Accounts Receivable
Customer Concentration Risk
Customer
Dec. 31, 2017
Accounts Receivable
Customer Concentration Risk
Customer A
Summary Of Significant Accounting Policies [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Concentration risk
 
 
 
 
 
 
 
 
 
 
13.00% 
11.00% 
10.00% 
10.00% 
10.00% 
13.00% 
Number of customer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intangible assets estimated useful lives
8 years 2 months 12 days 
 
 
 
 
10 years 
2 years 
5 years 
15 years 
11 years 
 
 
 
 
 
 
Intangible assets amortization method
Customer relationships are amortized on an accelerated basis, utilizing free cash flows, over periods ranging from five years to eleven years. All other intangible assets subject to amortization are amortized using the straight-line method over their estimated useful lives ranging from two to 15 years. All intangible assets subject to amortization are reviewed for impairment in accordance with ASC 360, Property, Plant and Equipment. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill impairment losses
$ 0 
$ 0 
$ 0 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment, estimated useful lives
 
 
 
 
 
 
3 years 
 
7 years 
 
 
 
 
 
 
 
Asset impairment losses
 
 
1,000,000 
 
 
 
 
 
 
 
 
 
 
 
Advertising expense
600,000 
500,000 
400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
New accounting pronouncement or change in accounting principle, deferred tax asset cumulative effect adjustment to retained earnings
 
 
 
$ 400,000 
 
 
 
 
 
 
 
 
 
 
 
 
New accounting pronouncement or change in accounting principle, offset deferred tax asset valuation allowance percentage
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
Summary of significant accounting policies - Schedule significant customer, revenue as a percentage (Details)
12 Months Ended
Dec. 31, 2017
Customer A
Dec. 31, 2016
Customer A
Dec. 31, 2015
Customer A
Maximum
Dec. 31, 2015
Customer B
Dec. 31, 2017
Customer B
Maximum
Dec. 31, 2016
Customer B
Maximum
Product Information [Line Items]
 
 
 
 
 
 
Concentration risk (as a percent)
13.00% 
11.00% 
10.00% 
13.00% 
10.00% 
10.00% 
Summary of significant accounting policies - Reconciliation of cash, cash equivalents and restricted cash (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Accounting Policies [Abstract]
 
 
 
 
Cash and cash equivalents
$ 12,053 
$ 66,825 
 
 
Restricted cash
5,406 
4,697 
 
 
Total cash, cash equivalents and restricted cash
$ 17,459 
$ 71,522 
$ 78,069 
$ 107,177 
Summary of significant accounting policies - Schedule of useful lives of property and equipment (Details)
12 Months Ended
Dec. 31, 2017
Furniture and fixtures
 
Useful lives
7 years 
Automobiles
 
Useful lives
7 years 
Laboratory equipment
 
Useful lives
5 years 
Computer equipment
 
Useful lives
3 years 
Software
 
Useful lives
3 years 
Leasehold improvements
 
Useful lives
Shorter of lease term or estimated useful life 
Business combinations - Additional Information (Details) (USD $)
12 Months Ended 0 Months Ended 3 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 0 Months Ended 1 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2017
Customer relationships
Dec. 31, 2017
Maximum
Dec. 31, 2017
Maximum
Customer relationships
Dec. 31, 2017
Minimum
Dec. 31, 2017
Minimum
Customer relationships
Jan. 6, 2017
AltaVoice
Mar. 31, 2017
AltaVoice
Dec. 31, 2017
AltaVoice
Dec. 31, 2016
AltaVoice
Jan. 6, 2017
AltaVoice
Customer relationships
Dec. 31, 2017
AltaVoice
Other Income Expense
Dec. 31, 2017
AltaVoice
Operating Expense
Dec. 31, 2017
AltaVoice
New Contingent Milestone Based On Achieving Revenue Target During 2017 And 2018
Mar. 31, 2018
AltaVoice
Scenario, Forecast
Mar. 31, 2018
AltaVoice
Scenario, Forecast
Milestone Based on Certain Threshold of Revenue Achieved During 2017 [Member]
Mar. 31, 2018
AltaVoice
Scenario, Forecast
New Contingent Milestone Based On Achieving Revenue Target During 2017 And 2018
Mar. 31, 2019
AltaVoice
Scenario, Forecast
New Contingent Milestone Based On Achieving Revenue Target During 2017 And 2018
Maximum
Jan. 6, 2017
AltaVoice
Common stock
Dec. 31, 2017
AltaVoice
Common stock
Maximum
Mar. 31, 2018
AltaVoice
Common stock
Scenario, Forecast
Jun. 11, 2017
Ommdom, Inc.
Dec. 31, 2017
Ommdom, Inc.
Jun. 11, 2017
Ommdom, Inc.
Customer relationships
Jun. 11, 2017
Ommdom, Inc.
Common stock
Aug. 4, 2017
Good Start Genetics
Dec. 31, 2017
Good Start Genetics
Aug. 4, 2017
Good Start Genetics
Customer relationships
Dec. 31, 2017
Good Start Genetics
General and Administrative Expense
Aug. 4, 2017
Good Start Genetics
Common stock
Aug. 4, 2017
Good Start Genetics
Common stock
General and Administrative Expense
Jul. 31, 2017
CombiMatrix
Dec. 31, 2017
CombiMatrix
Nov. 14, 2017
CombiMatrix
Jul. 31, 2017
CombiMatrix
Series F Preferred Stock
Jul. 31, 2017
CombiMatrix
Series F Warrants
Jul. 31, 2017
CombiMatrix
Series D Warrants
Jul. 31, 2017
CombiMatrix
Restricted Stock Units (RSUs)
Jul. 31, 2017
CombiMatrix
Stock Option
Jul. 31, 2017
CombiMatrix
Common Stock
Jul. 31, 2017
CombiMatrix
Warrants
Jul. 31, 2017
CombiMatrix
Customer relationships
Nov. 14, 2017
CombiMatrix
Customer relationships
Dec. 31, 2017
CombiMatrix
General and Administrative Expense
Jul. 31, 2017
CombiMatrix
General and Administrative Expense
Common Stock
Restricted Stock Units (RSUs)
Jul. 31, 2017
CombiMatrix
Common stock
Jul. 31, 2017
CombiMatrix
Common stock
General and Administrative Expense
Dec. 31, 2017
Coronado Merger Sub, Inc
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination, agreement date
 
 
 
 
 
 
 
 
 
 
Jan. 06, 2017 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jun. 11, 2017 
 
 
 
Aug. 04, 2017 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination, total purchase consideration
 
 
 
 
 
 
 
 
$ 12,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 6,100,000 
 
 
 
$ 24,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business acquisition payment through issuance of shares company's common stock
 
 
 
 
 
 
 
 
5,500,000 
 
 
 
 
 
 
 
 
 
 
 
5,500,000 
 
5,000,000 
5,500,000 
 
 
5,500,000 
 
 
 
 
 
900,000 
 
 
 
25,000 
7,400,000 
1,000 
700,000 
26,000 
 
 
 
 
 
1,700,000 
20,500,000 
200,000 
 
Business acquisition common stock issued, shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
641,126 
 
 
 
 
 
600,108 
 
 
 
 
 
83,025 
2,703,389 
 
 
3,144 
1,739,689 
337,584 
85,219 
3,323 
 
2,077,273 
 
 
 
214,976 
2,611,703 
22,966 
 
Business acquisition common stock issued, value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,000,000 
 
5,000,000 
 
 
5,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business acquisition contingently payable amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,000,000 
 
 
 
 
5,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination, contingent consideration, actual revenue target for payout
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination actual payout description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The actual payout is dependent upon the 2017 and 2018 revenue target (capped at $14.0 million) times 75% less $5.5 million. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination contingent consideration, percentage of actual revenue target
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
75.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination contingent consideration, amount deducted on actual revenue target
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination possible payout amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination basis of shares to be issued description
 
 
 
 
 
 
 
 
 
 
The number of shares to be issued will be equal to the payout amount divided by the trailing average share price of the Company’s common stock for the 30 days preceding March 31, 2019. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase consideration, second payment discounted and recorded as liability
 
 
 
 
 
 
 
 
4,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Change in fair value of contingent consideration
 
 
 
 
 
 
 
 
2,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination, accretion loss
 
 
 
 
 
 
 
 
 
 
 
 
 
200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination, remeasurement losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intangible assets estimated useful lives
8 years 2 months 12 days 
 
 
10 years 
15 years 
11 years 
2 years 
5 years 
 
 
 
 
10 years 
 
 
 
 
 
 
 
 
 
 
 
 
5 years 
 
 
 
8 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
11 years 
11 years 
 
 
 
 
 
Goodwill
46,575,000 
 
 
 
 
 
 
 
9,432,000 
 
9,432,000 
 
 
 
 
 
 
 
 
 
 
 
 
4,045,000 
4,045,000 
 
 
24,406,000 
24,406,000 
 
 
 
 
8,700,000 
8,692,000 
8,692,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional goodwill acquired
51,535,000 
 
 
 
 
 
 
 
1,400,000 
 
9,432,000 
 
 
 
 
 
 
 
 
 
 
 
 
434,000 
4,045,000 
 
 
 
29,366,000 
 
 
 
 
 
8,692,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition and transitional costs
 
 
 
 
 
 
 
 
 
159,000 
 
159,000 
 
 
 
 
 
 
 
 
 
 
 
 
164,000 
 
 
 
 
 
1,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,800,000 
 
 
 
 
Business combination, cash consideration
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination, hold-back consideration amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
613,000 
 
 
600,000 
 
 
 
 
 
400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business acquisition common stock issued, shares related to hold back
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
66,582 
 
 
 
 
 
37,406 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of diluted interest acquired
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination consideration transferred equity interests issued and issuable for settlement of convertible debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business acquisition equity interests issued or issuable number of shares for settlement of convertible debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,148,283 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combination sale of hold back stock for payment of bonus
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business acquisition number of hold back shares Issued or Issuable for payment of bonus
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
343,986 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provisional deferred tax liability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Date of acquisition
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nov. 14, 2017 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Date of merger agreement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jul. 31, 2017 
Business combination common stock conversion ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
86.92% 
 
 
 
 
 
 
 
 
Trailing average share value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 9.491 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 68,221,000 
$ 25,048,000 
$ 8,378,000 
 
 
 
 
 
 
 
$ 2,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 6,200,000 
 
 
 
 
 
$ 2,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business combinations - Summary of fair values of assets acquired and liabilities assumed (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2017
AltaVoice
Jan. 6, 2017
AltaVoice
Jan. 6, 2017
AltaVoice
Non-compete agreement
Jan. 6, 2017
AltaVoice
Developed technology
Jan. 6, 2017
AltaVoice
Customer relationships
Dec. 31, 2017
Ommdom, Inc.
Jun. 11, 2017
Ommdom, Inc.
Jun. 11, 2017
Ommdom, Inc.
Trade name
Jun. 11, 2017
Ommdom, Inc.
Developed technology
Jun. 11, 2017
Ommdom, Inc.
Customer relationships
Dec. 31, 2017
Good Start Genetics
Aug. 4, 2017
Good Start Genetics
Aug. 4, 2017
Good Start Genetics
Trade name
Aug. 4, 2017
Good Start Genetics
Developed technology
Aug. 4, 2017
Good Start Genetics
Customer relationships
Dec. 31, 2017
CombiMatrix
Nov. 14, 2017
CombiMatrix
Jul. 31, 2017
CombiMatrix
Nov. 14, 2017
CombiMatrix
Favorable leases
Nov. 14, 2017
CombiMatrix
Trade name
Nov. 14, 2017
CombiMatrix
Patent Licensing Agreement
Nov. 14, 2017
CombiMatrix
Developed technology
Nov. 14, 2017
CombiMatrix
Customer relationships
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
 
 
$ 54 
 
 
 
 
$ 53 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and restricted cash
 
 
 
 
 
 
 
 
 
 
 
 
1,381 
 
 
 
 
1,333 
 
 
 
 
 
 
Accounts receivable
 
 
274 
 
 
 
 
10 
 
 
 
 
2,904 
 
 
 
 
4,118 
 
 
 
 
 
 
Prepaid expense and other assets
 
 
52 
 
 
 
 
 
 
 
 
1,579 
 
 
 
 
1,299 
 
 
 
 
 
 
Property and equipment
 
 
 
 
 
 
 
 
 
 
 
 
1,320 
 
 
 
 
437 
 
 
 
 
 
 
Other assets - non current
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30 
 
 
 
 
 
 
Intangible Assets
 
 
 
286 
570 
3,389 
 
 
13 
2,335 
147 
 
 
460 
5,896 
7,830 
 
 
 
247 
103 
496 
3,162 
12,397 
Total identifiable assets acquired
 
 
4,625 
 
 
 
 
2,562 
 
 
 
 
21,370 
 
 
 
 
23,622 
 
 
 
 
 
 
Accounts payable
 
 
(28)
 
 
 
 
(16)
 
 
 
 
(5,418)
 
 
 
 
(276)
 
 
 
 
 
 
Deferred revenue
 
 
(202)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued expenses
 
 
(21)
 
 
 
 
(17)
 
 
 
 
(6,802)
 
 
 
 
(3,925)
 
 
 
 
 
 
Deferred tax liability
 
 
(1,422)
 
 
 
 
(434)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes payable
 
 
 
 
 
 
 
 
 
 
 
 
(17,904)
 
 
 
 
 
 
 
 
 
 
 
Convertible promissory notes payable
 
 
 
 
 
 
 
 
 
 
 
 
(15,430)
 
 
 
 
 
 
 
 
 
 
 
Other liabilities
 
 
 
 
 
 
 
 
 
 
 
 
(222)
 
 
 
 
(180)
 
 
 
 
 
 
Total liabilities assumed
 
 
(1,673)
 
 
 
 
(467)
 
 
 
 
(45,776)
 
 
 
 
(4,381)
 
 
 
 
 
 
Net identifiable assets acquired
 
 
2,952 
 
 
 
 
2,095 
 
 
 
 
(24,406)
 
 
 
 
19,241 
 
 
 
 
 
 
Goodwill
46,575 
9,432 
9,432 
 
 
 
4,045 
4,045 
 
 
 
24,406 
24,406 
 
 
 
8,692 
8,692 
8,700 
 
 
 
 
 
Net assets acquired
 
 
$ 12,384 
 
 
 
 
$ 6,140 
 
 
 
 
 
 
 
 
 
$ 27,933 
 
 
 
 
 
 
Business combinations - Schedule of economic benefits of intangible assets are expected to be realized (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended
Dec. 31, 2017
Dec. 31, 2017
Non-compete agreement
Dec. 31, 2017
Trade name
Dec. 31, 2017
Patent Licensing Agreement
Dec. 31, 2017
Developed technology
Dec. 31, 2017
Customer relationships
Jan. 6, 2017
AltaVoice
Jan. 6, 2017
AltaVoice
Non-compete agreement
Jan. 6, 2017
AltaVoice
Developed technology
Jan. 6, 2017
AltaVoice
Customer relationships
Jun. 11, 2017
Ommdom, Inc.
Jun. 11, 2017
Ommdom, Inc.
Trade name
Jun. 11, 2017
Ommdom, Inc.
Developed technology
Jun. 11, 2017
Ommdom, Inc.
Customer relationships
Aug. 4, 2017
Good Start Genetics
Aug. 4, 2017
Good Start Genetics
Trade name
Aug. 4, 2017
Good Start Genetics
Developed technology
Aug. 4, 2017
Good Start Genetics
Customer relationships
Nov. 14, 2017
CombiMatrix
Nov. 14, 2017
CombiMatrix
Favorable leases
Nov. 14, 2017
CombiMatrix
Trade name
Nov. 14, 2017
CombiMatrix
Patent Licensing Agreement
Nov. 14, 2017
CombiMatrix
Developed technology
Jul. 31, 2017
CombiMatrix
Customer relationships
Nov. 14, 2017
CombiMatrix
Customer relationships
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Purchased Intangible Assets
$ 37,331 
$ 286 
$ 576 
$ 496 
$ 11,963 
$ 23,763 
$ 4,245 
$ 286 
$ 570 
$ 3,389 
$ 2,495 
$ 13 
$ 2,335 
$ 147 
$ 14,186 
$ 460 
$ 5,896 
$ 7,830 
$ 16,405 
$ 247 
$ 103 
$ 496 
$ 3,162 
 
$ 12,397 
Intangible assets estimated useful lives
8 years 2 months 12 days 
5 years 
2 years 8 months 12 days 
15 years 
4 years 9 months 18 days 
10 years 
 
5 years 
6 years 
10 years 
 
5 years 
5 years 
5 years 
 
3 years 
5 years 
8 years 
 
2 years 
1 year 
15 years 
4 years 
11 years 
11 years 
Business combinations - Summary of pro forma financial information (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Business Combinations [Abstract]
 
 
Total revenue
$ 94,001 
$ 62,991 
Net loss
$ (149,596)
$ (123,148)
Goodwill and intangible assets - Summary of goodwill (Details) (USD $)
12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2017
Jan. 6, 2017
AltaVoice
Dec. 31, 2017
AltaVoice
Jun. 11, 2017
Ommdom
Dec. 31, 2017
Ommdom
Dec. 31, 2017
Good Start
Aug. 4, 2017
Good Start
Dec. 31, 2017
CombiMatrix
Nov. 14, 2017
CombiMatrix
Jul. 31, 2017
CombiMatrix
Goodwill [Line Items]
 
 
 
 
 
 
 
 
 
 
Beginning Balance
 
 
 
 
 
 
$ 24,406,000 
 
$ 8,692,000 
$ 8,700,000 
Goodwill acquired
51,535,000 
1,400,000 
9,432,000 
434,000 
4,045,000 
29,366,000 
 
8,692,000 
 
 
Goodwill adjustment
(4,960,000)
 
 
 
 
(4,960,000)
 
 
 
 
Ending Balance
$ 46,575,000 
$ 9,432,000 
$ 9,432,000 
$ 4,045,000 
$ 4,045,000 
$ 24,406,000 
$ 24,406,000 
$ 8,692,000 
$ 8,692,000 
$ 8,700,000 
Goodwill and intangible assets - Additional Information (Details) (USD $)
12 Months Ended 1 Months Ended 0 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2017
Minimum
Dec. 31, 2017
Maximum
Dec. 31, 2017
Customer relationships
Dec. 31, 2017
Customer relationships
Minimum
Dec. 31, 2017
Customer relationships
Maximum
Aug. 31, 2017
Good Start Genetics
Aug. 4, 2017
Good Start Genetics
Customer relationships
Goodwill [Line Items]
 
 
 
 
 
 
 
 
 
Reversal of provisional deferred tax liability
 
 
 
 
 
 
 
$ 4,800,000 
 
Amortization expense
$ 1,800,000 
$ 0 
 
 
 
 
 
 
 
Intangible assets estimated useful lives
8 years 2 months 12 days 
 
2 years 
15 years 
10 years 
5 years 
11 years 
 
8 years 
Goodwill and intangible assets - Schedule of finite-lived intangible assets (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Finite Lived Intangible Assets [Line Items]
 
Finite-Lived Intangible Assets, Cost
$ 37,331 
Finite-Lived Intangible Assets, Accumulated Amortization
(1,815)
Finite-Lived Intangible Assets, Net
35,516 
Finite-Lived Intangible Assets, Weighted Average Useful Life (in Years)
8 years 2 months 12 days 
Finite-Lived Intangible Assets, Weighted Average Estimated Remaining Useful Life (in Years)
7 years 9 months 18 days 
Customer relationships
 
Finite Lived Intangible Assets [Line Items]
 
Finite-Lived Intangible Assets, Cost
23,763 
Finite-Lived Intangible Assets, Accumulated Amortization
(717)
Finite-Lived Intangible Assets, Net
23,046 
Finite-Lived Intangible Assets, Weighted Average Useful Life (in Years)
10 years 
Finite-Lived Intangible Assets, Weighted Average Estimated Remaining Useful Life (in Years)
9 years 7 months 6 days 
Developed technology
 
Finite Lived Intangible Assets [Line Items]
 
Finite-Lived Intangible Assets, Cost
11,963 
Finite-Lived Intangible Assets, Accumulated Amortization
(949)
Finite-Lived Intangible Assets, Net
11,014 
Finite-Lived Intangible Assets, Weighted Average Useful Life (in Years)
4 years 9 months 18 days 
Finite-Lived Intangible Assets, Weighted Average Estimated Remaining Useful Life (in Years)
4 years 4 months 24 days 
Non-compete agreement
 
Finite Lived Intangible Assets [Line Items]
 
Finite-Lived Intangible Assets, Cost
286 
Finite-Lived Intangible Assets, Accumulated Amortization
(57)
Finite-Lived Intangible Assets, Net
229 
Finite-Lived Intangible Assets, Weighted Average Useful Life (in Years)
5 years 
Finite-Lived Intangible Assets, Weighted Average Estimated Remaining Useful Life (in Years)
4 years 
Trade name
 
Finite Lived Intangible Assets [Line Items]
 
Finite-Lived Intangible Assets, Cost
576 
Finite-Lived Intangible Assets, Accumulated Amortization
(78)
Finite-Lived Intangible Assets, Net
498 
Finite-Lived Intangible Assets, Weighted Average Useful Life (in Years)
2 years 8 months 12 days 
Finite-Lived Intangible Assets, Weighted Average Estimated Remaining Useful Life (in Years)
2 years 3 months 18 days 
Patent Licensing Agreement
 
Finite Lived Intangible Assets [Line Items]
 
Finite-Lived Intangible Assets, Cost
496 
Finite-Lived Intangible Assets, Accumulated Amortization
(4)
Finite-Lived Intangible Assets, Net
492 
Finite-Lived Intangible Assets, Weighted Average Useful Life (in Years)
15 years 
Finite-Lived Intangible Assets, Weighted Average Estimated Remaining Useful Life (in Years)
14 years 10 months 24 days 
Favorable leases
 
Finite Lived Intangible Assets [Line Items]
 
Finite-Lived Intangible Assets, Cost
247 
Finite-Lived Intangible Assets, Accumulated Amortization
(10)
Finite-Lived Intangible Assets, Net
$ 237 
Finite-Lived Intangible Assets, Weighted Average Useful Life (in Years)
2 years 2 months 12 days 
Finite-Lived Intangible Assets, Weighted Average Estimated Remaining Useful Life (in Years)
2 years 1 month 6 days 
Goodwill and intangible assets - Summary of estimated future amortization expense of intangible assets with finite lives (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Goodwill And Intangible Assets Disclosure [Abstract]
 
2018
$ 5,059 
2019
5,250 
2020
5,525 
2021
5,829 
2022
4,123 
Thereafter
9,730 
Finite-Lived Intangible Assets, Net
$ 35,516 
Balance sheet components - Cash equivalents and marketable securities (Details) (USD $)
12 Months Ended
Dec. 31, 2017
item
Dec. 31, 2016
Dec. 31, 2015
Investment Holdings
 
 
 
Cash equivalents
$ 592,000 
$ 14,760,000 
 
Restricted cash
5,406,000 
4,697,000 
 
Marketable securities, Estimated Fair Value
58,590,000 
25,798,000 
 
Total cash equivalents, restricted cash and marketable securities
64,588,000 
45,255,000 
 
Amortized Cost
64,759,000 
45,255,000 
 
Gross Unrealized Gains
 
2,000 
 
Gross Unrealized Losses
(171,000)
(2,000)
 
Total amount of unrealized losses on available-for-sale securities
171,000 
 
 
Total fair value of investments with unrealized losses
58,300,000 
 
 
Available for sale securities maximum remaining contractual maturity
13 months 
 
 
Available-for-sale Securities, Continuous Unrealized Loss Position
 
 
 
Number of securities that are in continuous unrealized loss position for more than one year
 
 
Realized gains or losses on available-for-sale securities
Maximum
 
 
 
Investment Holdings
 
 
 
Available for sale securities minimum remaining contractual maturity
1 month 
 
 
Certificate of deposits
 
 
 
Investment Holdings
 
 
 
Amortized Cost
300,000 
 
 
Marketable securities, Estimated Fair Value
300,000 
 
 
Money market funds
 
 
 
Investment Holdings
 
 
 
Estimated Fair Value
5,998,000 
19,457,000 
 
U.S. treasury notes
 
 
 
Investment Holdings
 
 
 
Amortized Cost
12,010,000 
11,515,000 
 
Gross Unrealized Gains
 
2,000 
 
Gross Unrealized Losses
(19,000)
 
 
Marketable securities, Estimated Fair Value
11,991,000 
11,517,000 
 
U.S. government agency securities
 
 
 
Investment Holdings
 
 
 
Amortized Cost
46,451,000 
14,283,000 
 
Gross Unrealized Losses
(152,000)
(2,000)
 
Marketable securities, Estimated Fair Value
$ 46,299,000 
$ 14,281,000 
 
Balance sheet components - Property and equipment (Details) (USD $)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Property and equipment
 
 
 
Total property and equipment, gross
$ 49,871,000 
$ 38,261,000 
 
Accumulated depreciation and amortization
(19,530,000)
(14,468,000)
 
Total property and equipment, net
30,341,000 
23,793,000 
18,709,000 
Depreciation
7,200,000 
6,600,000 
5,300,000 
Leasehold improvements
 
 
 
Property and equipment
 
 
 
Total property and equipment, gross
12,623,000 
1,256,000 
 
Laboratory equipment
 
 
 
Property and equipment
 
 
 
Total property and equipment, gross
17,705,000 
13,644,000 
 
Equipment under capital lease
 
 
 
Property and equipment
 
 
 
Total property and equipment, gross
11,446,000 
5,871,000 
 
Computer equipment
 
 
 
Property and equipment
 
 
 
Total property and equipment, gross
4,023,000 
2,514,000 
 
Software
 
 
 
Property and equipment
 
 
 
Total property and equipment, gross
2,520,000 
2,489,000 
 
Furniture and fixtures
 
 
 
Property and equipment
 
 
 
Total property and equipment, gross
569,000 
238,000 
 
Automobiles
 
 
 
Property and equipment
 
 
 
Total property and equipment, gross
20,000 
20,000 
 
Construction-in-progress
 
 
 
Property and equipment
 
 
 
Total property and equipment, gross
$ 965,000 
$ 12,229,000 
 
Balance sheet components - Accrued liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Balance Sheet Related Disclosures [Abstract]
 
 
Accrued compensation and related expenses
$ 7,406 
$ 3,072 
Accrued laboratory materials purchases
1,242 
338 
Accrued outsourced services
142 
 
Accrued professional services
1,077 
446 
Accrued construction in progress
 
1,215 
Lease incentive obligation, current
489 
468 
Liabilities associated with business combinations
9,497 
 
Other
2,889 
1,172 
Total accrued liabilities
$ 22,742 
$ 6,711 
Balance sheet components - Other long-term liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Balance Sheet Related Disclosures [Abstract]
 
 
Lease incentive obligation, non-current
$ 3,831 
$ 4,243 
Deferred rent, non-current
5,153 
3,419 
Liabilities associated with business combination
3,779 
 
Other non-current liabilities
677 
175 
Total other long-term liabilities
$ 13,440 
$ 7,837 
Fair value measurements - Financial instruments at fair value on a recurring basis (Details) (Recurring basis, USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Total financial assets
$ 64,588 
$ 45,255 
Total financial liabilities
3,779 
 
Contingent consideration
 
 
Total financial liabilities
3,779 
 
Money market funds
 
 
Estimated Fair Value
5,998 
19,457 
Certificate of deposits
 
 
Certificates of deposit
300 
 
Level 1
 
 
Total financial assets
18,289 
30,974 
Level 1 |
Money market funds
 
 
Estimated Fair Value
5,998 
19,457 
Level 1 |
Certificate of deposits
 
 
Certificates of deposit
300 
 
Level 2
 
 
Total financial assets
46,299 
14,281 
Level 3
 
 
Total financial liabilities
3,779 
 
Level 3 |
Contingent consideration
 
 
Total financial liabilities
3,779 
 
U.S. treasury notes
 
 
Total financial assets
11,991 
11,517 
U.S. treasury notes |
Level 1
 
 
Total financial assets
11,991 
11,517 
U.S. government agency securities
 
 
Total financial assets
46,299 
14,281 
U.S. government agency securities |
Level 2
 
 
Total financial assets
$ 46,299 
$ 14,281 
Fair value measurements - Additional Information (Details) (USD $)
0 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Jan. 6, 2017
AltaVoice
Mar. 31, 2018
AltaVoice
Scenario, Forecast
Dec. 31, 2017
AltaVoice
Contingent consideration
Level 3
Recurring basis
Jan. 6, 2017
AltaVoice
Contingent consideration
Level 3
Recurring basis
Mar. 31, 2018
AltaVoice
Common Stock
Scenario, Forecast
Dec. 31, 2017
AltaVoice
Maximum
Common Stock
Mar. 31, 2019
AltaVoice
Maximum
New Contingent Milestone Based On Achieving Revenue Target During 2017 And 2018
Scenario, Forecast
Mar. 31, 2019
AltaVoice
Minimum
New Contingent Milestone Based On Achieving Revenue Target During 2017 And 2018
Scenario, Forecast
Transfers from Level 1 to Level 2
$ 0 
$ 0 
 
 
 
 
 
 
 
 
Transfers from Level 2 to Level 1
 
 
 
 
 
 
 
 
Transfers from Level 1 to Level 3
 
 
 
 
 
 
 
 
Transfers from Level 3 to Level 1
 
 
 
 
 
 
 
 
Transfers from Level 2 to Level 3
 
 
 
 
 
 
 
 
Transfers from Level 3 to Level 2
 
 
 
 
 
 
 
 
Business acquisition contingently payable amount
 
 
 
5,000,000 
 
 
 
5,000,000 
 
 
Contingent revenue threshold
 
 
 
 
 
 
 
 
 
10,000,000 
Business acquisition common stock issued, value
 
 
 
 
 
 
5,000,000 
 
5,000,000 
 
Estimated fair value for contingent consideration
 
 
 
 
 
2,200,000 
 
 
 
 
Increase in fair value of contingent consideration
 
 
$ 2,200,000 
 
$ 1,600,000 
 
 
 
 
 
Fair value measurements - Financial instruments measured at fair value on a recurring basis (Details) (Contingent consideration, Recurring basis, Level 3, USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Contingent consideration |
Recurring basis |
Level 3
 
Contingent consideration
$ 2,200 
Change in estimate of fair value
1,579 
Balance as of December 31, 2017
$ 3,779 
Fair value measurements - Carrying amount and the estimated fair value of the Company's outstanding debt (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Debt
$ 39,084 
 
Recurring basis |
Level 2 |
Carrying Amount
 
 
Debt
39,084 
12,102 
Recurring basis |
Level 2 |
Fair Value
 
 
Debt
$ 40,526 
$ 11,905 
Commitments and contingencies - (Operating Leases) - Additional Information (Details) (USD $)
12 Months Ended 1 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2017
Other Noncurrent Assets
Dec. 31, 2016
Other Noncurrent Assets
Dec. 31, 2017
Good Start Facilities
Sep. 30, 2015
Office Facility In San Francisco
New Leases
Dec. 31, 2017
Office Facility In San Francisco
New Leases
Additional term of lease
 
 
 
 
 
 
10 years 
 
Actual lease expiration term
 
 
 
 
 
 
2026-07 
 
Lease term
 
 
 
 
 
 
10 years 
 
Security Deposit
 
 
 
$ 400,000 
$ 800,000 
$ 400,000 
$ 4,600,000 
 
Lease incentive in form of lease improvements
 
 
 
 
 
 
5,200,000 
 
Total minimum lease payments
78,101,000 
 
 
 
 
 
 
64,200,000 
Future minimum lease payments under operating leases
 
 
 
 
 
 
 
 
Rent expense
$ 8,600,000 
$ 8,600,000 
$ 3,700,000 
 
 
 
 
 
Commitments and contingencies - Schedule of future minimum payments under operating leases (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Commitments And Contingencies Disclosure [Abstract]
 
2018
$ 9,707 
2019
9,633 
2020
9,512 
2021
9,727 
2022
9,676 
Thereafter
29,846 
Total minimum lease payments
$ 78,101 
Commitments and contingencies - (Debt Financing) - Additional Information (Details) (USD $)
12 Months Ended 0 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended
Dec. 31, 2017
Mar. 15, 2017
Loan and Security Agreement
Initial term loan
Mar. 31, 2018
Loan and Security Agreement
Second Term Loan
Scenario, Forecast
Mar. 15, 2017
Loan and Security Agreement
Secured Debt
Dec. 31, 2017
Loan and Security Agreement
Secured Debt
Dec. 31, 2016
Loan and Security Agreement
Secured Debt
Dec. 31, 2015
Loan and Security Agreement
Secured Debt
Jul. 31, 2015
Loan and Security Agreement
Secured Debt
Mar. 15, 2017
Loan and Security Agreement
Secured Debt
Minimum
Mar. 15, 2017
Loan and Security Agreement
Secured Debt
Maximum
Mar. 15, 2017
Loan and Security Agreement
Secured Debt
Other Income (Expense), Net
Maximum borrowing capacity
 
 
 
 
 
 
 
$ 15,000,000 
 
 
 
Obligations under Loan Agreement
 
 
 
 
40,000,000 
12,100,000 
 
 
 
 
 
Term loan, borrowing amount
 
40,000,000 
20,000,000 
 
 
 
 
 
 
 
 
Net proceeds from term loan
39,661,000 
39,700,000 
 
 
 
 
 
 
 
 
 
Repayment of balance debt obligations
 
 
 
12,100,000 
 
 
 
 
 
 
 
Prepayment premium classified as extinguishment of debt
 
 
 
 
 
 
 
 
 
 
670,000 
Term loans, variable interest rate
 
 
 
7.73% 
 
 
 
 
 
 
 
Term loans, index interest rate, minimum
 
 
 
0.77% 
 
 
 
 
 
 
 
Term loans, floor interest rate
 
 
 
8.50% 
 
 
 
 
 
 
 
Term loans, variable interest rate description
 
 
 
Term loans under the Loan and Security Agreement bear interest at a floating rate equal to an index rate plus 7.73%, where the index rate is the greater of 0.77% or the 30-day U.S. Dollar London Interbank Offered Rate “LIBOR” as reported in The Wall Street Journal, with the floating rate resetting monthly subject to a floor of 8.5%. 
 
 
 
 
 
 
 
Term loans, payment description
 
 
 
The Company is required to make monthly interest-only payments until May 1, 2019 (or, subject to certain conditions, May 1, 2020), and thereafter monthly payments of principal and interest are required to fully amortize the borrowed amount by a final maturity date of March 1, 2022. 
 
 
 
 
 
 
 
Term loans, frequency of periodic payment
 
 
 
monthly 
 
 
 
 
 
 
 
Term loans, maturity date
 
 
 
Mar. 01, 2022 
 
 
 
 
 
 
 
Term loans, fee percentage of funded draw
 
 
 
5.00% 
 
 
 
 
 
 
 
Term loans, facility fee percentage
 
 
 
0.50% 
 
 
 
 
 
 
 
Term loans, prepayment fee percentage of outstanding balance
 
 
 
 
 
 
 
 
1.00% 
3.00% 
 
Warrants granted to acquire shares, percentage of funded amount
 
 
 
3.00% 
 
 
 
 
 
 
 
Warrants granted to acquire shares description
 
 
 
the Company will grant to the lender a warrant to acquire shares of the Company’s common stock equal to the quotient of 3% of the funded amount divided by a per share exercise price equal to the lower of the average closing price for the previous ten days of trading (calculated on the day prior to funding) or the closing price on the day prior to funding. 
 
 
 
 
 
 
 
Warrants granted to purchase shares of common stock
 
 
 
116,845 
 
 
 
 
 
 
 
Warrants granted to purchase common stock exercise price
 
 
 
$ 10.27 
 
 
 
 
 
 
 
Fair value of warrant
 
 
 
740,000 
740,000 
 
 
 
 
 
 
Warrants term
 
 
 
10 years 
 
 
 
 
 
 
 
Debt issuance cost
 
 
 
 
339,000 
 
 
 
 
 
 
Interest expense
 
 
 
 
$ 3,500,000 
$ 315,000 
$ 58,000 
 
 
 
 
Commitments and contingencies - Schedule of future payments under loan and security agreement (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Future payments under the Loan Agreement
 
 
2018
$ 3,691 
 
2019
12,587 
 
2020
15,988 
 
2021
14,716 
 
2022
5,482 
 
Total remaining debt payments
52,464 
 
Less: amount representing debt discount
(916)
 
Less: amount representing interest
(12,464)
 
Present value of remaining debt payments
39,084 
 
Less: current portion
 
(3,381)
Total non-current debt obligation
$ 39,084 
$ 8,721 
Commitments and Contingencies - (Capital Leases) - Additional Information (Details) (USD $)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Lease term
3 years 
 
 
Interest expense
$ 163,000 
$ 103,000 
$ 141,000 
Property and equipment under capital lease
11,400,000 
5,900,000 
 
Accumulated depreciation and amortization
$ 3,000,000 
$ 2,400,000 
 
Minimum
 
 
 
Interest rate (as a percent)
4.30% 
 
 
Maximum
 
 
 
Interest rate (as a percent)
6.40% 
 
 
Commitments and Contingencies - Schedule of future minimum lease payments under capital leases (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Future payments under the capital lease
 
 
2018
$ 2,369 
 
2019
2,087 
 
2020
1,394 
 
2021
21 
 
Total capital lease obligations
5,871 
 
Less: amount representing interest
(459)
 
Present value of net minimum capital lease payments
5,412 
 
Less: current portion
(2,039)
(1,309)
Total non-current capital lease obligations
$ 3,373 
$ 266 
Stockholders' Equity (Details)
Dec. 31, 2017
Dec. 31, 2016
Class of Stock
 
 
Options issued and outstanding
4,114,874 
4,490,662 
Shares available for grant under stock option plan
2,397,234 
1,375,766 
Common stock reserved for future issuance
15,867,670 
7,562,871 
Convertible Preferred stock
 
 
Class of Stock
 
 
Common stock reserved for future issuance
3,458,823 
 
Stock Payable Liabilities
 
 
Class of Stock
 
 
Common stock reserved for future issuance
689,347 
 
Payable as Contingent Consideration
 
 
Class of Stock
 
 
Common stock reserved for future issuance
550,660 
 
Warrants
 
 
Class of Stock
 
 
Common stock reserved for future issuance
1,962,074 
 
RSUs
 
 
Class of Stock
 
 
RSU awards issued and outstanding
2,387,120 
1,421,757 
2015 Employee Stock Purchase Plan
 
 
Class of Stock
 
 
Common stock reserved for future issuance
307,538 
274,686 
Stockholders' Equity - Additional Information (Details) (Private Placement, USD $)
In Millions, except Share data, unless otherwise specified
0 Months Ended
Aug. 3, 2017
Class Of Stock [Line Items]
 
Gross proceeds from private placement
$ 73.5 
Net proceeds from private placement
$ 68.9 
Preferred stock convertible into common stock conversion ratio
100.00% 
Description of preferred stock convertible into common stock
The Series A preferred stock is convertible into common stock on a one-for-one basis 
Description of preferred stock voting rights
The Series A Preferred Stock has no voting rights except as required by law, as modified by the Company’s Amended and Restated Certificate of Incorporation. 
Preferred stock liquidation preference per share
$ 0.001 
Series A Convertible Preferred Stock
 
Class Of Stock [Line Items]
 
Number of shares sold in private placement
3,458,823 
Shares issued price per share
$ 8.50 
Common Stock
 
Class Of Stock [Line Items]
 
Number of shares sold in private placement
5,188,235 
Shares issued price per share
$ 8.50 
Stockholders' Equity - Schedule of Outstanding Warrants to Purchase Common Stock (Details) (Common Stock, USD $)
12 Months Ended
Dec. 31, 2017
Class Of Warrant Or Right [Line Items]
 
Number of Warrants Outstanding
1,962,074 
CombiMatrix |
Series D Warrants
 
Class Of Warrant Or Right [Line Items]
 
Issuance Date
Nov. 14, 2017 
Expiration Date
Dec. 19, 2018 
Exercise Price Per Share
$ 53.84 
Number of Warrants Outstanding
337,584 
CombiMatrix |
Series F Warrants
 
Class Of Warrant Or Right [Line Items]
 
Issuance Date
Nov. 14, 2017 
Expiration Date
Mar. 24, 2021 
Exercise Price Per Share
$ 5.95 
Number of Warrants Outstanding
1,507,645 
Warrants Issued to Lender Under Loan and Security Agreement
 
Class Of Warrant Or Right [Line Items]
 
Issuance Date
Mar. 15, 2017 
Expiration Date
Mar. 15, 2027 
Exercise Price Per Share
$ 10.27 
Number of Warrants Outstanding
116,845 
Stock incentive plans - Additional Information (Details) (USD $)
12 Months Ended 1 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2017
RSUs
Dec. 31, 2016
RSUs
Dec. 31, 2015
RSUs
Dec. 31, 2017
PRSU
Dec. 31, 2016
PRSU
Jan. 31, 2015
2010 Plan
Jan. 31, 2015
2015 Plan
Feb. 28, 2017
2015 Plan
PRSU
Feb. 29, 2016
2015 Plan
PRSU
Dec. 31, 2017
2015 Plan
PRSU
Dec. 31, 2016
2015 Plan
PRSU
Dec. 31, 2017
Stock incentive plans
Dec. 31, 2017
Stock incentive plans
RSUs
Dec. 31, 2017
Stock incentive plans
Options
Dec. 31, 2016
Stock incentive plans
Options
Dec. 31, 2015
Stock incentive plans
Options
Dec. 31, 2017
Stock incentive plans
First anniversary
RSUs
Dec. 31, 2017
Stock incentive plans
Second anniversary
RSUs
Dec. 31, 2017
Stock incentive plans
Third anniversary
RSUs
Dec. 31, 2017
Minimum
2010 Plan
Dec. 31, 2017
Maximum
2010 Plan
Stock incentive plan
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employees holding voting rights of all classes of stock (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.00% 
 
Exercise price of options on common stock (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
110.00% 
 
Term of options granted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10 years 
Additional shares reserved
15,867,670 
7,562,871 
 
 
 
 
 
 
120,452 
4,370,452 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vesting period
 
 
 
 
 
 
 
 
 
 
 
12 months 
 
 
4 years 
3 years 
 
 
 
 
 
 
 
 
Vesting rate upon anniversaries (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25.00% 
 
 
 
 
33.33% 
33.33% 
33.33% 
 
 
Monthly vesting rate thereafter (as a percent)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.08% 
 
 
 
 
 
 
 
 
 
Vested stock units awarded
 
 
 
572,672 
 
 
352,045 
 
 
 
352,045 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock-based compensation
$ 19,221,000 
$ 10,699,000 
$ 3,477,000 
 
 
 
 
 
 
 
 
 
$ 400,000 
$ 1,900,000 
 
 
 
 
 
 
 
 
 
 
Vested and expected to vest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average grant date fair value (in dollars per share)
 
 
 
$ 10.03 
$ 9.80 
$ 10.72 
 
$ 6.50 
 
 
 
 
 
 
 
 
$ 5.82 
$ 6.18 
$ 6.26 
 
 
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Grants In Period
 
 
 
2,360,511 
 
 
 
 
 
 
 
 
 
 
2,360,511 
 
 
 
 
 
 
 
 
Total grant date fair value of options to purchase common stock vested
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,900,000 
5,600,000 
2,100,000 
 
 
 
 
 
Exercised, aggregate intrinsic value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 2,100,000 
$ 1,400,000 
$ 1,200,000 
 
 
 
 
 
Stock incentive plans - Stock incentive plans (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Activity under the plan
 
 
Shares Available For Grant
2,397,234 
1,375,766 
Balance at the end of the period
4,114,874 
4,490,662 
RSUs
 
 
Activity under the plan
 
 
Units granted
(2,360,511)
 
Units cancelled
292,471 
 
PRSU
 
 
Activity under the plan
 
 
Units granted
 
Units cancelled
177,960 
 
Stock incentive plans |
Options
 
 
Activity under the plan
 
 
Shares Available For Grant
1,375,766 
 
Balance at the beginning of the period
4,490,662 
 
Additional shares reserved
2,923,183 
 
Options granted (in shares)
607,398 
 
Option cancelled (in shares)
(595,763)
 
Options exercised (in shares)
(387,423)
 
Shares Available For Grant
2,397,234 
1,375,766 
Balance at the end of the period
4,114,874 
4,490,662 
Weighted-Average Exercise Price
 
 
Balance at the beginning of the period (in dollars per share)
$ 8.21 
 
Options granted (in dollars per share)
$ 9.20 
 
Options cancelled (in dollars per share)
$ 9.67 
 
Options exercised (in dollars per share)
$ 4.38 
 
Balance at the end of the period (in dollars per share)
$ 8.51 
$ 8.21 
Additional information
 
 
Exercisable, Number of shares
2,213,417 
 
Exercisable, Weighted-Average Exercise Price (in dollars per share)
$ 7.75 
 
Weighted-Average Remaining Contractual Life
7 years 7 months 17 days 
8 years 1 month 9 days 
Exercisable, Weighted-Average Remaining Contractual Life
7 years 1 month 2 days 
 
Aggregate Intrinsic Value
$ 5,128 
$ 5,312 
Exercisable, Aggregate Intrinsic Value
4,411 
 
Vested and expected to vest
 
 
Number of shares
3,861,828 
 
Weighted-Average Exercise Price (in dollars per share)
$ 8.45 
 
Weighted-Average Remaining Contractual Life
7 years 7 months 2 days 
 
Aggregate Intrinsic Value
$ 5,043 
 
Stock incentive plans |
RSUs
 
 
Activity under the plan
 
 
Units granted
(2,360,511)
 
Units cancelled
292,471 
 
2015 Plan |
PRSU
 
 
Activity under the plan
 
 
Units cancelled
177,960 
 
Stock incentive plans - RSU and PRSU Activity (Details) (USD $)
12 Months Ended
Dec. 31, 2017
RSUs
 
Number of Shares
 
Balance at the beginning of the period
1,421,757 
Granted
2,360,511 
Vested
(572,672)
Cancelled
(292,471)
Balance at the end of the period
2,387,120 
Weighted-Average Grant Date Fair Value
 
Balance at the beginning of the period
$ 8.77 
Granted
$ 10.03 
Vested
$ 10.51 
Cancelled
$ 10.17 
Balance at the end of the period
$ 9.91 
PRSU
 
Number of Shares
 
Granted
Vested
(352,045)
Cancelled
(177,960)
Weighted-Average Grant Date Fair Value
 
Vested
$ 6.54 
Cancelled
$ 6.53 
Stock incentive plans - Risk-free interest rate & Dividend yield (Details) (USD $)
1 Months Ended 12 Months Ended
Jan. 31, 2015
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Assumptions used in determination of fair value of options using the Black-Scholes option pricing valuation model
 
 
 
 
Common stock reserved for future issuance
 
15,867,670 
7,562,871 
 
Number of employees affected by the stock option and RSU modifications
 
 
14 
 
Incremental compensation cost relating to stock option and RSU modifications
 
 
$ 323,000 
 
Stock-based compensation
 
19,221,000 
10,699,000 
3,477,000 
Non-Employee Options
 
 
 
 
Assumptions used in determination of fair value of options using the Black-Scholes option pricing valuation model
 
 
 
 
Expected volatility
 
 
76.92% 
 
Non-Employee Options |
Minimum
 
 
 
 
Assumptions used in determination of fair value of options using the Black-Scholes option pricing valuation model
 
 
 
 
Expected term (in years)
 
8 years 4 months 28 days 
6 years 3 months 
7 years 3 months 
Expected volatility
 
69.90% 
 
69.90% 
Risk-free interest rate
 
1.83% 
1.55% 
1.86% 
Non-Employee Options |
Maximum
 
 
 
 
Assumptions used in determination of fair value of options using the Black-Scholes option pricing valuation model
 
 
 
 
Expected term (in years)
 
8 years 9 months 29 days 
10 years 
9 years 9 months 25 days 
Expected volatility
 
78.70% 
 
78.70% 
Risk-free interest rate
 
2.04% 
2.37% 
2.25% 
Employees and directors stock options |
Options
 
 
 
 
Assumptions used in determination of fair value of options using the Black-Scholes option pricing valuation model
 
 
 
 
Expected term (in years)
 
6 years 10 days 
6 years 10 days 
6 years 10 days 
Expected volatility
 
72.64% 
71.42% 
 
Risk-free interest rate
 
2.01% 
1.37% 
 
Employees and directors stock options |
Options |
Minimum
 
 
 
 
Assumptions used in determination of fair value of options using the Black-Scholes option pricing valuation model
 
 
 
 
Expected volatility
 
 
 
68.20% 
Risk-free interest rate
 
 
 
1.28% 
Employees and directors stock options |
Options |
Maximum
 
 
 
 
Assumptions used in determination of fair value of options using the Black-Scholes option pricing valuation model
 
 
 
 
Expected volatility
 
 
 
79.70% 
Risk-free interest rate
 
 
 
1.86% 
2015 Employee Stock Purchase Plan
 
 
 
 
Assumptions used in determination of fair value of options using the Black-Scholes option pricing valuation model
 
 
 
 
Purchase price of common stock of the lesser of fair market value on the purchase date or the last trading day preceding the offering date (as a percent)
85.00% 
 
 
 
Cash received from payroll deductions
 
400,000 
 
 
Common stock reserved for future issuance
 
307,538 
274,686 
 
Purchase period term
 
6 months 
 
 
Expected term (in years)
 
6 months 
6 months 
6 months 
Expected volatility
 
52.50% 
66.31% 
74.13% 
Risk-free interest rate
 
1.23% 
0.50% 
0.33% 
Weighted-average grant date fair value (in dollars per share)
 
$ 2.51 
$ 2.66 
$ 2.17 
Stock-based compensation
 
$ 1,100,000 
$ 900,000 
$ 102,000 
Stock incentive plans - Stock-based compensation expense (Details) (USD $)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Stock-based compensation
 
 
 
Total stock-based compensation expense
$ 19,221,000 
$ 10,699,000 
$ 3,477,000 
Unrecognized stock-based compensation
9,000,000 
 
 
Expected period to recognize on a straight-line basis
2 years 2 months 12 days 
 
 
Capitalized stock-based employee compensation
 
 
RSUs
 
 
 
Stock-based compensation
 
 
 
Unrecognized stock-based compensation
14,600,000 
 
 
Expected period to recognize on a straight-line basis
2 years 1 month 6 days 
 
 
PRSU
 
 
 
Stock-based compensation
 
 
 
Unrecognized stock-based compensation
 
 
Cost of test revenue
 
 
 
Stock-based compensation
 
 
 
Total stock-based compensation expense
2,093,000 
1,353,000 
368,000 
Research and development
 
 
 
Stock-based compensation
 
 
 
Total stock-based compensation expense
6,158,000 
4,976,000 
1,545,000 
Selling and marketing
 
 
 
Stock-based compensation
 
 
 
Total stock-based compensation expense
3,956,000 
1,709,000 
688,000 
General and Administrative Expense
 
 
 
Stock-based compensation
 
 
 
Total stock-based compensation expense
$ 7,014,000 
$ 2,661,000 
$ 876,000 
Income Taxes - Additional Information (Details) (USD $)
12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Dec. 31, 2017
State
Dec. 31, 2017
Federal
Dec. 31, 2017
Federal
Research and development
Dec. 31, 2017
California
Dec. 31, 2017
California
Research and development
Dec. 31, 2018
Scenario, Forecast
Income tax provision (benefit)
$ (1,856,000)
$ 0 
$ 0 
 
 
 
 
 
 
 
Corporate tax rate
34.00% 
34.00% 
34.00% 
 
 
 
 
 
 
21.00% 
Provisional amount related to the remeasurement of certain deferred tax assets and liabilities
48,800,000 
 
 
 
 
 
 
 
 
 
Provisional amount related to the one-time transition tax on mandatory deemed repatriation of foreign earnings
 
 
 
 
 
 
 
 
 
Adjustment to deferred tax assets and valuation allowance
48,800,000 
 
 
 
 
 
 
 
 
 
Increase in valuation allowance
2,000,000 
33,400,000 
 
 
 
 
 
 
 
 
Increase in valuation allowance as result of operation
50,800,000 
 
 
 
 
 
 
 
 
 
Valuation allowance reduction due to Tax Act
48,800,000 
 
 
 
 
 
 
 
 
 
Net operating loss carryforwards
 
 
 
 
145,600,000 
292,200,000 
 
 
 
 
Tax credit carryforwards
 
 
 
 
 
 
5,500,000 
 
5,100,000 
 
Net operating loss carryforwards change in ownership percentage minimum
50.00% 
 
 
 
 
 
 
 
 
 
Unrecognized tax benefits
10,561,000 
7,791,000 
11,429,000 
5,661,000 
 
 
 
 
 
 
Interest and penalties related to unrecognized tax benefits
$ 0 
$ 0 
$ 0 
 
 
 
 
 
 
 
Number of tax years open for examination
 
 
 
 
 
3 years 
 
4 years 
 
 
Income Taxes - Schedule of components of loss before income taxes by U.S. and foreign jurisdictions (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Components of loss before income taxes
 
 
 
United States
$ 124,108 
$ 99,793 
$ 88,112 
Foreign
1,128 
463 
1,670 
Total
$ 125,236 
$ 100,256 
$ 89,782 
Income Taxes - Schedule of components of the provision for income taxes (Details) (USD $)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Deferred
 
 
 
Federal
$ (1,704,000)
 
 
State
(152,000)
 
 
Total Deferred
(1,856,000)
 
 
Tax Provision
$ (1,856,000)
$ 0 
$ 0 
Income Taxes - Schedule of reconciliation of the tax expense computed at the statutory federal rate and Company's tax expense (Details)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Reconciliation of the tax expense computed at the statutory federal rate and Company's tax expense
 
 
 
U.S. federal taxes at statutory rate
34.00% 
34.00% 
34.00% 
State taxes (net of federal benefit)
3.30% 
1.40% 
0.80% 
Stock-based compensation
(1.10%)
(1.70%)
 
Non-deductible expenses
 
0.20% 
(0.80%)
Foreign tax differential
(0.30%)
(0.20%)
(0.20%)
Other
 
1.10% 
 
Change in valuation allowance
(34.40%)
(34.80%)
(33.80%)
Change in deferred—Tax Reform
(39.00%)
 
 
Change in valuation allowance—Tax Reform
39.00% 
 
 
Total
1.50% 
 
 
Income Taxes - Schedule of net deferred tax assets (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Deferred tax assets:
 
 
Net operating loss carryforwards
$ 70,825 
$ 76,353 
Tax credits
15 
13 
Revenue recognition reserves
29,819 
14,291 
Accruals and other
5,544 
3,405 
Gross deferred tax assets
106,203 
94,062 
Valuation allowance
(95,687)
(93,666)
Net deferred tax assets
10,516 
396 
Deferred tax liabilities:
 
 
Property and equipment
(10,516)
(396)
Total deferred tax liabilities
$ (10,516)
$ (396)
Income Taxes - Schedule of reconciliation of unrecognized tax benefits (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Reconciliation of unrecognized tax benefits
 
 
 
Unrecognized tax benefits, beginning of period
$ 7,791 
$ 11,429 
$ 5,661 
Gross increases—current period tax positions
2,552 
782 
2,993 
Gross increases—prior period tax positions
218 
(4,420)
2,775 
Unrecognized tax benefits, end of period
$ 10,561 
$ 7,791 
$ 11,429 
Net loss per common share - Schedule of Earnings per share, basic and diluted (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Earnings Per Share [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Net loss
$ (40,493)
$ (27,402)
$ (28,557)
$ (26,928)
$ (24,848)
$ (24,971)
$ (24,847)
$ (25,590)
$ (123,380)
$ (100,256)
$ (89,782)
Shares used in computing net loss per share, basic and diluted
 
 
 
 
 
 
 
 
46,511,739 
33,176,305 
28,213,324 
Net loss per share, basic and diluted
 
 
 
 
 
 
 
 
$ (2.65)
$ (3.02)
$ (3.18)
Net loss per common share - Schedule of Antidilutive securities excluded from computation of earnings per share (Details)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Earnings Per Share [Line Items]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
11,982,150 
5,967,497 
4,193,153 
Options
 
 
 
Earnings Per Share [Line Items]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
4,114,874 
4,490,662 
3,659,713 
Warrants
 
 
 
Earnings Per Share [Line Items]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
1,962,074 
 
 
RSUs
 
 
 
Earnings Per Share [Line Items]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
2,387,120 
891,752 
482,818 
PRSU
 
 
 
Earnings Per Share [Line Items]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
 
530,005 
 
ESPP
 
 
 
Earnings Per Share [Line Items]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
59,259 
55,078 
45,963 
Series A convertible preferred stock
 
 
 
Earnings Per Share [Line Items]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
3,458,823 
 
 
Unvested early exercise of outstanding options subject to repurchase
 
 
 
Earnings Per Share [Line Items]
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
 
 
4,659 
Geographic information - Schedule of Revenue by country (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Geographic information
 
 
 
Revenue
$ 68,221 
$ 25,048 
$ 8,378 
United States
 
 
 
Geographic information
 
 
 
Revenue
62,446 
20,758 
5,432 
Canada
 
 
 
Geographic information
 
 
 
Revenue
3,226 
2,526 
2,112 
Rest of World
 
 
 
Geographic information
 
 
 
Revenue
$ 2,549 
$ 1,764 
$ 834 
Geographic information - Summary of Long-lived assets (net) by location (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Geographic information
 
 
 
Total long-lived assets, net
$ 30,341 
$ 23,793 
$ 18,709 
United States
 
 
 
Geographic information
 
 
 
Total long-lived assets, net
30,341 
23,793 
17,180 
Chile
 
 
 
Geographic information
 
 
 
Total long-lived assets, net
 
 
$ 1,529 
Selected Quarterly Data (Unaudited) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Sep. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Quarterly Financial Information Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Revenue
$ 25,399 
$ 18,148 
$ 14,336 
$ 10,338 
$ 9,236 
$ 6,276 
$ 5,581 
$ 3,955 
 
 
 
Loss from operations
(34,891)
(30,976)
(28,075)
(27,337)
(24,952)
(24,906)
(24,835)
(25,490)
(121,279)
(100,183)
(89,477)
Net loss
$ (40,493)
$ (27,402)
$ (28,557)
$ (26,928)
$ (24,848)
$ (24,971)
$ (24,847)
$ (25,590)
$ (123,380)
$ (100,256)
$ (89,782)
Net loss per share, basic and diluted
$ (0.78)
$ (0.57)
$ (0.66)
$ (0.64)
$ (0.69)
$ (0.77)
$ (0.77)
$ (0.80)
$ (2.65)
$ (3.02)
$ (3.18)
Subsequent Event - Additional Information (Details) (Amended 2017 Loan Agreement, Third Term Loan, USD $)
In Millions, unless otherwise specified
Feb. 26, 2018
Subsequent Event
Jun. 30, 2018
Scenario, Forecast
Subsequent Event [Line Items]
 
 
Term loan, borrowing amount
 
$ 20.0 
Term loan, line fee percentage on unused commitment amount
1.00%