UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes
As of July 30, 2021, the registrant had
Table of Contents
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Page |
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PART I. |
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1 |
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Item 1. |
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1 |
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1 |
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2 |
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3 |
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Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) |
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4 |
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6 |
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8 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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15 |
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Item 3. |
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23 |
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Item 4. |
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23 |
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PART II. |
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24 |
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Item 1. |
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24 |
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Item 1A. |
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24 |
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Item 2. |
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Item 3. |
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24 |
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Item 4. |
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24 |
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Item 5. |
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24 |
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Item 6. |
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25 |
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26 |
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i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Outset Medical, Inc.
Condensed Balance Sheets
(in thousands, except per share amounts)
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June 30, |
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December 31, |
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2021 |
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2020 |
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Restricted cash |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued compensation and related benefits |
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Accrued expenses and other current liabilities |
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Accrued warranty liability |
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Deferred revenue, current |
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Operating lease liabilities, current |
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Total current liabilities |
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Accrued interest, noncurrent |
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Deferred revenue, noncurrent |
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Operating lease liabilities, noncurrent |
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Term loan, noncurrent |
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Total liabilities |
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Commitments and contingencies (Note 6) |
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Stockholders' equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive (loss) income |
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Accumulated deficit |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
1
Outset Medical, Inc.
Condensed Statements of Operations
(Unaudited)
(in thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Revenue: |
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Product revenue |
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$ |
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$ |
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$ |
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$ |
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Service and other revenue |
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Total revenue |
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Cost of revenue: |
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Cost of product revenue |
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Cost of service and other revenue |
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Total cost of revenue |
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Gross profit |
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( |
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( |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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Interest income and other income, net |
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Interest expense |
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( |
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( |
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( |
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( |
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Change in fair value of redeemable convertible preferred stock warrant liability |
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— |
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( |
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— |
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( |
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Loss before provision for income taxes |
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( |
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( |
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( |
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( |
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Provision for income taxes |
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— |
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- |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss attributable to common stockholders, basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share attributable to common stockholders, basic and diluted |
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$ |
( |
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$ |
( |
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$ |
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$ |
( |
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Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
2
Outset Medical, Inc.
Condensed Statements of Comprehensive Loss
(Unaudited)
(in thousands)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive loss: |
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Unrealized gain (loss) on available-for-sale securities |
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( |
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( |
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( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
) |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
Outset Medical, Inc.
Condensed Statement of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(Unaudited)
(in thousands)
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Redeemable Convertible Preferred Stock |
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Common Stock |
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Additional Paid-in |
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Accumulated Other Comprehensive |
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Accumulated |
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Total Stockholders’ Equity |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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(Deficit) |
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Balance as of December 31, 2020 |
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— |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of common stock through employee stock purchase plan |
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— |
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— |
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— |
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— |
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— |
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Stock option exercises |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Unrealized loss on available-for-sale securities |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of March 31, 2021 |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Issuance of common stock upon follow-on public offering, net of issuance costs |
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— |
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— |
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— |
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— |
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Issuance of common stock for settlement of RSUs |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock option exercises |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Unrealized loss on available-for-sale securities |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Balance as of June 30, 2021 |
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— |
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$ |
— |
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$ |
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$ |
( |
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$ |
( |
) |
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$ |
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|
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
Outset Medical, Inc.
Condensed Statement of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(Unaudited)
(in thousands)
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Redeemable Convertible Preferred Stock |
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Common Stock |
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Additional Paid-in |
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Accumulated Other Comprehensive |
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Accumulated |
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Total Stockholders’ Equity |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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(Deficit) |
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Balance as of December 31, 2019 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
|
Issuance of Series E redeemable convertible preferred stock, net of issuance costs |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock on settlement of accrued dividend |
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— |
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( |
) |
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— |
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— |
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Deemed dividend on settlement of accrued dividend |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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Stock option exercises |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Unrealized loss on available-for-sale securities |
|
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
|
Adjustment to redemption value on redeemable convertible preferred stock |
|
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— |
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— |
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— |
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( |
) |
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— |
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|
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— |
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|
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( |
) |
|
Net loss |
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— |
|
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
|
Balance as of March 31, 2020 |
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|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Stock option exercises |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Unrealized gain on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of June 30, 2020 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
5
Outset Medical, Inc.
Condensed Statements of Cash Flows
(Unaudited)
(in thousands)
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
Non-cash lease expense |
|
|
|
|
|
|
|
|
|
Non-cash interest expense |
|
|
|
|
|
|
|
|
|
Accretion of discount on investments, net |
|
|
|
|
|
|
|
|
|
Provision for accounts receivable |
|
|
|
|
|
|
|
|
|
Provision for inventories |
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
Change in fair value of redeemable convertible preferred stock warrant liability |
|
|
— |
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
|
Inventories |
|
|
( |
) |
|
|
( |
) |
|
Prepaid expenses and other assets |
|
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
( |
) |
|
|
( |
) |
|
Accrued payroll and related benefits |
|
|
( |
) |
|
|
|
|
|
Accrued expenses and other current liabilities |
|
|
|
|
|
|
|
|
|
Accrued warranty liability |
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
|
|
|
|
|
|
|
Operating lease liabilities |
|
|
( |
) |
|
|
|
|
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
|
Purchases of investment securities |
|
|
( |
) |
|
|
— |
|
|
Sales and maturities of investment securities |
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
( |
) |
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock upon follow-on public offering, net of issuance costs |
|
|
|
|
|
|
— |
|
|
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs |
|
|
— |
|
|
|
|
|
|
Proceeds from stock option exercises and employee stock purchase plan purchases |
|
|
|
|
|
|
|
|
|
Repayment of finance lease |
|
|
— |
|
|
|
( |
) |
|
Payment of deferred offering costs |
|
|
— |
|
|
|
( |
) |
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
|
Cash, cash equivalents and restricted cash as of beginning of period |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash as of end of period |
|
$ |
|
|
|
$ |
|
|
|
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
|
|
|
$ |
— |
|
|
Cash paid for interest |
|
$ |
|
|
|
$ |
|
|
|
Cash paid for amounts included in the measurement of operating lease liabilities |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
6
Outset Medical, Inc.
Condensed Statements of Cash Flows
(Unaudited)
(in thousands)
|
|
|
|
|
|||||
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Supplemental non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Capital expenditures included in accounts payable and accrued expenses |
|
$ |
|
|
|
$ |
|
|
|
Transfer of inventories to property and equipment |
|
$ |
|
|
|
$ |
— |
|
|
Right-of-use assets obtained in exchange for lease liabilities |
|
$ |
— |
|
|
$ |
|
|
|
Deemed dividend on settlement of accrued dividend |
|
$ |
— |
|
|
$ |
|
|
|
Adjustment to redemption value on redeemable convertible preferred stock |
|
$ |
— |
|
|
$ |
|
|
|
Issuance of common stock on settlement of accrued dividend |
|
$ |
— |
|
|
$ |
|
|
|
Debt issuance costs included in accrued expenses |
|
$ |
— |
|
|
$ |
|
|
|
Deferred offering costs included in accrued expenses |
|
$ |
— |
|
|
$ |
|
|
|
Transfer of property and equipment to inventories |
|
$ |
— |
|
|
$ |
|
|
7
Outset Medical, Inc.
Notes to Condensed Financial Statements
1. Description of Business
Outset Medical, Inc. (the “Company”) is a medical technology company pioneering a first-of-its-kind technology to reduce the cost and complexity of dialysis. The Tablo® Hemodialysis System, FDA cleared for use from the hospital to the home, represents a significant technological advancement that transforms the dialysis experience for patients and operationally simplifies it for providers. Tablo serves as a single enterprise solution that can be utilized across the continuum of care, allowing dialysis to be delivered anytime, anywhere and by anyone. The integration of water purification and on-demand dialysate production enables Tablo to serve as a dialysis clinic on wheels, with 2-way wireless data transmission and a proprietary data analytics platform powering a new holistic approach to dialysis care. The Company’s headquarters are located in San Jose, CA.
The Company’s registration statement on Form S-1 related to its initial public offering (“IPO”) was declared effective by the Securities and Exchange Commission (“SEC”) on September 14, 2020, and the Company’s common stock began trading on the Nasdaq Global Select Market on September 15, 2020. Upon the completion of the IPO, the Company sold
On April 13, 2021, the Company completed a follow-on public offering and sold
Reverse Stock Split
Liquidity
Since inception, the Company has incurred net losses and negative cash flows from operations. During the six months ended June 30, 2021 and 2020, the Company incurred a net loss of $
As of June 30, 2021, the Company had cash, cash equivalents and short-term investments of $
Basis of Presentation
The accompanying condensed financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, that are necessary for the fair statement of the Company’s financial position, results of operations, comprehensive loss and cash flows for the interim periods presented. The financial data and the other financial information disclosed in these notes to the condensed financial statements related to the three-and six-month period are also unaudited. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results of operations to be anticipated for any other future annual or interim period. The condensed balance sheet as of December 31, 2020 included herein was derived from the audited financial statements as of that date.
8
These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and related notes for the year ended December 31, 2020, which are included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with SEC on March 22, 2021 (“2020 Annual Report”).
All share amounts disclosed in the notes to the condensed financial statements are rounded to the nearest thousand except for per share data.
2. Summary of Significant Accounting Policies
During the three and six months ended June 30, 2021, there have been no changes to the Company’s significant accounting policies as described in its 2020 Annual Report that have had a material impact on the Company’s condensed financial statements and related notes, except as described below.
Cash, Cash Equivalents and Restricted Cash
As of June 30, 2021 and December 31, 2020, the restricted cash balance of $
The following table provides a reconciliation of cash, cash equivalents and restricted cash that sum to the total of the amounts shown in the accompanying condensed statements of cash flows (in thousands):
|
|
|
June 30, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Restricted cash |
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
|
$ |
|
|
Stock-Based Compensation Expense
Stock-based compensation expense relates to stock options with a service-based vesting condition, stock options with performance and market-based vesting conditions, stock purchase rights under the Company’s Employee Stock Purchase Plan (“ESPP”), restricted stock units (“RSUs”) and performance stock units (“PSUs”). Stock-based compensation expense for the Company’s stock-based awards is based on their grant date fair value.
Service-based options granted to an optionee generally vest at a rate of
The Black-Scholes model considers several variables and assumptions in estimating the fair value of service-based stock options and stock purchase rights under the ESPP. These variables include the per share fair value of the underlying common stock, exercise price, expected term, risk-free interest rate, expected annual dividend yield and expected stock price volatility over the expected term. For all service-based stock options granted, the Company calculates the expected term using the simplified method for “plain vanilla” stock option awards.
For stock options with performance and market-based vesting conditions, stock-based compensation expense is recognized when it is considered probable that the performance vesting condition will be satisfied. Stock-based compensation expense related to these options is recognized using the accelerated attribution method and not reversed if the achievement of the market condition does not occur. The fair value of these stock options is estimated using the Monte Carlo approach.
RSUs granted to an optionee generally vest at a rate of
9
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12, Income Taxes (Topic 740) (“ASU 2019-12”), which simplifies the accounting for income taxes, primarily by eliminating certain exceptions to ASC 740. The Company early adopted ASU 2019-12 on a modified retrospective basis as of
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial assets and certain other instruments, including but not limited to available-for-sale debt securities. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. ASU 2016-13 requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022 for all entities except SEC reporting companies that are not smaller reporting companies. ASU 2016-13 will be effective for the Company beginning January 1, 2023. The Company is currently evaluating the impact of the adoption of ASU 2016-13 on its financial statements.
3. Revenue and Deferred Revenue
Disaggregation of Revenue
Revenue by source consists of the following (in thousands):
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Consoles |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Consumables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total product revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service and other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
For the three and six months ended June 30, 2021, $
Performance Obligations and Contract Liabilities
As of June 30, 2021, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer service contracts that are unsatisfied or partially unsatisfied was $
The contract liabilities consist of deferred revenue which represents payments received in advance of revenue recognition related to console service agreements and for prepayments for products or services yet to be delivered. Revenue under these agreements is recognized over the related service period.
10
Revenue recorded during the three and six months ended June 30, 2021 included $
4. Fair Value Measurements
The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
|
|
|
|
|
June 30, 2021 |
|
|||||||||||||
|
|
|
Valuation Hierarchy |
|
Amortized Costs |
|
|
Gross Unrealized Holding Gains |
|
|
Gross Unrealized Holding Losses |
|
|
Aggregate Fair Value |
|
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
Level 1 |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt |
|
Level 2 |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Commercial paper |
|
Level 2 |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Yankee debt securities |
|
Level 2 |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total cash equivalents and short-term investments |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
December 31, 2020 |
|
|||||||||||||
|
|
|
|
|
Amortized Costs |
|
|
Gross Unrealized Holding Gains |
|
|
Gross Unrealized Holding Losses |
|
|
Aggregate Fair Value |
|
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
Level 1 |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
|
Level 1 |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Corporate debt |
|
Level 2 |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Total cash equivalents and short-term investments |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
As of June 30, 2021, the remaining contractual maturities for available-for-sale securities were between one month to sixteen months.
Impairment assessments are made at the individual security level at each reporting period. When the fair value of an available-for-sale security is less than its cost at the balance sheet date, a determination is made as to whether the impairment is other-than-temporary and, if it is other-than-temporary, an impairment loss is recognized in earnings equal to the difference between the investment’s amortized cost and fair value at such date. There were
5. Balance Sheet Components
Inventories
Inventories consist of the following (in thousands):
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
Raw materials |
|
$ |
|
|
|
$ |
|
|
|
Work in process |
|
|
|
|
|
|
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
|
Total inventories |
|
$ |
|
|
|
$ |
|
|
11
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
Accrued inventory |
|
$ |
|
|
|
$ |
|
|
|
Accrued research and development expenses |
|
|
|
|
|
|
|
|
|
Accrued professional services |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total accrued expenses and other current liabilities |
|
$ |
|
|
|
$ |
|
|
Accrued Warranty Liability
The change in accrued warranty liability is presented in the following table (in thousands):
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
Balance at the beginning of the period |
|
$ |
|
|
|
$ |
|
|
|
Additions charge to cost of product revenue |
|
|
|
|
|
|
|
|
|
Consumption |
|
|
( |
) |
|
|
( |
) |
|
Balance at the end of the period |
|
$ |
|
|
|
$ |
|
|
6. Commitments and Contingencies
Litigation
From time to time, the Company may become involved in legal proceedings or investigations, which could have an adverse impact on its reputation, business and financial condition and divert the attention of the Company’s management from the operation of the Company’s business. The Company is not presently a party to any legal proceedings that, if determined adversely to the Company, would individually or taken together have a material adverse effect on its business, results of operations, financial condition or cash flows.
Indemnifications
In the ordinary course of business, the Company often includes standard indemnification provisions in its arrangements with its partners, customers and suppliers. Pursuant to these provisions, the Company may be obligated to indemnify such parties for losses or claims suffered or incurred in connection with its service, breach of representations or covenants, intellectual property infringement or other claims made against such parties. These provisions may limit the time within which an indemnification claim can be made. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, the Company has not incurred any material costs as a result of such indemnification obligations and has not accrued any liabilities related to such obligations in these financial statements.
7. Term Loan
Term loan consists of the following (in thousands):
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
2021 |
|
|
2020 |
|
||
|
Principal of term loan |
|
$ |
|
|
|
$ |
|
|
|
Unamortized debt discount |
|
|
( |
) |
|
|
( |
) |
|
Total term loan, noncurrent |
|
$ |
|
|
|
$ |
|
|
SVB Loan and Security Agreement
On July 2, 2020, the Company entered into a senior secured term loan facility with Silicon Valley Bank (“SVB”) (the “SVB Loan and Security Agreement”), which provides for a $
The SVB Term Loan matures on
12
There is also a final payment fee equal to
In the event of a default or change in control, all unpaid principal and all accrued and unpaid interest amounts (if any) become immediately due and payable including the prepayment fee. Events of default include, but are not limited to, a payment default, a material adverse change, and insolvency. The SVB Term Loan is secured by substantially all of the Company’s assets, including all of the capital stock held by the Company, if any (subject to a
Debt issuance costs paid directly to SVB and other debt issuance costs amounting to $
8. Equity Incentive Plan
Equity Incentive Plans
On January 1, 2021, the number of shares of common stock reserved for the issuance of awards under the Company’s 2020 Equity Incentive Plan (the “2020 Plan”) was increased by
Employees Share Purchase Plan (ESPP)
On January 1, 2021, the number of shares of common stock reserved for purchase under the Company’s Employee Share Purchase Plan (“ESPP”) was increased by
The price at which common stock is purchased under the ESPP is equal to
Stock-Based Compensation Expense
The following table sets forth stock-based compensation expense included in the accompanying condensed statements of operations (in thousands):
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Cost of revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Stock Options with Performance and Market Conditions
As of December 31, 2020, the Company had
For the three and six months ended June 30, 2021, the Company recorded stock-based compensation expense of $
13
9. Income Taxes
For each of the three and six months ended June 30, 2021 and 2020, the Company incurred an income tax provision of an insignificant amount . The U.S. federal and state net deferred tax assets have been fully offset by a valuation allowance, as the Company believes it is not more likely than not that the deferred tax assets will be realized.
10. Net Loss Per Share Attributable to Common Stockholders
A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share attributable to common stockholders is as follows (in thousands except per share amounts):
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Adjustment to redemption value on redeemable convertible preferred stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Deemed dividend on settlement of accrued dividend |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Net loss attributable to common stockholders, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares of common stock, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to common stockholders, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The following outstanding potentially dilutive shares were excluded from the calculation of diluted net loss per share due to their anti-dilutive effect (in thousands):
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Stock options to purchase common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant to purchase common stock |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Restricted stock units |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Shares committed under ESPP |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
Redeemable convertible preferred stock, on an as-if converted basis |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Warrants to purchase redeemable convertible preferred stock |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11. Subsequent Event
On July 1, 2021, the Company announced the departure of Rebecca Chambers from her position as the Company’s Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer, effective July 16, 2021 as well as the appointment of Nabeel Ahmed, the Company’s Vice President, Finance, as the Company’s Interim Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer, effective upon Ms. Chambers’ departure until such time as a permanent replacement was named. Subsequently, the Company announced that Nabeel Ahmed transitioned to the permanent role of Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer, effective July 30, 2021.
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read together with our unaudited condensed financial statements and related notes and other financial information included elsewhere in this Quarterly Report, as well as our audited financial statements and notes thereto and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on March 22, 2021 (“2020 Annual Report”).
In addition to historical financial information, this discussion and other parts of this report contain forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact contained in this Quarterly Report are forward-looking statements. The forward-looking statements in this report are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Such risks and uncertainties include those described throughout this Quarterly Report, including in this discussion as well as in the section titled “Risk Factors” under Part II, Item 1A below. The forward-looking statements in this Quarterly Report are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements, like all statements in this report, speak only as of their date, and, except as required by law we undertake no obligation to update or revise these statements, whether as a result of any new information, future developments or otherwise. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
Overview
Our technology is designed to elevate the dialysis experience for patients, and help providers overcome traditional care delivery challenges. Requiring only an electrical outlet and tap water to operate, Tablo frees patients and providers from the burdensome infrastructure required to operate traditional dialysis machines. The integration of water purification and on-demand dialysate production enables Tablo to serve as a dialysis clinic on wheels and allows providers to standardize to a single technology platform from the hospital to the home. Tablo is also intelligent and connected, with automated documentation and the ability to integrate with electronic medical record reporting, along with streamlined remote machine management to maximize device uptime. We have generated meaningful evidence to demonstrate that providers can realize significant operational efficiencies, including reducing the cost of their dialysis programs by up to 80% in the intensive care unit. In addition, Tablo has been shown to deliver robust clinical care. In studies we have conducted, patients have reported experiencing fewer symptoms and better quality sleep while on Tablo. We believe Tablo empowers patients, who have traditionally been passive recipients of care, to regain agency and ownership of their treatment. Tablo is cleared by the U.S. Food and Drug Administration (“FDA”) for use in the hospital, clinic or home setting.
We designed Tablo from the ground up to be a single enterprise solution that can be utilized across the continuum of care, allowing dialysis to be delivered anytime, anywhere and by anyone. Tablo is comprised of a compact console with integrated water purification, on-demand dialysate production and a simple-to-use touchscreen interface. With Tablo, we are bringing data to dialysis. Tablo is built to live in a connected setting with cloud-based system monitoring, patient analytics, remote treatment monitoring and clinical recordkeeping and the ability to activate new capabilities and enhancements through wireless software updates. Tablo’s data analytics and connectivity also enable predictive preventative maintenance to maximize machine uptime. Unlike existing hemodialysis machines, which have limited clinical versatility across care settings and are generally burdened by specialized and expensive infrastructure, Tablo is a single enterprise dialysis solution that can be seamlessly utilized across different care settings and for multiple clinical needs.
Driving adoption of Tablo in the acute care setting has been our primary focus to date. We have invested in growing our economic and clinical evidence, built a veteran sales and clinical support team with significant expertise, and implemented a comprehensive training and customer experience program. Our experience in the acute market has demonstrated Tablo’s clinical flexibility and operational versatility, while also delivering meaningful cost savings to the providers. We plan to continue leveraging our commercial infrastructure to broaden our installed base in the acute care market as well as driving utilization and fleet expansion with our existing customers. While the COVID-19 pandemic has presented opportunities to demonstrate the real-world benefits of Tablo over traditional machines, we believe these benefits, in addition to the other advantages of Tablo, are continuing to drive customer purchasing decisions.
Tablo is also well suited for home-based dialysis. Tablo was cleared by the FDA for use in patients with acute and/or chronic renal failure in September 2014. Subsequently, on March 31, 2020, Tablo was cleared by the FDA for patient use in the home. Our ability to reduce training time, patient dropout, preparation and set up time, and the total treatment time required to deliver dialysis in the home can drive efficiency and economic improvements to the home care model. In our home investigational device exemption (“IDE”) trial, patients reported specific quality of life improvements compared to their experience on the incumbent home dialysis machine. To penetrate and grow this market successfully, we are focused on refining our home distribution, logistics and support systems to help ensure they are ready for rapid scale. We are also working with providers, patients and payors to increase awareness and adoption of transitional care units (“TCUs”) as a bridge to home based therapy. To demonstrate the cost advantages of Tablo in the home setting, we will also be collecting additional patient clinical experience and outcomes data.
15
We sell our solution through our direct sales organization, which covers most major metropolitan markets in the United States. As of June 30, 2021, our sales organization is comprised of 29 capital sales team members, responsible for generating new customer demand for Tablo, and 70 clinical sales team members responsible for driving utilization and fleet expansion of Tablo consoles at existing customer sites. In addition, our field service team comprised of 78 members provides maintenance services and product support to Tablo customers. The same sales organization and field service team drive Tablo penetration in both the acute and home markets. We believe the ability to leverage one team to serve both markets will result in significant productivity and cost optimization as we continue to scale our business.
We are continuing to execute a well-defined strategy designed to expand gross margins. First, we have successfully begun production at our own console manufacturing facility. Second, we are adding a second-source contract manufacturer for our cartridges to help gain higher efficiency and lower material and logistics cost. Third, we will continue to drive scale across our console platform to leverage our supply base and help improve our manufacturing efficiency. Fourth, we will continue to utilize our cloud-based data system, as well as enhanced product performance, to help drive down the cost of service.
We generate revenue primarily from the initial sale of Tablo consoles, and recurring sales of per-treatment consumables, including the Tablo cartridge, which generates significant total revenue over the life of the console. We generate additional revenue via annual service contracts and shipping and handling charged to customers. Our total revenue was $25.2 million and $11.7 million for the three months ended June 30, 2021 and 2020, respectively, and $48.1 million and $18.9 million for the six months ended June 30, 2021 and 2020, respectively.
For the three months ended June 30, 2021 and 2020, we incurred net losses of $30.2 million and $26.5 million, respectively, and for the six months ended June 30, 2021 and 2020, we incurred net losses of $60.2 million and $47.2 million, respectively. As of June 30, 2021, we had an accumulated deficit of $554.3 million.
On September 17, 2020, we completed our initial public offering (“IPO”), in which we sold 10,293,777 shares of common stock (which included 1,342,666 shares that were offered and sold pursuant to the full exercise of the IPO underwriters’ option to purchase additional shares in connection with the IPO) at a price to the public of $27.00 per share. We received aggregate net proceeds of approximately $254.8 million after deducting offering costs, underwriting discounts and commissions of approximately $23.1 million. Upon the closing of the IPO, all of our outstanding redeemable convertible preferred stock automatically converted into shares of common stock.
On April 13, 2021, we completed a follow-on public offering and sold 2,945,864 shares of our common stock (which included 445,864 shares that were offered and sold pursuant to the full exercise of the underwriters’ option to purchase additional shares) at a price to the public of $53.50 per share. We received aggregate net proceeds of approximately $149.1 million after deducting offering costs, underwriting discounts and commissions of $8.5 million.
Impacts of the COVID-19 pandemic
We believe that the COVID-19 pandemic has highlighted the limitations of traditional machines and the benefits of Tablo, driving an increase in demand for Tablo during 2020. We also believe the advantages of Tablo highlighted by the pandemic are now embedded as one of the many factors driving our customers’ purchasing decisions and do not expect to experience significant revenue driven solely by COVID-19 in future periods. However, the duration and extent of the COVID-19 pandemic remain uncertain, particularly in light of ongoing vaccination efforts and emerging variant strains of the virus, and we cannot predict with certainty the ultimate impact of the COVID-19 pandemic and related containment measures on our business.
In order to operate in a safe manner, we continue to monitor and follow the latest health and safety guidelines of the U.S. Centers for Disease Control and Prevention, Occupational Safety and Health Administration, and local and state public health departments where we operate. These guidelines continue to change in light of local circumstances related to vaccine availability, population vaccination rates and emerging variant strains of the virus (including the Delta variant which appears to be highly transmissible). For employees working on-site, we continue to follow masking protocols consistent with evolving health and safety guidelines, facilitate social distancing and practice increased sanitizing standards. We have strongly encouraged all of our employees to get vaccinated, and continue to provide vaccination site information and COVID-19 testing at our facilities. We also actively support remote work arrangements. In addition, we have created a business continuity plan and incident management team to respond quickly and effectively to changes in order to offer customers uninterrupted products, services and support while safeguarding the best interest of employees, suppliers and stockholders.
Our business may also be impacted by an escalation or a continuation of the COVID-19 pandemic. While the operations at our contract manufacturing partners’ facilities and our outsourced business administration service provider, TACNA, for our facility in Tijuana, Mexico, have not yet experienced significant disruption as a result of the pandemic, the possibility that such disruption may occur remains. Additionally, the COVID-19 pandemic has disrupted the operations of certain of our third-party suppliers, resulting in increased lead-times, higher component costs and lower allocations for our purchase of some components (including certain critical components) and, in certain cases, requiring us to procure materials from alternative sources or incur higher logistical expenses. We have worked closely with our manufacturing partners and suppliers to enable us to source key components and maintain appropriate
16
inventory levels to meet customer demand and have not experienced material disruptions in our supply chain to date. How long the pandemic and measures intended to contain the spread of COVID-19 will continue remains uncertain and depends on ongoing developments, including but not limited to any resurgences of the virus including emerging variant strains such as the Delta variant, federal, state and local government actions taken in response, and continued availability, effectiveness and public acceptance of COVID-19 vaccines. As a result, we cannot predict what effect COVID-19 and the associated containment measures will ultimately have on our suppliers and vendors, in particular for any of our suppliers and vendors that may not qualify as essential businesses and suffer more significant or lengthier disruptions to their business operations. There is no assurance that we will not experience more significant disruptions in our supply chain in the future, particularly if the operations of our contract manufacturing partners, our critical single source component providers, or the facility we operate in Tijuana, Mexico in collaboration with TACNA, are more severely impacted by the pandemic and associated containment measures.
Results of Operations
The following table summarizes our results of operations for the three and six months ended June 30, 2021 and 2020 (in thousands):
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
|
$ |
20,628 |
|
|
$ |
9,697 |
|
|
$ |
38,838 |
|
|
$ |
15,623 |
|
|
Service and other revenue |
|
|
4,588 |
|
|
|
2,045 |
|
|
|
9,294 |
|
|
|
3,309 |
|
|
Total revenue |
|
|
25,216 |
|
|
|
11,742 |
|
|
|
48,132 |
|
|
|
18,932 |
|
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenue |
|
|
22,077 |
|
|
|
15,291 |
|
|
|
42,654 |
|
|
|
24,853 |
|
|
Cost of service and other revenue |
|
|
2,087 |
|
|
|
1,215 |
|
|
|
4,137 |
|
|
|
2,407 |
|
|
Total cost of revenue |
|
|
24,164 |
|
|
|
16,506 |
|
|
|
46,791 |
|
|
|
27,260 |
|
|
Gross profit |
|
|
1,052 |
|
|
|
(4,764 |
) |
|
|
1,341 |
|
|
|
(8,328 |
) |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
8,032 |
|
|
|
6,053 |
|
|
|
15,602 |
|
|
|
11,891 |
|
|
Sales and marketing |
|
|
13,204 |
|
|
|
9,244 |
|
|
|
26,353 |
|
|
|
16,526 |
|
|
General and administrative |
|
|
9,722 |
|
|
|
4,848 |
|
|
|
18,968 |
|
|
|
8,374 |
|
|
Total operating expenses |
|
|
30,958 |
|
|
|
20,145 |
|
|
|
60,923 |
|
|
|
36,791 |
|
|
Loss from operations |
|
|
(29,906 |
) |
|
|
(24,909 |
) |
|
|
(59,582 |
) |
|
|
(45,119 |
) |
|
Interest income and other income, net |
|
|
164 |
|
|
|
67 |
|
|
|
276 |
|
|
|
527 |
|
|
Interest expense |
|
|
(431 |
) |
|
|
(1,032 |
) |
|
|
(853 |
) |
|
|
(2,033 |
) |
|
Change in fair value of redeemable convertible preferred stock warrant liability |
|
|
— |
|
|
|
(631 |
) |
|
|
— |
|
|
|
(530 |
) |
|
Loss before provision for income taxes |
|
|
(30,173 |
) |
|
|
(26,505 |
) |
|
|
(60,159 |
) |
|
|
(47,155 |
) |
|
Provision for income taxes |
|
|
35 |
|
|
|
— |
|
|
|
74 |
|
|
|
- |
|
|
Net loss |
|
$ |
(30,208 |
) |
|
$ |
(26,505 |
) |
|
$ |
(60,233 |
) |
|
$ |
(47,155 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparison of the Three and Six Months Ended June 30, 2021 and 2020
Revenue
|
|
|
Three Months Ended June 30, |
|
|
Change |
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||||||||||||
|
(dollars in thousands) |
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenue |
|
$ |
20,628 |
|
|
$ |
9,697 |
|
|
$ |
10,931 |
|
|
|
113 |
% |
|
$ |
38,838 |
|
|
$ |
15,623 |
|
|
$ |
23,215 |
|
|
|
149 |
% |
|
Service and other revenue |
|
|
4,588 |
|
|
|
2,045 |
|
|
|
2,543 |
|
|
|
124 |
% |
|
|
9,294 |
|
|
|
3,309 |
|
|
|
5,985 |
|
|
|
181 |
% |
|
Total revenue |
|
$ |
25,216 |
|
|
$ |
11,742 |
|
|
|
13,474 |
|
|
|
115 |
% |
|
$ |
48,132 |
|
|
$ |
18,932 |
|
|
|
29,200 |
|
|
|
154 |
% |
17
Product revenue increased by $10.9 million, or 113% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, driven by a $8.7 million increase in consoles revenue and a $2.2 million increase in consumables revenue. The increase in consoles revenue was driven by new customer adoption, fleet expansion across existing customer sites, higher average selling prices and a $0.7 million increase in console leasing revenue. The increase in consumables revenue was driven by our growth in console installed base.
Product revenue increased by $23.2 million, or 149% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020, driven by a $18.4 million increase in consoles revenue and a $4.8 million increase in consumables revenue. The increase in consoles revenue was driven by new customer adoption, fleet expansion across existing customer sites, higher average selling prices and a $1.4 million increase in console leasing revenue. The increase in consumables revenue was driven by our growth in console installed base.
Service and other revenue increased for the three and six months ended June 30, 2021 from the three and six months ended June 30, 2020. The increase was primarily due to services associated with our growth in console installed base, including leased consoles.
Cost of Revenue, Gross Profit and Gross Margin
|
|
|
Three Months Ended June 30, |
|
|
Change |
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||||||||||||
|
(dollars in thousands) |
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||||||
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product revenue |
|
$ |
22,077 |
|
|
$ |
15,291 |
|
|
$ |
6,786 |
|
|
|
44 |
% |
|
$ |
42,654 |
|
|
$ |
24,853 |
|
|
$ |
17,801 |
|
|
|
72 |
% |
|
Cost of service and other revenue |
|
|
2,087 |
|
|
|
1,215 |
|
|
|
872 |
|
|
|
72 |
% |
|
|
4,137 |
|
|
|
2,407 |
|
|
|
1,730 |
|
|
|
72 |
% |
|
Total cost of revenue |
|
$ |
24,164 |
|
|
$ |
16,506 |
|
|
|
7,658 |
|
|
|
46 |
% |
|
$ |
46,791 |
|
|
$ |
27,260 |
|
|
|
19,531 |
|
|
|
72 |
% |
|
Gross profit |
|
|
1,052 |
|
|
|
(4,764 |
) |
|
|
5,816 |
|
|
|
122 |
% |
|
|
1,341 |
|
|
|
(8,328 |
) |
|
|
9,669 |
|
|
|
116 |
% |
|
Gross margin |
|
|
4.2 |
|
% |
|
(40.6 |
) |
% |
|
|
|
|
|
|
|
|
|
2.8 |
|
% |
|
(44.0 |
) |
% |
|
|
|
|
|
|
|
Cost of product revenue increased by $6.8 million, or 44% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. This increase was primarily due to higher console and consumable volume of $12.8 million and higher depreciation expense for leased consoles of $0.2 million. This was offset by a $5.9 million reduction in product costs and a $0.4 million decrease in manufacturing overhead.
Cost of product revenue increased by $17.8 million, or 72% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. This increase was primarily due to higher console and consumable volume of $27.8 million, higher depreciation expense for leased consoles of $0.4 million and higher manufacturing overhead of $0.1 million. This was offset by a $10.6 million reduction in product costs.
Cost of service and other revenue increased by $0.9 million, or 72% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. This increase was primarily due to additional headcount costs in our service department, which were absorbed across our larger installed base.
Cost of service and other revenue increased by $1.7 million, or 72% for the six months ended June 30, 2021 as compared to the three months ended June 30, 2020. This increase was primarily due to additional headcount costs in our service department, which were absorbed across our larger installed base.
Gross profit increased by $5.8 million, or 122% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The gross margin percentage improved by 44.8 percentage points for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, driven primarily by the impact of our cost reduction activities.
Gross profit increased by $9.7 million, or 116% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The gross margin percentage improved by 46.8 percentage points for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, driven primarily by the impact of our cost reduction activities.
18
Operating Expenses
|
|
|
Three Months Ended June 30, |
|
|
Change |
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||||||||||||
|
(dollars in thousands) |
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
$ |
8,032 |
|
|
$ |
6,053 |
|
|
$ |
1,979 |
|
|
|
33 |
% |
|
$ |
15,602 |
|
|
$ |
11,891 |
|
|
$ |
3,711 |
|
|
|
31 |
% |
|
Sales and marketing |
|
|
13,204 |
|
|
|
9,244 |
|
|
|
3,960 |
|
|
|
43 |
% |
|
|
26,353 |
|
|
|
16,526 |
|
|
|
9,827 |
|
|
|
59 |
% |
|
General and administrative |
|
|
9,722 |
|
|
|
4,848 |
|
|
|
4,874 |
|
|
|
101 |
% |
|
|
18,968 |
|
|
|
8,374 |
|
|
|
10,594 |
|
|
|
127 |
% |
|
Total operating expenses |
|
$ |
30,958 |
|
|
$ |
20,145 |
|
|
|
10,813 |
|
|
|
54 |
% |
|
$ |
60,923 |
|
|
$ |
36,791 |
|
|
|
24,132 |
|
|
|
66 |
% |
Research and development expenses increased by $2.0 million, or 33% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase was primarily due to a $1.1 million increase in compensation and personnel costs, which includes a $0.5 million increase in stock-based compensation expense, and a $0.8 million increase in consultant services.
Research and development expenses increased by $3.7 million, or 31% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The increase was primarily due to a $3.2 million increase in compensation and personnel costs, which includes a $1.6 million increase in stock-based compensation expense, and a $0.8 million increase in consultant services. The increases were partially offset by a $0.4 million decrease in supplies and materials.
Sales and marketing expenses increased by $4.0 million, or 43% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase was primarily due to a $2.3 million increase in compensation and personnel costs, which includes a $1.0 million increase in stock-based compensation expense, a $0.9 million increase in clinical sales consultant services, a $0.5 million increase in travel expenses and a $0.2 million increase in allocated costs for facilities and information technology to support the general expansion of our operations.
Sales and marketing expenses increased by $9.8 million, or 59% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The increase was primarily due to a $6.9 million increase in compensation and personnel costs, which includes a $2.6 million increase in stock-based compensation expense, a $2.0 million increase in clinical sales consultant services, a $0.4 million increase in allocated costs for facilities and information technology to support the general expansion of our operations, a $0.2 million in travel expenses and a $0.2 million increase in freight expenses.
General and administrative expenses increased by $4.9 million, or 101% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The increase was primarily due to a $3.1 million increase in compensation and personnel costs, which includes a $1.8 million increase in stock-based compensation expense, a $0.9 million increase in insurance costs, a $0.6 million increase in outside services costs, and a $0.4 million increase in allocated costs for facilities and information technology to support the general expansion of our operations. The increases were partially offset by a $0.1 million decrease in professional and consultant services.
General and administrative expenses increased by $10.6 million, or 127% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The increase was primarily due to a $6.6 million increase in compensation and personnel costs, which includes a $4.3 million increase in stock-based compensation expense, a $1.8 million increase in insurance costs, a $1.2 million increase in allocated costs for facilities and information technology to support the general expansion of our operations, a $0.6 million increase in outside services costs, and a $0.5 million increase in professional and consultant services. The increases were partially offset by a $0.1 million decrease in depreciation expense.
19
Other Income (Expense), Net
|
|
|
Three Months Ended June 30, |
|
|
Change |
|
|
Six Months Ended June 30, |
|
|
Change |
|
||||||||||||||||||||
|
(dollars in thousands) |
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||||||
|
Other Income (Expense), Net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income and other income, net |
|
$ |
164 |
|
|
$ |
67 |
|
|
$ |
97 |
|
|
|
145 |
% |
|
$ |
276 |
|
|
$ |
527 |
|
|
$ |
(251 |
) |
|
|
(48 |
)% |
|
Interest expense |
|
|
(431 |
) |
|
|
(1,032 |
) |
|
|
601 |
|
|
|
(58 |
)% |
|
|
(853 |
) |
|
|
(2,033 |
) |
|
|
1,180 |
|
|
|
(58 |
)% |
|
Change in fair value of redeemable convertible preferred stock warrant liability |
|
|
— |
|
|
|
(631 |
) |
|
|
631 |
|
|
* |
|
|
|
— |
|
|
|
(530 |
) |
|
|
530 |
|
|
* |
|
||
|
Total other expense, net |
|
$ |
(267 |
) |
|
$ |
(1,596 |
) |
|
|
1,329 |
|
|
|
(83 |
)% |
|
$ |
(577 |
) |
|
$ |
(2,036 |
) |
|
|
1,459 |
|
|
|
(72 |
)% |
|
* Not meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Interest income and other income, net increased by $0.1 million, or 145% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020, primarily driven by a value added taxes refund related to startup costs in our new manufacturing facility received in the second quarter of 2021.
Interest income and other income, net decreased by $0.3 million, or 48% for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The decrease was primarily due to a $0.6 million decrease in interest income driven by lower interest rates in the first half of 2021. This decrease was partially offset by a $0.3 million value added taxes refund primarily related to startup costs in our new manufacturing facility received during the first half of 2021.
Interest expense decreased for the three and six months ended June 30, 2021 as compared to the three and six months ended June 30, 2020. The decrease was driven primarily by a lower interest rate under the SVB Term Loan as compared to the rate under the Perceptive Term Loan, which we voluntarily repaid in July 2020.
The change in the fair value of redeemable convertible preferred stock warrant liability was driven by the changes in assumptions used to value the warrant liability. Upon the closing of our IPO in September 2020, all shares of our outstanding redeemable convertible preferred stock warrants were either exercised into common stock or automatically converted into warrants to purchase common stock. Accordingly, we have ceased to incur the change in the fair value of redeemable convertible preferred stock warrant liability as the entire redeemable convertible preferred stock warrant liability was reclassified to additional paid-in capital.
Liquidity and Capital Resources
Sources of Liquidity
As of June 30, 2021, the Company had cash, cash equivalents and short-term investments of $396.2 million, which are available to fund future operations, and restricted cash of $33.3 million, for a total cash, cash equivalents, restricted cash and short-term investments balance of $429.5 million.
Since our inception, we have incurred net losses and negative cash flows from operations. To date, we have financed our operations and capital expenditures primarily through sales of redeemable convertible preferred stock and common stock, revenue from sales and issuances of debt. In September 2020, we completed our IPO for aggregate net proceeds of approximately $254.8 million (inclusive of the full exercise of the underwriters’ option to purchase additional shares), net of offering costs, underwriter discounts and commissions of $23.1 million. In April 2021, we completed a follow-on public offering for aggregate net proceeds of approximately $149.1 million, after deducting offering costs, underwriting discounts and commissions of $8.5 million.
We expect to continue to incur significant expenses for the foreseeable future and to incur operating losses in the near term while we make investments to support our anticipated growth. We may raise additional capital through the issuance of additional equity financing, debt financings or other sources. If this financing is not available to us at adequate levels or on acceptable terms, we may need to reevaluate our operating plans. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. We believe that our existing cash, cash equivalents and short-term investments, and cash generated from sales of our products, will be sufficient to meet our anticipated needs for at least the next 12 months from the date of this Quarterly Report.
20
Cash Flows Summary
The following table summarizes the cash flows for each of the periods indicated (in thousands):
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Net cash (used in) provided by: |
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
(69,457 |
) |
|
$ |
(44,059 |
) |
|
Investing activities |
|
|
(104,267 |
) |
|
|
25,471 |
|
|
Financing activities |
|
|
153,026 |
|
|
|
126,797 |
|
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
$ |
(20,698 |
) |
|
$ |
108,209 |
|
Operating Activities
The net cash used in operating activities of $69.5 million for the six months ended June 30, 2021 was due to a net loss of $60.2 million and a net cash outflow from the change in our operating assets and liabilities of $23.1 million, which were partially offset by adjustments for stock-based compensation expense of $9.8 million, depreciation and amortization of $2.6 million, non-cash lease expense of $0.5 million, accretion of discount on investments of $0.4 million, non-cash interest expense of $0.3 million, and provision for inventories of $0.3 million. The net cash outflow from operating assets and liabilities was primarily due to an increase in inventories of $12.1 million due to the timing of inventory purchases including advance purchases of inventory due to the transition to our own manufacturing facility, anticipated demand and to mitigate supply chain disruptions, which partially related to COVID-19, an increase in accounts receivable of $9.9 million due to timing of collections, a net decrease in account payable, accrued expenses and other current liabilities of $1.0 million due to timing of vendor payments and a decrease in accrued payroll and related benefits of $1.5 million, and a decrease in operating lease liabilities of $0.4 million. The net cash outflow from operating assets and liabilities was partially offset by an increase in deferred revenue of $1.1 million due to the growth of our business, an increase in prepaid expenses and other assets of $0.6 million, and an increase in accrued warranty liability of $0.2 million.
The net cash used in operating activities for the six months ended June 30, 2020 was $44.1 million, attributable to a net loss of $47.2 million and a net change in our net operating assets and liabilities of $0.3 million, partially offset by non-cash charges of $3.4 million. Non-cash charges primarily consisted of $1.3 million in stock-based compensation, $0.7 million in depreciation and amortization, $0.5 million in the change in the fair value of the redeemable convertible preferred stock warrant liability, $0.4 million in non-cash interest expense, $0.2 million in provision for inventory and $0.1 million in no-cash lease expense. The change in our net operating assets and liabilities was primarily due to a $3.4 million increase in accounts receivable and a $2.0 million increase in inventories due to growth in our business, a $0.7 million decrease in accounts payable due to timing of payments and a $0.6 million increase in prepaid expenses and other assets. These changes were partially offset by a $2.5 million increase in accrued expenses and other current liabilities due to timing of payments, a $2.2 million increase in deferred revenue mainly due to the growth of our business, a $1.1 million increase in accrued payroll and related benefits and a $0.6 million increase in accrued warranty liability.
Investing Activities
The net cash used in investing activities of $104.3 million for the six months ended June 30, 2021 was due primarily to the purchases of investment securities of $122.4 million and the purchases of property and equipment of $1.8 million, partially offset by the sales and maturities of investment securities of $19.9 million.
The net cash provided by investing activities for the six months ended June 30, 2020 was $25.5 million and related primarily to the sales and maturities of investment securities of $30.5 million, partially offset by the purchases of property and equipment of $5.0 million.
Financing Activities
The net cash provided by financing activities of $153.0 million for the six months ended June 30, 2021 was due primarily to the net proceeds of $149.1 million from the issuance of our common stock upon the follow-on offering and the proceeds of $3.9 million from employee exercises of stock options and employee stock purchase plan purchases.
The net cash provided by financing activities for the six months ended June 30, 2020 was due primarily to the net proceeds of $126.8 million from the issuance of our Series E redeemable convertible preferred stock.
Contractual Obligations and Commitments
During the three and six months ended June 30, 2021, there have been no material changes to our contractual obligations from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2020 Annual Report.
21
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of the financial condition and results of operations is based on the financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses incurred during the reporting periods. The estimates are based on historical experience and on various other factors that are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2020 Annual Report. For additional information, please refer to Note 2 to our unaudited condensed financial statements in this Quarterly Report.
Emerging Growth Company Status
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Because (i) the aggregate worldwide market value of our voting common stock held by non-affiliates (or "public float") exceeded $700 million on June 30, 2021, (ii) we will have been subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) for at least twelve calendar months, (iii) we have previously filed an annual report under Section 13(a) or 15(d) of the Exchange Act and (iv) we are not eligible for smaller reporting company status because we exceed the public float and revenue threshold for such status, we will qualify as a "large accelerated filer" under Rule 12b-2 of the Exchange Act as of the end of the current fiscal year. As a large accelerated filer, we will no longer qualify as an emerging growth company.
Recent Accounting Pronouncements
See Note 2 to our unaudited condensed financial statements included elsewhere in this Quarterly Report for more information.
22
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our cash, cash equivalents, restricted cash and short-term investments are held in bank deposits, money market funds, U.S. Treasury and debt securities. Such interest-earning instruments carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation; we do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate exposure. We believe that we do not have any material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the relative short-term nature of our cash, cash equivalents and short-term investments.
As of June 30, 2021, we had $30.0 million in variable rate debt outstanding. The SVB Term Loan matures on November 1, 2025, with interest-only monthly payments until June 2023. The term loan accrues interest at a rate per annum equal to the greater of (A) one-half of one percent (0.50%) above the Prime Rate as reported in the Wall Street Journal then in effect (which shall not be less than zero) and (B) three and three-quarters of one percent (3.75%). An immediate 100 basis point change in the prime rate would not have a material impact on our debt-related obligations, financial position or results of operations.
Foreign Currency Exchange Risk
Our expenses are generally denominated in U.S. dollars. However, as certain of our Mexico-based manufacturing operations incur costs that are denominated in Mexican Pesos (“MXN”), we are exposed to the risk of currency fluctuations between the U.S. dollar and MXN. To date, foreign currency transaction gains and losses have not been material to our financial statements.
Unfavorable changes in foreign exchange rates versus the U.S. dollar could increase our product costs, thus reducing our gross profit. We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future. We do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on our operating results or financial condition.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation and supervision of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of the period covered by this Quarterly Report.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
23
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time we may become involved in legal proceedings or investigations, which could have an adverse impact on our reputation, business and financial condition and divert the attention of our management from the operation of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows.
Item 1A. Risk Factors.
You should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our 2020 Annual Report, as updated by the risk factors discussed in Part II, “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2021 (“Q1 2021 Quarterly Report”), which could materially affect our business, financial position, or future results of operations. There have been no material changes to the risk factors described in our 2020 Annual Report, as updated by our Q1 2021 Quarterly Report. The risks described in our 2020 Annual Report and our Q1 2021 Quarterly Report are not the only risks that we face. Additional risks and uncertainties not precisely known to us, or that we currently deem to be immaterial, may also arise and materially impact our business. If any of these risks occur, our business, results of operations and financial condition could be materially and adversely affected and the trading price of our common stock could decline.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Sales of Unregistered Securities
None.
(b) Use of Proceeds from Public Offering of Common Stock
The offer and sale of shares in our IPO was registered under the Securities Act pursuant to a registration statement on Form S-1 (File No.333-248225), which was declared effective by the SEC on September 17, 2020. The remainder of the information required by this item regarding the use of our IPO proceeds has been omitted pursuant to SEC rules because such information has not changed since our last periodic report was filed.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
24
Item 6. Exhibits.
|
|
|
|
|
Incorporation by Reference |
||||||
|
Exhibit Number |
|
Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
Form of Amended and Restated Certificate of Incorporation of Outset Medical, Inc. |
|
S-1/A |
|
333-248225 |
|
3.1 |
|
September 9, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
|
S-1/A |
|
333-248225 |
|
3.2 |
|
September 9, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1 |
|
|
S-1/A |
|
333-248225 |
|
4.1 |
|
September 9, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.2 |
|
|
S-1 |
|
333-248225 |
|
4.2 |
|
August 21, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.3 |
|
|
S-1 |
|
333-248225 |
|
4.3 |
|
August 21, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.4 |
|
|
S-1 |
|
333-248225 |
|
4.4 |
|
August 21, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
|
|
|
|
101.SCH* |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL* |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF* |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB* |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE* |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
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* |
Filed herewith. |
25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Outset Medical, Inc. |
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Date: August 5, 2021 |
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By: |
/s/ Leslie Trigg |
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Leslie Trigg |
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President and Chief Executive Officer (Principal Executive Officer) |
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Date: August 5, 2021 |
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By: |
/s/ Nabeel Ahmed |
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Nabeel Ahmed |
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Chief Financial Officer (Principal Financial and Accounting Officer) |
26
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Leslie Trigg, certify that:
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1. |
I have reviewed this Quarterly Report on Form 10-Q of Outset Medical, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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By: |
/s/ Leslie Trigg |
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Leslie Trigg |
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Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Nabeel Ahmed, certify that:
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1. |
I have reviewed this Quarterly Report on Form 10-Q of Outset Medical, Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: August 5, 2021 |
By: |
/s/ Nabeel Ahmed |
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Nabeel Ahmed |
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Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Outset Medical, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to her/his knowledge:
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1. |
The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and |
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2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations the Company. |
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August 5, 2021 |
By: |
/s/ Leslie Trigg |
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Leslie Trigg |
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Chief Executive Officer |
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(Principal Executive Officer) |
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August 5, 2021 |
By: |
/s/ Nabeel Ahmed |
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Nabeel Ahmed |
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Chief Financial Officer |
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(Principal Financial Officer) |
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The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Report and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.