The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1)
Interim Condensed Consolidated Financial Statements
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and related notes that appear in the Annual Report on Form 10-K of Juniper Pharmaceuticals, Inc. (“Juniper” or the “Company”) for the year ended December 31, 2016 filed with the SEC on March 7, 2017 (the “2016 Annual Report”). In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of September 30, 2017, and its results of operations for the three and nine months ended September 30, 2017 and 2016, and cash flows for the nine months ended September 30, 2017 and 2016. The condensed consolidated balance sheet at December 31, 2016, was derived from audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements. Results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results for the year ending December 31, 2017 or any period thereafter.
At September 30, 2017, cash and cash equivalents were $22.1 million. The Company’s future funding requirements depend on a number of factors, including the rate of market acceptance of its current and future products and services and the resources the Company devotes to developing and supporting the same. The Company believes that current cash and cash equivalents, as well as cash generated from operations, will be sufficient to meet anticipated cash needs for working capital, including potentially advancing a product candidate, and capital expenditures through the next twelve months from the date of the filing of this Form 10-Q. The Company may be dependent on its ability to raise additional capital to finance operations and further fund research and development programs. If the Company is not able to raise additional capital on terms acceptable to it, or at all, as and when needed, it may be required to curtail its operating spend including spend related to its research and development programs.
Management Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures at the date of the financial statements during the reporting period. Significant estimates are used for, but are not limited to, revenue recognition, allowance for doubtful accounts, inventory reserve, impairment analysis of goodwill and intangibles including their useful lives, research and development accruals, deferred tax assets, liabilities and valuation allowances, restructuring charges and fair value of stock options. On an ongoing basis, management evaluates its estimates. Actual results could differ from those estimates.
(2)
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Components of inventory cost include materials, labor and manufacturing overhead. Inventories consist of the following (in thousands):
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Raw materials
|
|
$
|
2,020
|
|
|
$
|
856
|
|
Work in process
|
|
|
3,099
|
|
|
|
3,806
|
|
Finished goods
|
|
|
778
|
|
|
|
959
|
|
Total
|
|
$
|
5,897
|
|
|
$
|
5,621
|
|
The inventory reserve balance at September 30, 2017 was $0.3 million. No reserve was required at December 31, 2016. During the three and nine months ended September 30, 2017, the Company recorded charges in the condensed consolidated statements of operations for excess and obsolete inventory of $0.3 million and $0.5 million, respectively. No charges were recorded for the three and nine months ended September 30, 2016
.
5
(3)
Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price over the fair value acquired and liabilities assumed in a business combination. The Company does not amortize its goodwill, but instead tests for impairment annually in the fourth quarter and more frequently whenever events or changes in circumstances indicate that fair value of the asset may be less than the carrying value of the asset. The Company determined a triggering event occurred in September 2017 based on Juniper’s announcement of a corporate reprioritization which aimed to re-focus its resources on the core business of Crinone® progesterone gel and JPS and to focus its research and development organization on its hormone replacement therapy initiative, its lead IVR program, and the Company would seek to partner its other IVR programs.
In accordance with Accounting Standard Codification, or ASC 350,
Goodwill and Other Intangibles
(“ASC 350”), the Company uses the two-step approach for each reporting unit. The first step compares the carrying amount of the reporting unit to its estimated fair value (Step 1) utilizing a discounted cash flow analysis based on the present value of estimated future cash flows to be generated using a risk-adjusted discount rate. To the extent that the carrying value of the reporting unit exceeds its estimated fair value, a second step is performed wherein the reporting unit’s carrying value is compared to the implied fair value (Step 2). To the extent that the carrying value of goodwill exceeds the implied fair value of goodwill, impairment exists and must be recognized.
Juniper concluded that the business represents two reporting units for goodwill impairment testing, which are product and service. Juniper’s goodwill is assigned to the Company’s service reporting unit. Juniper performed an impairment test as of the date of the triggering event and determined the Company’s goodwill is not impaired as of that date.
Changes to goodwill during the nine months ended September 30, 2017 were as follows (in thousands):
|
|
Total
|
|
Balance—December 31, 2016
|
|
$
|
8,342
|
|
Effects of foreign currency translation
|
|
|
714
|
|
Balance—September 30, 2017
|
|
$
|
9,056
|
|
Intangible assets consist of the following at September 30, 2017 and December 31, 2016 (in thousands):
|
|
Trademark
|
|
|
Developed
Technology
|
|
|
Customer
Relationships
|
|
|
Total
|
|
Gross carrying amount
|
|
$
|
300
|
|
|
$
|
1,370
|
|
|
$
|
1,240
|
|
|
$
|
2,910
|
|
Foreign currency translation adjustment
|
|
|
(65
|
)
|
|
|
(206
|
)
|
|
|
(187
|
)
|
|
|
(458
|
)
|
Accumulated amortization
|
|
|
(235
|
)
|
|
|
(792
|
)
|
|
|
(608
|
)
|
|
|
(1,635
|
)
|
Balance—September 30, 2017
|
|
$
|
—
|
|
|
$
|
372
|
|
|
$
|
445
|
|
|
$
|
817
|
|
|
|
Trademark
|
|
|
Developed
Technology
|
|
|
Customer
Relationships
|
|
|
Total
|
|
Gross carrying amount
|
|
$
|
300
|
|
|
$
|
1,370
|
|
|
$
|
1,240
|
|
|
$
|
2,910
|
|
Foreign currency translation adjustment
|
|
|
(53
|
)
|
|
|
(298
|
)
|
|
|
(270
|
)
|
|
|
(621
|
)
|
Accumulated amortization
|
|
|
(247
|
)
|
|
|
(617
|
)
|
|
|
(456
|
)
|
|
|
(1,320
|
)
|
Balance—December 31, 2016
|
|
$
|
—
|
|
|
$
|
455
|
|
|
$
|
514
|
|
|
$
|
969
|
|
Amortization expense related to developed technology is classified as a component of cost of service revenues in the accompanying consolidated statements of operations. Amortization expense related to trademark and customer relationships is classified as a component of general and administrative expenses in the accompanying consolidated statements of operations.
Amortization expense for the three months ended September 30, 2017 and 2016 was $0.1 million. Amortization expense for the nine months ended September 30, 2017 and 2016 was $0.2 million and $0.3 million, respectively. Amortization expense on existing intangible assets as of September 30, 2017 is as follows (in thousands):
Year ending December 31,
|
|
Total
|
|
Remainder of 2017
|
|
$
|
78
|
|
2018
|
|
|
287
|
|
2019
|
|
|
260
|
|
2020
|
|
|
192
|
|
Total
|
|
$
|
817
|
|
6
(4)
Debt and other Contractual Obligations
In September 2013, Juniper assumed debt of $3.9 million in connection with its acquisition of Juniper Pharma Services (“JPS”). JPS had entered into a Business Loan Agreement (“Loan Agreement”) covering three loan facilities (collectively referred to as the “original agreements”) with Lloyds TSB Bank (“Lloyds”) as administrative agent. In May 2017, JPS repaid one of the existing loan facilities upon which JPS subsequently entered into a new loan facility with the same administrative agent for the same outstanding balance. The refinancing was accounted for as a modification with no resulting gain or loss. The remaining original agreements and the new agreement are collectively referred to as the “loan facilities”.
As of September 30, 2017, the Company owed $2.5 million on the loan facilities. The loan facilities are due for repayment over periods ranging from 7-15 years. Two of the facilities bear interest at the Bank of England’s base rate plus 1.95%, and 2.55%, respectively. The interest rates at September 30, 2017 for these facilities were 2.45% and 3.05%, respectively. The third facility is a fixed rate agreement bearing interest at 2.99% per annum. The weighted average interest rate for the three loan facilities for the three months ended September 30, 2017 was 2.76%. The Loan Agreement is secured by the mortgaged property and an unlimited lien on other assets of JPS. The original agreements under the Loan Agreement contains financial covenants that limit the amount of indebtedness JPS may incur, requires JPS to maintain certain levels of net worth, and restricts JPS’s ability to materially alter the character of its business. The new loan facility contains the same financial covenants outlined above in addition to a covenant which requires that JPS maintain certain levels of earnings before interest, taxes, depreciation and amortization. As of September 30, 2017, the Company is in compliance with all of the covenants under the Loan Agreement.
In September 2013, as part of the acquisition of JPS, Juniper assumed a $2.5 million obligation under a grant arrangement with the Regional Growth Fund on behalf of the Secretary of State for Business, Innovation, and Skills in the United Kingdom. JPS used this grant to fund the building of its second facility, which includes analytical labs, office space, and a manufacturing facility. As part of the arrangement, JPS is required to create and maintain certain full-time equivalent personnel levels through October 1, 2017. As of September 30, 2017, the Company is in compliance with the covenants of the arrangement. The obligation ended on October 1, 2017. As of the date of this filing, the Company’s obligation under the grant arrangement is complete and the Company met all compliance requirements through October 1, 2017.
The income from the Regional Growth Fund was on a decelerated basis through October 1, 2017. As of September 30, 2017, the Company had recorded all deferred revenue previously recognized under this arrangement. Other income associated with the Regional Growth Fund obligation for the three months ended September 30, 2017 and 2016 was $0.2 million and $0.2 million, respectively. Other income associated with the Regional Growth Fund obligation for the nine months ended September 30, 2017 and 2016 was $0.6 million and $0.5 million, respectively.
Juniper leases its U.S. corporate office under an operating lease. Additionally, Juniper financed certain equipment under loan agreements with payments through March 2022. In October 2015, the Company entered into a lease agreement for its corporate office in Boston, Massachusetts. The initial term of the lease agreement is approximately 39 months and ends in 2019
, which includes a three-month free rent period. In January and March 2017, the Company entered into loans of $0.9 million and $0.6 million, respectively, for equipment in its Nottingham, U.K. facility. The interest rate for the two loans was 2.09% at September 30, 2017. The transactions were considered failed sales-leaseback arrangements as the Company will obtain title to the equipment at the end of the term of the financing for little or no consideration. These failed sale-leaseback arrangements have been recorded as a component of long-term debt on the Company’s condensed consolidated balance sheets. The initial terms of the loans are 60 months.
Commitments under Juniper’s debt and lease arrangements are as follows as of September 30, 2017 (in thousands):
|
|
Operating
Leases
|
|
|
Debt
Principal
Payments
|
|
|
Total
|
|
Remainder of 2017
|
|
$
|
109
|
|
|
$
|
132
|
|
|
$
|
241
|
|
2018
|
|
|
443
|
|
|
|
540
|
|
|
|
983
|
|
2019
|
|
|
74
|
|
|
|
563
|
|
|
|
637
|
|
2020
|
|
|
—
|
|
|
|
582
|
|
|
|
582
|
|
2021
|
|
|
—
|
|
|
|
602
|
|
|
|
602
|
|
Thereafter
|
|
|
—
|
|
|
|
1,485
|
|
|
|
1,485
|
|
Total minimum debt and lease payments
|
|
$
|
626
|
|
|
$
|
3,904
|
|
|
$
|
4,530
|
|
7
(5)
Intravaginal Ring Technology License
In March 2015, the Company obtained an exclusive worldwide license (“License Agreement”) to the intellectual property rights for a novel segmented intravaginal ring (“IVR”) technology. Due to its novel polymer and segmentation composition, the Company believes the IVR has the potential to deliver one or more drugs, including hormones and larger molecules such as peptides, at different dosages and release rates within a single segmented ring. Drugs such as progesterone and leuprolide have already been tested using the technology and demonstrated sustained release for up to three weeks. This technology was developed by Dr. Robert Langer from the Massachusetts Institute of Technology (“MIT”) and Dr. William Crowley from Massachusetts General Hospital (“MGH”) and Harvard Medical School. Drs. Langer and Crowley have each agreed to serve a three-year term as strategic advisors to the Company in exchange for an upfront one-time payment plus quarterly fees and equity compensation.
Unless earlier terminated by the parties, the License Agreement will remain in effect until the later of (i) the date on which all issued patents and filed patent applications within the licensed patent rights have expired or been abandoned and (ii) one year after the last sale for which a royalty is due under the License Agreement or 10 years after such expiration or abandonment date referred to in (i), whichever is earlier. Juniper has the right to terminate the License Agreement by giving 90 days advance written notice to MGH. MGH has the right to terminate the License Agreement based on the Company’s failure to make payments due under the License Agreement, subject to a 15 day cure period, or the Company’s failure to maintain the insurance required by the License Agreement. MGH may also terminate the License Agreement based on Juniper’s non-financial default under the License Agreement, subject to a 60 day cure period.
Pursuant to the terms of the License Agreement, Juniper has agreed to reimburse MGH for all costs associated with the preparation, filing, prosecution and maintenance of the licensed patent rights, and has agreed to pay MGH a $50,000 annual license fee on each of the first five year anniversaries of the effective date of the License Agreement, and a $100,000 annual license fee beginning on the sixth anniversary of the effective date of the License Agreement and on each subsequent anniversary thereafter. The annual license fee is creditable against any royalties or sublicense income payable in each calendar year.
Under the terms of the License Agreement, Juniper has agreed to use commercially reasonable efforts to develop and commercialize at least one product and/or process related to the IVR technology, which efforts will include the making of certain minimum annual expenditures in each of the first five years following the effective date of the License Agreement. Juniper has also agreed to pay MGH certain milestone payments totaling up to $1.2 million tied to the Company’s achievement of certain development and commercialization milestones, and certain annual royalty payments based on net sales of any such patented products or processes developed by Juniper.
(6)
Segments and Geographic Information
The Company and its subsidiaries currently operate in two segments: product and service. The product segment oversees the supply chain and manufacturing of Crinone, the Company’s sole commercialized product. The product segment included the royalty stream the Company received from Allergan for Crinone sales in the United States, which ceased with the November 2016 agreement with Allergan, as well as the development of new product candidates. The service segment includes product development, clinical trial manufacturing, and advanced analytical and consulting services for the Company’s customers, as well as the characterizing and developing of pharmaceutical product candidates for the Company’s internal programs and managing certain preclinical activities including manufacturing of the Company’s pipeline products. In September 2013, the Company acquired JPS, a U.K.-based provider of pharmaceutical development, clinical trial manufacturing, and advanced analytical and consulting services to the pharmaceutical industry. The Company conducts its advanced formulation, analytical and consulting services through JPS. The Company has integrated its supply chain management for its sole commercialized product, Crinone, into those operations and have therefore sought to capture synergies by transferring all operational activities related to its historic business. The Company owns certain plant and equipment physically located at third party contractor facilities in the United Kingdom and Switzerland.
The Company’s largest customer, Merck KGaA, utilizes a Switzerland-based subsidiary to acquire product from the Company, which it then sells throughout the world excluding the United States. Up until November 2016, the Company’s primary domestic customer, Allergan, Plc (“Allergan”), was responsible for the commercialization and sale of Crinone in the United States. In November 2016, the Company entered into an agreement with Allergan to monetize future royalty payments. Under the agreement, the Company received a one-time payment of $11.0 million representing all future royalty amounts payable.
8
The following tables show selected information by geographic area (in thousands):
Revenues:
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
United States
|
|
$
|
3,230
|
|
|
$
|
2,851
|
|
|
$
|
7,245
|
|
|
$
|
7,066
|
|
Switzerland
|
|
|
8,505
|
|
|
|
7,081
|
|
|
|
26,021
|
|
|
|
20,772
|
|
United Kingdom
|
|
|
751
|
|
|
|
981
|
|
|
|
2,788
|
|
|
|
3,474
|
|
Other countries
|
|
|
500
|
|
|
|
643
|
|
|
|
2,135
|
|
|
|
2,331
|
|
Total
|
|
$
|
12,986
|
|
|
$
|
11,556
|
|
|
$
|
38,189
|
|
|
$
|
33,643
|
|
Total assets:
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
United States
|
|
$
|
22,780
|
|
|
$
|
21,423
|
|
Switzerland
|
|
|
3,358
|
|
|
|
4,673
|
|
United Kingdom
|
|
|
35,529
|
|
|
|
31,288
|
|
Other countries
|
|
|
88
|
|
|
|
187
|
|
Total
|
|
$
|
61,755
|
|
|
$
|
57,571
|
|
Long-lived assets:
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
United States
|
|
$
|
500
|
|
|
$
|
663
|
|
Switzerland
|
|
|
438
|
|
|
|
369
|
|
United Kingdom
|
|
|
15,083
|
|
|
|
13,468
|
|
Other countries
|
|
|
2
|
|
|
|
2
|
|
Total
|
|
$
|
16,023
|
|
|
$
|
14,502
|
|
Long-lived assets include fixed assets, intangibles and other assets.
No other individual country represented greater than 10% of total revenues, total assets, or long-lived assets for any period presented.
For the three and nine months ended September 30, 2017, Merck KGaA accounted for 100% of the product segment revenue. For the three and nine months ended September 30, 2016, Merck KGaA accounted for 86% and 87% of the product segment revenue, respectively. For the three and nine months ended September 30, 2016, Allergan accounted for 14% and 13% of the product segment revenue, respectively. At September 30, 2017 and December 31, 2016, Merck KGaA made up 100% of the product segment accounts receivable.
For the three and nine months ended September 30, 2017 the same customer accounted for 46% and 31% of the service segment total revenue, respectively. No customers accounted for 10% or more of the service segment total revenue for the three and nine months ended September 30, 2016. At September 30, 2017, one customer accounted for 41% of total service segment accounts receivable, respectively. At December 31, 2016, two customers accounted for 18% and 13% of total service segment net accounts receivable.
9
The following summarizes other information by segment for the three months ended September 30, 2017 (in thousands):
|
|
Product
|
|
|
Service
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
$
|
8,389
|
|
|
$
|
—
|
|
|
$
|
8,389
|
|
Service revenues
|
|
|
—
|
|
|
|
4,597
|
|
|
|
4,597
|
|
Total revenues
|
|
$
|
8,389
|
|
|
$
|
4,597
|
|
|
$
|
12,986
|
|
Cost of product revenues
|
|
$
|
5,160
|
|
|
$
|
—
|
|
|
$
|
5,160
|
|
Cost of service revenues
|
|
|
—
|
|
|
|
2,559
|
|
|
|
2,559
|
|
Total cost of revenues
|
|
$
|
5,160
|
|
|
$
|
2,559
|
|
|
$
|
7,719
|
|
Gross profit
|
|
$
|
3,229
|
|
|
$
|
2,038
|
|
|
$
|
5,267
|
|
Total operating expenses
|
|
|
|
|
|
|
|
|
|
|
6,802
|
|
Total non-operating expense
|
|
|
|
|
|
|
|
|
|
|
80
|
|
Loss before income taxes
|
|
|
|
|
|
|
|
|
|
$
|
(1,455
|
)
|
The following summarizes other information by segment for the three months ended September 30, 2016 (in thousands):
|
|
Product
|
|
|
Service
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
$
|
7,057
|
|
|
$
|
—
|
|
|
$
|
7,057
|
|
Service revenues
|
|
|
—
|
|
|
|
3,337
|
|
|
|
3,337
|
|
Royalties
|
|
|
1,162
|
|
|
|
—
|
|
|
|
1,162
|
|
Total revenues
|
|
$
|
8,219
|
|
|
$
|
3,337
|
|
|
$
|
11,556
|
|
Cost of product revenues
|
|
$
|
3,683
|
|
|
$
|
—
|
|
|
$
|
3,683
|
|
Cost of service revenues
|
|
|
—
|
|
|
|
2,022
|
|
|
|
2,022
|
|
Total cost of revenues
|
|
$
|
3,683
|
|
|
$
|
2,022
|
|
|
$
|
5,705
|
|
Gross profit
|
|
$
|
4,536
|
|
|
$
|
1,315
|
|
|
$
|
5,851
|
|
Total operating expenses
|
|
|
|
|
|
|
|
|
|
|
5,674
|
|
Total non-operating income
|
|
|
|
|
|
|
|
|
|
|
66
|
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
$
|
243
|
|
The following summarizes other information by segment for the nine months ended September 30, 2017 (in thousands):
|
|
Product
|
|
|
Service
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
$
|
25,684
|
|
|
$
|
—
|
|
|
$
|
25,684
|
|
Service revenues
|
|
|
—
|
|
|
|
12,505
|
|
|
|
12,505
|
|
Total revenues
|
|
$
|
25,684
|
|
|
$
|
12,505
|
|
|
$
|
38,189
|
|
Cost of product revenues
|
|
$
|
14,776
|
|
|
$
|
—
|
|
|
$
|
14,776
|
|
Cost of service revenues
|
|
$
|
—
|
|
|
$
|
7,149
|
|
|
$
|
7,149
|
|
Total cost of revenues
|
|
|
14,776
|
|
|
|
7,149
|
|
|
|
21,925
|
|
Gross profit
|
|
$
|
10,908
|
|
|
$
|
5,356
|
|
|
$
|
16,264
|
|
Total operating expenses
|
|
|
|
|
|
|
|
|
|
|
19,610
|
|
Total non-operating expense
|
|
|
|
|
|
|
|
|
|
|
74
|
|
Loss before income taxes
|
|
|
|
|
|
|
|
|
|
$
|
(3,272
|
)
|
10
The following summarizes other information by segment for the nine months ended September 30, 2016 (in thousands):
|
|
Product
|
|
|
Service
|
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
$
|
20,716
|
|
|
$
|
—
|
|
|
$
|
20,716
|
|
Service revenues
|
|
|
—
|
|
|
|
9,964
|
|
|
|
9,964
|
|
Royalties
|
|
|
2,963
|
|
|
|
—
|
|
|
|
2,963
|
|
Total revenues
|
|
$
|
23,679
|
|
|
$
|
9,964
|
|
|
$
|
33,643
|
|
Cost of product revenues
|
|
$
|
11,892
|
|
|
$
|
—
|
|
|
$
|
11,892
|
|
Cost of service revenues
|
|
|
—
|
|
|
|
6,630
|
|
|
|
6,630
|
|
Total cost of revenues
|
|
$
|
11,892
|
|
|
$
|
6,630
|
|
|
$
|
18,522
|
|
Gross profit
|
|
$
|
11,787
|
|
|
$
|
3,334
|
|
|
$
|
15,121
|
|
Total operating expenses
|
|
|
|
|
|
|
|
|
|
|
18,959
|
|
Total non-operating income
|
|
|
|
|
|
|
|
|
|
|
222
|
|
Loss before income taxes
|
|
|
|
|
|
|
|
|
|
$
|
(3,616
|
)
|
(7)
Property and Equipment
Property and equipment consists of the following (in thousands):
|
|
Estimated
Useful Life
(Years)
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
Machinery and equipment
|
|
3-10
|
|
$
|
11,765
|
|
|
$
|
8,628
|
|
Furniture and fixtures
|
|
3-5
|
|
|
1,083
|
|
|
|
1,190
|
|
Computer equipment and software
|
|
3-5
|
|
|
625
|
|
|
|
538
|
|
Buildings
|
|
Up to 39
|
|
|
7,936
|
|
|
|
7,310
|
|
Land
|
|
Indefinite
|
|
|
509
|
|
|
|
469
|
|
Construction in-process
|
|
|
|
|
1,150
|
|
|
|
1,567
|
|
|
|
|
|
|
23,068
|
|
|
|
19,702
|
|
Less: Accumulated depreciation
|
|
|
|
|
(7,941
|
)
|
|
|
(6,336
|
)
|
Total
|
|
|
|
$
|
15,127
|
|
|
$
|
13,366
|
|
Depreciation expense was $0.5 million and $0.4 million for the three-month periods ended September 30, 2017 and 2016, respectively. Depreciation expense was $1.4 million and $1.1 million for the nine month periods ended September 30, 2017 and 2016, respectively. The Company recorded $0 and $0.2 million in disposals during the three and nine months ended September 30, 2017. The Company recorded an impairment of $14,000 as a component of the Restructuring charge (See Note 15) recorded during the three months ended September 30, 2017, associated with the discontinuation of use on assets used in its new product research and development group.
Machinery and equipment includes $1.5 million of equipment purchased under equipment loans.
(8) Shareholders’ Equity
Preferred Stock
At December 31, 2016, 130 shares of Series B Preferred Stock (“Series B”) and 550 shares of Series C Preferred Stock (“Series C”) remained outstanding. During the quarter ending June 30, 2017, the Company issued a Notice of Conversion to the holders of the Series B and a Notice of Redemption to the Series C giving notice that on June 30, 2017 (the “Redemption and Conversion Date”) all outstanding shares of the respective Preferred Stock issuances would be converted, as in the case of the Series B, or redeemed, as in the case of the Series C.
The Series B, by its terms, automatically convert into common stock upon the occurrence of certain events. On the Redemption and Conversion Date, each share of Series B converted into 2.78 shares of common stock resulting in an issuance of 361 common shares.
11
The holders of the Series C had the right to require the Company to redeem their shares in cash plus all accrued and unpaid dividends thereon the date such redemption is demanded. On the Redemption and Conversion Date, the Company paid to the holders o
f the Series C approximately $0.1 million and as a result of the transaction recorded
the excess of the carrying value of Series C Preferred Stock over redemption value
of approximately $0.5 million to accumulated deficit for the
nine
months ended Septembe
r 30, 2017.
There were no remaining outstanding shares of either the Series B or the Series C following the Redemption and Conversion Date.
(9)
Net Loss Per Common Share
The calculation of basic and diluted loss per common share and common share equivalents is as follows (in thousands except for per share data):
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Basic net (loss) income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(1,410
|
)
|
|
$
|
248
|
|
|
$
|
(3,227
|
)
|
|
$
|
(3,663
|
)
|
Add: Excess of carrying value of Series C
Preferred Stock over redemption value
|
|
|
—
|
|
|
|
—
|
|
|
|
459
|
|
|
|
—
|
|
Less: Preferred stock dividends
|
|
|
—
|
|
|
|
(7
|
)
|
|
|
(14
|
)
|
|
|
(21
|
)
|
Net (loss) income applicable to common
stock
|
|
$
|
(1,410
|
)
|
|
$
|
241
|
|
|
$
|
(2,782
|
)
|
|
$
|
(3,684
|
)
|
Basic weighted average number of common
shares outstanding
|
|
|
10,844
|
|
|
|
10,799
|
|
|
|
10,817
|
|
|
|
10,791
|
|
Basic net (loss) income per common share
|
|
$
|
(0.13
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.26
|
)
|
|
$
|
(0.34
|
)
|
Diluted (loss) income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income applicable to common
stock
|
|
$
|
(1,410
|
)
|
|
$
|
241
|
|
|
$
|
(2,782
|
)
|
|
$
|
(3,684
|
)
|
Less: Excess of carrying value of Series C
Preferred Stock over redemption value
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Add: Preferred stock dividends
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
|
—
|
|
Net (loss) income applicable to dilutive
common stock
|
|
$
|
(1,410
|
)
|
|
$
|
248
|
|
|
$
|
(2,782
|
)
|
|
$
|
(3,684
|
)
|
Basic weighted average number of common
shares outstanding
|
|
|
10,844
|
|
|
|
10,799
|
|
|
|
10,817
|
|
|
|
10,791
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive stock awards
|
|
|
—
|
|
|
|
178
|
|
|
|
—
|
|
|
|
—
|
|
Dilutive preferred share conversions
|
|
|
—
|
|
|
|
83
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
261
|
|
|
|
—
|
|
|
|
—
|
|
Diluted weighted average number of common
shares outstanding
|
|
|
10,844
|
|
|
|
11,060
|
|
|
|
10,817
|
|
|
|
10,791
|
|
Diluted net (loss) income per common share
|
|
$
|
(0.13
|
)
|
|
$
|
0.02
|
|
|
$
|
(0.26
|
)
|
|
$
|
(0.34
|
)
|
Basic net loss per common share is computed by dividing the net loss, less preferred dividends and adding the excess of carrying value of Series C Preferred Stock over redemption value recognized on the conversion of the Series C Preferred Stock, by the weighted-average number of shares of common stock outstanding during a period. The diluted loss per common share calculation gives effect to dilutive options, convertible preferred stock, and other potential dilutive common stock including restricted shares of common stock outstanding during the period. Diluted net loss per share is based on the treasury stock method and includes the effect from potential issuance of common stock, such as shares issuable pursuant to the exercise of stock options, assuming the exercise of all in-the-money stock options. Common share equivalents have been excluded where their inclusion would be anti-dilutive.
Shares to be issued upon the exercise of the outstanding options, performance-based restricted stock units, convertible preferred stock, and selected restricted shares of common stock excluded from the income per share calculation amounted to 2.2 million and 1.7 million in each of the three-month and nine-month periods ended September 30, 2017 and 2016, respectively, because the awards were anti-dilutive.
12
(10)
Accumulated Other Comprehensive Loss
Changes to accumulated other comprehensive loss during the nine months ended September 30, 2017 were as follows (in thousands):
|
|
Translation
Adjustment
|
|
Balance—December 31, 2016
|
|
$
|
(5,028
|
)
|
Current period other comprehensive income (loss)
|
|
|
1,690
|
|
Balance—September 30, 2017
|
|
$
|
(3,338
|
)
|
(11)
Stock-Based Compensation
Stock-based compensation expense was $0.4 million and $0.3 million for the three months ended September 30, 2017 and 2016, respectively. Stock-based compensation expense for the nine months ended September 30, 2017 and 2016 was $1.2 million and $0.8 million, respectively.
Stock-based compensation relates to options granted to employees, non-employee members of the Board of Directors and non-employees, time-based restricted stock units granted to employees and non-employee members of the Board of Directors and performance-based restricted stock units granted to employees. Total stock-based compensation expense was recorded to cost of revenues and operating expenses based upon the functional responsibilities of the individuals holding the respective awards as follows (in thousands):
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Cost of revenues
|
|
$
|
84
|
|
|
$
|
94
|
|
|
$
|
143
|
|
|
$
|
152
|
|
Sales and marketing
|
|
|
12
|
|
|
|
17
|
|
|
|
35
|
|
|
|
48
|
|
Research and development
|
|
|
(38
|
)
|
|
|
23
|
|
|
|
(10
|
)
|
|
|
(14
|
)
|
General and administrative
|
|
|
313
|
|
|
|
195
|
|
|
|
1,048
|
|
|
|
618
|
|
Total
|
|
$
|
371
|
|
|
$
|
329
|
|
|
$
|
1,216
|
|
|
$
|
804
|
|
There were no option exercises in the nine months ended September 30, 2017 and 2016.
Juniper granted options to purchase 680,400 shares of common stock to employees and non-employee directors during the nine months ended September 30, 2017 and options to purchase 642,500 shares of common stock to employees during the nine months ended September 30, 2016. No stock options were granted to non-employee directors during the nine months ended September 30, 2016. Stock options granted to employees typically vest over a four-year term. Stock options granted to non-employee directors typically vest over a three-year term.
Juniper granted 52,700 time-based restricted stock units to employees and 66,234 time-based restricted stock units to non-employee directors during the nine months ended September 30, 2017. Juniper granted 42,203 restricted stock units to non-employee directors during the nine months ended September 30, 2016
Juniper granted 186,000 performance-based restricted stock units to employees during the nine months ended September 30, 2017. No performance-based restricted stock units were granted during the nine months ended September 30, 2016. The performance-based restricted stock units vest based on the occurrence of certain operational and strategic events which were determined by the Company’s Board of Directors.
The Company uses the Black-Scholes option pricing model to determine the estimated grant date fair values for stock options and estimates the fair value of time-based restricted stock units and performance-based restricted stock units based on the closing price of the Company’s common stock on the date of grant. The Company’s assumptions do not include an estimated forfeiture rate.
Option-pricing models require the input of various subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. Juniper’s estimated expected stock price volatility is based on its own historical volatility. Juniper’s expected term of options granted during the nine months ended September 30, 2017 and 2016 was derived using the simplified method for employees. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
13
The weighted-average grant date fair values of options granted to employees during the nine months ended September 30, 2017 and 2016 were $2.43 and $
4.71
, respectiv
ely, using the following assumptions
:
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Risk free interest rate
|
|
1.45% - 1.59%
|
|
|
0.85% - 1.14%
|
|
Expected term
|
|
4.5 - 4.75 years
|
|
|
4.75 years
|
|
Dividend yield
|
|
|
-
|
|
|
|
-
|
|
Expected volatility
|
|
53.15% - 55.20%
|
|
|
78.08% - 79.29%
|
|
The Company records stock-based compensation expense for stock options granted to non-employees based on the fair value of the stock options, which is re-measured over the graded vesting term resulting in periodic adjustments to stock-based compensation expense. The stock-based compensation expense recorded for non-employees is primarily reflected in the research and development line of the statement of operations and is remeasured on a quarterly basis from the date of grant. During the nine months ended September 30, 2017, the Company recorded a reduction of stock-based compensation expense of $0.1 million for non-employee options as a result of changes in the fair value of the options during the period. During the nine months ended September 30, 2016, the Company recorded a reduction of stock-based compensation expense of $0.2 million for non-employee options. No tax benefit has been recognized due to the net tax losses during the periods presented. There were no options granted to non-employees during the nine months ended September 30, 2017 and 2016.
The weighted-average grant date fair value of both the time-based restricted stock units and performance-based restricted stock units was $4.97 per share during the nine months ended September 30, 2017. The Company recognizes stock-based compensation expense for time-based restricted stock units over the vesting period. For performance-based restricted stock units, the Company considers the performance criteria at each balance sheet date and recognizes stock-based compensation expense for those criteria considered probable. The criteria associated with these performance-based stock units were not determined to be probable at September 30, 2017 and as such, no expense was recorded.
As of September 30, 2017, the total unrecognized compensation cost related to outstanding stock options, time-based restricted stock units and performance-based restricted stock units expected to vest was $4.4 million, which the Company expects to recognize over a weighted-average period of 3.55 years.
During the three months ended September 30, 2017, in conjunction with the corporate reprioritization (see Note 15) announced in September 2017, the Company modified options held by an executive to extend the exercise period allowed and recorded incremental stock-based compensation of approximately $17,000 as a component of Restructuring expense. The Company recognized the forfeiture on unvested awards upon the executive’s departure and has recognized a reduction in stock-based compensation of approximately $68,000 during the period ended September 30, 2017.
(12)
Fair Value of Financial Instruments
U.S. GAAP establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets and liabilities.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The fair value of cash and cash equivalents are classified as Level 1 at September 30, 2017 and December 31, 2016.
14
The fair values of accounts receivable and accounts payable approximate their respective carrying amounts. The Company’s long-term debt is carried at amortized face
value, which approximates fair value based on current market pricing of similar debt instruments and is categorized as a Level 2 measurement.
During the three and nine months ended September 30, 2017, the Company did not have transfers of financial assets between Level 1 and 2.
(13)
Income Taxes
During the three and nine months ended September 30, 2017, Juniper recorded an income tax benefit of $45,000, representing an effective tax rate of 3.1% and 1.4%, respectively. This benefit reflecting an adjustment to the Company’s foreign income inclusion for U.S. tax purposes, which reduced its alternative minimum tax recorded in 2016. No income tax expense has been recorded due to expected losses forecasted for the year. During the three months ended September 30, 2016, Juniper recorded income tax benefit of $5,000, representing an effective tax rate of (2.1)%. During the nine months ended September 30, 2016, Juniper recorded income tax expense of $47,000, representing an effective tax rate of (1.3)%. The income tax provision for the three and nine months ended September 30, 2016, is primarily attributable to alternative minimum taxes.
Juniper files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. Juniper is no longer subject to U.S. federal income tax examinations by tax authorities for years prior to 2012. Additionally, with few exceptions, Juniper is no longer subject to U.S. state tax examinations for years prior to 2012.
(14)
Recent Accounting Pronouncements
Adopted
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
(“ASU 2016-09”). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company adopted the standard as of January 1, 2017. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows.
In November 2015, the FASB issued ASU No. 2015-17,
Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes
(“ASU 2015-17”). The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. The Company adopted the standard as of January 1, 2017. The adoption did not have a material impact on the Company’s financial position.
In July 2015, the FASB issued ASU No. 2015-11,
Simplifying the Measurement of Inventory
. This ASU simplifies the measurement of inventory by requiring certain inventory to be measured at the lower of cost or net realizable value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016 and for interim periods therein. The Company adopted the standard as of January 1, 2017. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows.
To be adopted
In January 2017, the FASB issued ASU No. 2017-04,
Simplifying the Test for Goodwill Impairment
. The standard simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. The ASU is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard is not expected to have a material impact on the consolidated financial statements and related disclosures.
On August 26, 2016, the FASB issued ASU No. 2016-15,
Classification of Certain Cash Receipts and Cash Payments
("ASU 2016-15"), which amends the guidance in ASC No. 230 on the classification of certain items in the statement of cash flows. The primary purpose of ASU 2016-15 is to reduce the diversity in practice by making amendments that add or clarify the guidance on eight specific cash flow issues. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim
15
periods within those fiscal years. ASU 2016-15 should be applied retrospectively
to all periods presented, but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable. The Company is currently assessing the impact ASU 2016-15 will have on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases
. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the method and impact that the adoption will have on its consolidated financial statements and related disclosures.
In January 2016, the FASB issued ASU No. 2016-01,
Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities
, which provides new guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. The standard becomes effective for Juniper beginning in the first quarter of 2018 and early adoption is permitted. The Company is currently evaluating the effect, if any, that the standard will have on its consolidated financial statements and related disclosures.
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
(“ASU 2014-09”), which provides guidance for revenue recognition. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in Topic 605,
Revenue Recognition
, and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35,
Revenue Recognition-Construction-Type and Production-Type Contracts
. In August 2015, the FASB issued ASU No. 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
, which defers the effective date of ASU 2014-09 by one year, but permits companies to adopt one year earlier if they choose (i.e. the original effective date). As such, ASU 2014- 09 will be effective for annual and interim reporting periods beginning after December 15, 2017. In March and April 2016, the FASB issued ASU No. 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Consideration (Reporting Revenue Gross versus Net)
and ASU No. 2016-10
, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
, respectively, which clarify the guidance on reporting revenue as a principal versus agent, identifying performance obligations and accounting for intellectual property licenses. In addition, in May 2016 and December 2016, the FASB issued ASU No. 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
and ASU No. 2016-20,
Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers
, both of which amend certain narrow aspects of Topic 606. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. Currently, the Company is in the process of reviewing our historical contracts and evaluating the impact of ASU 2014-09 on its accounting policies, processes and system requirements, and has assigned internal resources and engaged a third-party provider to assist in its evaluation. While the Company continues to assess the impact of the new standard, there is the potential for changes to the pattern of revenue recognition for its arrangements with Merck, where revenue may be recorded earlier than under current guidance, and an impact could be material. The Company’s product revenue could be impacted by a number of items, including inventory levels on the adoption date. The Company is also evaluating its service revenue arrangement to assess changes in performance obligation, inclusion of variable consideration in the transaction price, allocation of the transaction price based on relative standalone selling prices, timing of recognition, accounting for contract acquisition costs, among other areas, as well as the related financial statement disclosures. To date, the Company has not identified any significant differences in its service revenue contracts, and the amount of any change upon adoption, if any, will depend upon the agreements in place at the adoption date. The Company expects to complete its assessment, identify and implement the necessary changes to its business processes, systems and controls to support revenue recognition and disclosures under the new standard. However, the assessment is ongoing and further analysis may identify future impacts. The guidance is effective for the Company beginning January 1, 2018 and, at that time the Company plans to adopt the standard using the modified retrospective approach.
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Restructuring Charges
In September 2017, the Company announced a corporate reprioritization which aimed to re-focus its resources on the core businesses of Crinone progesterone gel and JPS and reduce expenditures on research and development activities associated with the Company’s intravaginal ring (IVR) program with the goal of potentially identifying a partner for one or more of its IVR product candidates. As a result, during the three and nine months ended September 30, 2017, the Company incurred approximately $0.8 million in restructuring charges. The Company accounted for these actions in accordance with ASC 420,
Exit or Disposal Cost Obligations
. This restructuring expense included approximately $0.4 million for one-time severance and other employee-related costs, approximately $0.3 million future obligations due under our manufacturing and development contracts, approximately $17,000 in
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additional stock-based c
ompensation expense associated with the modification of the exercise period on options held by an executive and approximately $14,000 related to fixed asset impairments resulting from the discontinuation of use on assets associated with programs terminated
.
No significant additional charges are anticipated relating to this restructuring plan.
The Company has recorded a liability totaling approximately $0.7 million for ongoing payments due associated with severance and employee-related costs and future contractual obligations. Severance payments totaling approximately $23,000 were paid during the three months ended September 30, 2017. The Company expects to pay approximately $0.3 million during the remainder of 2017 and approximately $0.4 million in 2018 and beyond.
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