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. Yes ☒ No ☐

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). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

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 ☐ No ☒

As of ~~May 3,~~November 5, 2021, the number of outstanding shares of the registrant’s common stock, par value $0.01 per share, was ~~57,520,682.~~58,122,465.

“Sientra”, “Sientra Platinum20”, “Sientra Full Circle”, “Sientra ~~OPUS”~~Smooth”, ~~“OPUS”, “OPUS Curve”, “OPUS Luxe”, “ACX”~~“Sientra Teardrop”, “Allox”, “Allox2”, “Anatomical Controlled”, “BIOCORNEUM”, “Curve”, “Dermaspan”, “Luxe”, “Softspan”, ~~“Silishield”, “miraDry”, “miraDry~~ and Design”, “miraDry Fresh”, “bioTip”, “The Sweat Stops Here”, “No Sweat No Stress”, “Sweat Less Live More”, “Drop Design”, “freshRewards”, “freshNet”, “freshEquity”, “freshConnect”, and “ML Stylized mark”“Silishield” are trademarks of our company. Our logo and our other trade names, trademarks and service marks appearing in this document are our property. Other trade names, trademarks and service marks appearing in this document are the property of their respective owners. Solely for convenience, our trademarks and trade names referred to in this document appear without the TM or the (R) symbol, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the rights of the applicable licensor to these trademarks and trade names.

	March 31,			December 31,			September 30,			December 31,
	2021			2020			2021			2020
Assets
Current assets:
Cash and cash equivalents	$	80,372		$	54,967		$	66,127		$	54,967
Accounts receivable, net of allowances of $3,658 and $4,464 at March 31, 2021 and December 31, 2020, respectively		25,438			23,503
Accounts receivable, net of allowances of $1,833 and $1,047 at September 30, 2021 and December 31, 2020, respectively								26,453			19,771
Inventories, net		50,556			48,648			51,529			39,168
Prepaid expenses and other current assets		2,803			2,154			2,663			1,891
Current assets of discontinued operations								4			13,475
Total current assets		159,169			129,272			146,776			129,272
Property and equipment, net		13,388			13,106			14,886			12,301
Goodwill		9,202			9,202			9,202			9,202
Other intangible assets, net		9,081			9,387			8,471			9,387
Other assets		7,573			8,011			7,323			8,011
Non-current assets of discontinued operations								—			805
Total assets	$	198,413		$	168,978		$	186,658		$	168,978
Liabilities and Stockholders’ Equity
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Current portion of long-term debt	$	5,820		$	4,670		$	-		$	4,670
Accounts payable		3,845			6,504			6,300			5,799
Accrued and other current liabilities		26,935			32,389			22,285			28,408
Customer deposits		21,956			17,905			30,286			17,905
Sales return liability		11,020			9,192			12,305			9,192
Current liabilities of discontinued operations								501			4,686
Total current liabilities		69,576			70,660			71,677			70,660
Long-term debt		60,540			60,500			61,483			60,500
Derivative liability		69,310			26,570			—			26,570
Deferred and contingent consideration		2,467			2,350			2,786			2,350
Warranty reserve and other long-term liabilities		9,461			9,455			9,950			9,455
Total liabilities		211,354			169,535			145,896			169,535
Commitments and contingencies (Note 11)
Commitments and contingencies (Note 12)
Stockholders’ equity (deficit):
Preferred stock, $0.01 par value – Authorized 10,000,000 shares; NaN issued or outstanding		—			—			—			—
Common stock, $0.01 par value — Authorized 200,000,000 shares; issued 57,515,085 and 50,712,151 and outstanding 57,442,358 and 50,639,424 shares at March 31, 2021 and December 31, 2020, respectively		574			506
Common stock, $0.01 par value — Authorized 200,000,000 shares; issued 58,129,589 and 50,712,151 and outstanding 58,056,862 and 50,639,424 shares at September 30, 2021 and December 31, 2020, respectively								581			506
Additional paid-in capital		600,297			558,059			645,717			558,059
Treasury stock, at cost (72,727 shares at March 31, 2021 and December 31, 2020)		(260	)		(260	)
Treasury stock, at cost (72,727 shares at September 30, 2021 and December 31, 2020)								(260	)		(260	)
Accumulated deficit		(613,552	)		(558,862	)		(605,276	)		(558,862	)
Total stockholders’ equity (deficit)		(12,941	)		(557	)		40,762			(557	)
Total liabilities and stockholders’ equity	$	198,413		$	168,978		$	186,658		$	168,978

	Three Months Ended						Three Months Ended						Nine Months Ended
	March 31,						September 30,						September 30,
	2021			2020			2021			2020			2021			2020
Net sales	$	23,236		$	16,932		$	19,620		$	15,329		$	58,035		$	37,109
Cost of goods sold		10,935			6,792			9,030			7,105			26,027			15,887
Gross profit		12,301			10,140			10,590			8,224			32,008			21,222
Operating expenses:
Sales and marketing		12,375			16,763			12,052			9,969			34,348			24,858
Research and development		2,392			2,908			2,367			1,778			6,962			6,142
General and administrative		7,354			9,304			7,865			6,445			23,321			21,183
Restructuring		—			1,739			—			(442	)		—			389
Impairment		—			6,432
Total operating expenses		22,121			37,146			22,284			17,750			64,631			52,572
Loss from operations		(9,820	)		(27,006	)		(11,694	)		(9,526	)		(32,623	)		(31,350	)
Other income (expense), net:
Interest income		2			180			1			6			4			203
Interest expense		(2,004	)		(1,623	)		(2,026	)		(2,055	)		(6,143	)		(7,284	)
Change in fair value of derivative liability		(42,740	)		(130	)		35,550			10,090			(14,460	)		(8,420	)
Other income (expense), net		(128	)		(33	)		6,672			(2	)		6,575			34
Total other income (expense), net		(44,870	)		(1,606	)		40,197			8,039			(14,024	)		(15,467	)
Loss before income taxes		(54,690	)		(28,612	)
Income tax		—			—
Net loss	$	(54,690	)	$	(28,612	)
Basic and diluted net loss per share attributable to common stockholders	$	(1.01	)	$	(0.57	)
Weighted average outstanding common shares used for net loss per share attributable to common stockholders:
Basic and diluted		54,321,146			49,916,412
Income (loss) from continuing operations before income taxes								28,503			(1,487	)		(46,647	)		(46,817	)
Income tax expense (benefit)								—			—			—			—
Income (loss) from continuing operations								28,503			(1,487	)		(46,647	)		(46,817	)
Income (loss) from discontinued operations, net of income taxes								(93	)		(4,334	)		233			(21,893	)
Net income (loss)							$	28,410		$	(5,821	)	$	(46,414	)	$	(68,710	)

Basic earnings (loss) per share:
Continuing operations							$	0.49		$	(0.03	)	$	(0.82	)	$	(0.93	)
Discontinued operations								(0.00	)		(0.09	)		0.00			(0.44	)
Basic earnings (loss) per share							$	0.49		$	(0.12	)	$	(0.82	)	$	(1.37	)
Diluted earnings (loss) per share:
Continuing operations							$	(0.08	)	$	(0.03	)	$	(0.82	)	$	(0.93	)
Discontinued operations								(0.00	)		(0.09	)		0.00			(0.44	)
Diluted earnings (loss) per share							$	(0.08	)	$	(0.12	)	$	(0.82	)	$	(1.37	)
Weighted average outstanding common shares used for net income (loss) per share attributable to common stockholders:
Basic								58,005,784			50,394,858			56,680,594			50,155,623
Diluted								72,639,930			50,394,858			56,680,594			50,155,623

																Additional						Total																			Additional						Total
	Preferred stock				Common stock						Treasury stock					paid-in			Accumulated			stockholders'			Preferred stock				Common stock							Treasury stock					paid-in			Accumulated			stockholders'
	Shares		Amount		Shares			Amount			Shares		Amount			capital			deficit			equity			Shares		Amount		Shares			Amount				Shares		Amount			capital			deficit			equity
Balances at December 31, 2019		—	$	—		49,612,907		$	495			72,727	$	(260	)	$	550,562		$	(468,915	)	$	81,882			—	$	—		49,612,907		$	495				72,727	$	(260	)	$	550,562		$	(468,915	)	$	81,882
Issuance of common stock through ATM		—		—		37,000			1			—		—			263			—			264			—		—		37,000			1				—		—			263			—			264
Stock-based compensation		—		—		—			—			—		—			2,000			—			2,000			—		—		—			—				—		—			2,000			—			2,000
Employee stock purchase program (ESPP)		—		—		113,615			1			—		—			533			—			534			—		—		113,615			1				—		—			533			—			534
Vested restricted stock		—		—		472,914			5			—		—			(5	)		—			—			—		—		472,914			5				—		—			(5	)		—			—
Shares withheld for tax obligations on vested RSUs		—		—		(157,412	)		(2	)		—		—			(1,199	)		—			(1,201	)		—		—		(157,412	)		(2	)			—		—			(1,199	)		—			(1,201	)
Net loss		—		—		—			—			—		—			—			(28,612	)		(28,612	)		—		—		—			—				—		—			—			(28,612	)		(28,612	)
Balances at March 31, 2020		—	$	—		50,079,024		$	500			72,727	$	(260	)	$	552,154		$	(497,527	)	$	54,867			—	$	—		50,079,024		$	500				72,727	$	(260	)	$	552,154		$	(497,527	)	$	54,867
Stock-based compensation																										—		—		—			—				—		—			1,718			—			1,718
Stock option exercises																										—		—		5,454			—				—		—			13			—			13
Employee stock purchase program (ESPP)																										—		—		(1,012	)		—				—		—			(5	)		—			(5	)
Vested restricted stock																										—		—		363,795			4				—		—			(4	)		—			—
Shares withheld for tax obligations on vested RSUs																										—		—		(91,529	)		(1	)	��		—		—			(226	)		—			(227	)
Net loss																										—		—		—			—				—		—			—			(34,277	)		(34,277	)
Balances at June 30, 2020																										—	$	—		50,355,732		$	503				72,727	$	(260	)	$	553,650		$	(531,804	)	$	22,089
Stock-based compensation																										—		—		—			—				—		—			1,574			—			1,574
Stock option exercises																										—		—		727			—				—		—			3			—			3
Employee stock purchase program (ESPP)																										—		—		91,125			1				—		—			306			—			307
Vested restricted stock																										—		—		85,255			1				—		—			(1	)		—			—
Shares withheld for tax obligations on vested RSUs																										—		—		(25,204	)		(1	)			—		—			(67	)		—			(68	)
Net loss																										—		—		—			—				—		—			—			(5,821	)		(5,821	)
Balances at September 30, 2020																										—	$	—		50,507,635		$	504				72,727	$	(260	)	$	555,465		$	(537,625	)	$	18,084

																Additional						Total																			Additional						Total
	Preferred stock				Common stock						Treasury stock					paid-in			Accumulated			stockholders'			Preferred stock				Common stock							Treasury stock					paid-in			Accumulated			stockholders'
	Shares		Amount		Shares			Amount			Shares		Amount			capital			deficit			equity			Shares		Amount		Shares			Amount				Shares		Amount			capital			deficit			equity
Balances at December 31, 2020		—	$	—		50,712,151		$	506			72,727	$	(260	)	$	558,059		$	(558,862	)	$	(557	)		—	$	—		50,712,151		$	506				72,727	$	(260	)	$	558,059		$	(558,862	)	$	(557	)
Proceeds from follow-on offering, net of costs		—		—		6,222,222			62			—		—			39,164			—			39,226			—		—		6,222,222			62				—		—			39,164			—			39,226
Stock-based compensation		—		—		—			—			—		—			3,163			—			3,163			—		—		—			—				—		—			3,163			—			3,163
Stock option exercises		—		—		12,727			—			—		—			51			—			51			—		—		12,727			—				—		—			51			—			51
Employee stock purchase program (ESPP)		—		—		95,919			1			—		—			322			—			323			—		—		95,919			1				—		—			322			—			323
Vested restricted stock		—		—		554,896			6			—		—			752			—			758			—		—		554,896			6				—		—			752			—			758
Shares withheld for tax obligations on vested RSUs		—		—		(82,830	)		(1	)		—		—			(1,214	)		—			(1,215	)		—		—		(82,830	)		(1	)			—		—			(1,214	)		—			(1,215	)
Net loss		—		—		—			—			—		—			—			(54,690	)		(54,690	)		—		—		—			—				—		—			—			(54,690	)		(54,690	)
Balances at March 31, 2021		—	$	—		57,515,085		$	574			72,727	$	(260	)	$	600,297		$	(613,552	)	$	(12,941	)		—	$	—		57,515,085		$	574				72,727	$	(260	)	$	600,297		$	(613,552	)	$	(12,941	)
Stock-based compensation																										—		—		—			—				—		—			2,584			—			2,584
Stock option exercises																										—		—		23,636			1				—		—			94			—			95
Vested restricted stock																										—		—		471,759			5				—		—			242			—			247
Shares withheld for tax obligations on vested RSUs																										—		—		(81,386	)		(1	)			—		—			(726	)		—			(727	)
Net loss																										—		—		—			—				—		—			—			(20,134	)		(20,134	)
Balances at June 30, 2021																										—	$	—		57,929,094		$	579				72,727	$	(260	)	$	602,491		$	(633,686	)	$	(30,876	)
Stock-based compensation																										—		—		—			—				—		—			2,326			—			2,326
Employee stock purchase program (ESPP)																										—		—		103,152			1				—		—			349			—			350
Vested restricted stock																										—		—		148,098			1				—		—			(1	)		—			—
Shares withheld for tax obligations on vested RSUs																										—		—		(50,755	)		—				—		—			(478	)		—			(478	)
Reclassification of derivative liability to equity																										—		—		—			—				—		—			41,030			—			41,030
Net income																										—		—		—			—				—		—			—			28,410			28,410
Balances at September 30, 2021																										—	$	—		58,129,589		$	581				72,727	$	(260	)	$	645,717		$	(605,276	)	$	40,762

	Three Months Ended March 31,						Nine Months Ended September 30,
	2021			2020			2021			2020
Cash flows from operating activities:
Net loss	$	(54,690	)	$	(28,612	)	$	(46,414	)	$	(68,710	)
Income (loss) from discontinued operations, net of income taxes								233			(21,893	)
Loss from continuing operations, net of income taxes								(46,647	)		(46,817	)
Adjustments to reconcile net loss to net cash used in operating activities
Impairment		—			6,432
Depreciation and amortization		1,384			1,228			3,149			2,386
Provision for doubtful accounts		(386	)		357			875			258
Provision for warranties		332			236			684			362
Provision for inventory		26			1,081			638			1,435
Fair value adjustments to derivative liability		42,740			130			14,460			8,420
Fair value adjustments of other liabilities held at fair value		17			(39	)		49			29
Amortization of debt discount and issuance costs		848			290			2,632			3,430
Gain on extinguishment of debt								(6,652	)		—
Stock-based compensation expense		3,163			2,133			8,073			5,342
Payments of contingent consideration liability in excess of acquisition-date fair value								(2,419	)		—
Other non-cash adjustments		213			107			584			198
Changes in operating assets and liabilities:
Accounts receivable		(1,544	)		1,766			(7,558	)		(5,311	)
Inventories		(1,933	)		(3,720	)		(12,999	)		(6,569	)
Prepaid expenses, other current assets and other assets		(268	)		(587	)		(205	)		(166	)
Accounts payable, accrueds, and other liabilities		(8,443	)		(9,867	)		1,279			(4,921	)
Customer deposits		4,051			1,284			12,381			1,547
Sales return liability		1,823			592			3,113			1,930
Net cash flow from operating activities - continuing operations								(28,563	)		(38,447	)
Net cash flow from operating activities - discontinued operations								(989	)		(14,292	)
Net cash used in operating activities		(12,667	)		(27,189	)		(29,552	)		(52,739	)
Cash flows from investing activities:
Purchase of property and equipment		(1,321	)		(1,206	)		(4,882	)		(3,112	)
Net cash used in investing activities		(1,321	)		(1,206	)
Net cash flow from investing activities - continuing operations								(4,882	)		(3,112	)
Net cash flow from investing activities - discontinued operations								11,314			(80	)
Net cash provided by (used in) investing activities								6,432			(3,192	)
Cash flows from financing activities:
Proceeds from issuance of common stock for employee stock-based plans		1,132			534			1,824			852
Net proceeds from issuance of common stock		39,226			264			39,226			264
Tax payments related to shares withheld for vested restricted stock units (RSUs)		(1,215	)		(1,201	)		(2,420	)		(1,496	)
Gross borrowings under the Term Loan		1,000			—			1,000			—
Repayments under the Term Loan								—			(25,000	)
Gross borrowings under the PPP Loan								—			6,652
Repayment of the Revolving Loan		—			(6,508	)		—			(6,508	)
Net proceeds from issuance of the Convertible Note		—			60,000			—			60,000
Payments of contingent consideration up to acquisition-date fair value								(4,550	)		—
Deferred financing costs		(750	)		(240	)		(800	)		(2,958	)
Net cash provided by financing activities		39,393			52,849			34,280			31,806
Net increase in cash, cash equivalents and restricted cash		25,405			24,454
Net increase (decrease) in cash, cash equivalents and restricted cash								11,160			(24,125	)
Cash, cash equivalents and restricted cash at:
Beginning of period		55,310			87,951			55,300			87,951
End of period	$	80,715		$	112,405		$	66,460		$	63,826

Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets
Cash and cash equivalents		80,372		$	112,062			66,127		$	63,483
Restricted cash included in other assets		343			343			333			343
Total cash, cash equivalents and restricted cash	$	80,715		$	112,405		$	66,460		$	63,826

Supplemental disclosure of cash flow information:
Interest paid	$	1,058		$	1,067		$	3,133		$	3,781
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment in accounts payable and accrued liabilities		400			222			323			114
Deferred follow-on offering costs in accounts payable and accrued liabilities		122			—
Deferred financing costs in accounts payable and accrued liabilities		50			1,275
Equity component of the Convertible Note								41,030			—

The accompanying unaudited condensed consolidated financial statements of Sientra, Inc. (“Sientra”, the “Company”, “we”, “our”, or “us”) in this Quarterly Report on Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and the rules and regulations of the U.S. Securities and Exchange Commission, or SEC. Accordingly, they do not include certain footnotes and financial presentations normally required under accounting principles generally accepted in the United States of America for complete financial reporting. The interim financial information is unaudited, but reflects all normal adjustments and accruals which are, in the opinion of management, considered necessary to provide a fair presentation for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 11, 2021, or the Annual Report. The results for the three and nine months ended ~~March 31,~~September 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.

As a result of the miraDry Sale discussed in Note 2, the miraDry business met the criteria to be reported as discontinued operations. Therefore, the Company is reporting the historical results of miraDry, including the results of operations, cash flows, and related assets and liabilities, as discontinued operations for all periods presented herein through the date of the Sale. Unless otherwise noted, the accompanying notes to the unaudited condensed consolidated financial statements have all been revised to reflect continuing operations only. As discussed in Note 11, following the Sale the Company has one operating segment in continuing operations named Plastic Surgery, formerly known as Breast Products.

Since the Company’s inception, it has incurred significant net operating losses and the Company anticipates that losses will continue in the near term. The Company expects its operating expenses will ~~continue to decrease following~~remain consistent with the ~~completion of the organizational efficiency initiative in 2020~~current period and ~~the sale of the miraDry business but~~ will need to generate significant net sales to achieve profitability. To date, the Company has funded operations primarily with proceeds from the sales of preferred stock, borrowings under term loans and the convertible note, sales of products since 2012, and the proceeds from the sale of common stock in public offerings. To fund ongoing operating and capital needs, the Company may need to raise additional capital in the future through the sale of equity securities and incremental debt financing.

On February 5, 2021, the Company entered into a Second Amended and Restated Credit and Security Agreement (Term Loan), by and among the Company, certain of the Company’s wholly-owned subsidiaries (together with Sientra, the “Borrowers”), the lenders party thereto from timeRefer to time and MidCap Financial Trust, as administrative agent and collateral agent (“Agent”) (the “Restated Term Loan Agreement”). The Restated Term Loan Agreement amends and restates the Company’s existing Amended and Restated Credit and Security Agreement (Term Loan), dated as of July 1, 2019.

Also on February 5, 2021, the Company entered in to a Third Amendment to Amended and Restated Credit and Security Agreement (Revolving Loan), by and among the Borrowers, the lenders party thereto from time to time, and the Agent (the “Revolving Loan Amendment”). The Revolving Loan Amendment modified the Net Revenue (as defined therein) requirement in a manner consistent with the modification under the Restated Term Loan Agreement. In addition, the Revolving Loan Amendment made other conforming changes to the Restated Term Loan Agreement.

~~See~~ Note ~~6 to the condensed consolidated financial statements~~7 for a full description ofand updates to all of the Company’s long-term debt, revolving line of credit, convertible note, and ~~PPP~~Paycheck Protection Program (PPP) loan.

On February 8, 2021, the Company completed a follow-on public offering of 5,410,628 shares of common stock at $6.75 per share, as well as 811,594 additional shares of common stock pursuant to the full exercise of the over-allotment option granted to the underwriters. Net proceeds were approximately $39.2 million after deducting

underwriting discounts and commissions of approximately $2.5 million and offering expenses of approximately $0.3 million.

As of ~~March 31,~~September 30, 2021, the Company had cash and cash equivalents of ~~$80.4~~$66.1 million. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company believes that its cash and cash equivalents will be sufficient to fund its operations for at least the next 12 months.

The preparation of the condensed consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendment removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation, and calculating income taxes in interim periods. The amendment also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption was permitted. The Company adopted the applicable amendments within ASU 2019-12 in the first quarter of 2021 and there was no material impact on its condensed consolidated financial statements from the adoption.

~~In August 2020, the FASB issued ASU 2020-06,~~ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendment eliminates certain accounting models and simplifies the accounting for convertible instruments and enhances disclosures for convertible instruments and earnings per share. The amendments are effective for public entities excluding smaller reporting companies for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023 including interim periods within those fiscal years and early adoption is permitted. The Company is currently evaluating the impact that adoption of the standard will have on the consolidated financial statements.

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

The rapid, global spread of COVID-19 has resulted in significant economic uncertainty, significant declines in business and consumer confidence and global demand in the non-essential healthcare industry (among others), a global economic slowdown, and could lead to a global recession. The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, and employee-related amounts, will depend on future developments that are highly uncertain. The Company continues to monitor and assess new information related to the COVID-19 pandemic, the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

As an aesthetics company, surgical procedures involving the Company’s breast ~~and miraDry~~ products are susceptible to local and national government restrictions, such as social distancing, vaccination requirements, “shelter in place” orders and business ~~closures, due to the economic and logistical impacts these measures have on consumer demand as well as the practitioners’ ability to administer such procedures.~~closures. The inability or limited ability to perform such non-emergency procedures significantly harmed the Company’s revenues since the second quarter of 2020 and continued to harm the Company’s revenues during the ~~three~~nine months ended ~~March 31,~~September 30, 2021. While ~~some~~many states have lifted certain restrictions on non-emergency procedures, the Company will likely continue to experience future harm to its revenues while existing or new restrictions remain in place. It is not possible to accurately predict the length or severity of the COVID-19 pandemic or the timing for a broad and sustained ability to perform non-emergency procedures involving the Company’s products. The Company continues to monitor and assess new information related to the COVID-19 pandemic, the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

Further, the spread of COVID-19 has caused the Company to modify workforce practices, and the Company may take further actions determined to be in the best interests of the Company’s employees or as required by governments. In addition, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that this can lead to a local and/or global economic recession, which may result in further harm to the aesthetics market. Such economic disruption could adversely affect the Company’s business. The continued spread of COVID-19, or another infectious disease, could also result in delays or disruptions in the Company’s supply chain or adversely affect the Company’s manufacturing facilities and personnel. Further, trade and/or national security protection policies may be adjusted as a result of the COVID-19 pandemic, such as actions by governments that limit, restrict or prevent the movement of certain goods into a country and/or region, and current U.S./China trade relations may be further exacerbated by the pandemic.

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

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

On June 10, 2021, the Company completed the sale of its miraDry business (the “Sale”) to miraDry Acquisition Company, Inc., a Delaware corporation (“Buyer”), an entity affiliated with 1315 Capital II, LP, as a result of the Company’s strategic decision to focus investment on its core Plastic Surgery segment. The Sale was made pursuant to the terms and conditions of the Asset Purchase Agreement (the “Purchase Agreement”), dated May 11, 2021, among the Company and certain of its subsidiaries, Buyer, and, solely for purposes of Section 8.14 of the Purchase Agreement, 1315 Capital II, LP. The aggregate purchase price was $10.0 million, which after certain adjustments for agreed upon changes in the estimated net asset value amount of purchased assets and assumed liabilities resulted in net cash proceeds of $11.3 million to the Company on the date of close. As of September 30, 2021, the Company has an escrow liability of $3.2 million in “Accrued and other current liabilities” on the condensed consolidated balance sheet to account for additional agreed upon post close changes in the net asset value and has recognized a loss on sale of $2.5 million. In October 2021, the Company finalized the transaction and paid $3.2 million to the Buyer in accordance with the agreed upon post close changes in the net asset value.

In accordance with the Purchase Agreement, assumed liabilities did not include product liabilities, environmental, and employee claims arising prior to the closing date. The Purchase Agreement also included customary representations and warranties, as well as certain covenants, including, among other things, that: (i) the Company will abide by certain non-solicitation, exclusivity, and non-competition covenants, and (ii) the Company would enter into a transition services agreement (“TSA”) to provide certain transition services related to the business.

Under the TSA, the Company provides certain post-closing services to the Buyer related to the miraDry business for a period of up to six months, including accounting, accounts receivable support, customer service, IT, regulatory, quality assurance, and clinical support. As consideration for these services, the Buyer will reimburse the Company for direct and certain indirect costs, as well as certain overhead or administrative expenses related to operating the business. The Company recognized $0.1 million of TSA fees and cost reimbursements in operating expenses from continuing operations in the condensed consolidated statement of operations for the nine months ended September 30, 2021. As of September 30, 2021, the Company has received $0.3 million relating to the TSA services and has recorded a receivable of $0.1 million within other current assets in the condensed consolidated balance sheets. In connection with the accounts receivable support under the TSA, the Company received $2.3 million in customer payments and remitted $2.2 million to the Buyer during the period from June 10, 2021 through September 30, 2021. As of September 30, 2021, the Company has recorded a $0.1 million payable in accounts payable on the condensed consolidated balance sheets.

Additionally, the Company and the Buyer entered into a sublease agreement whereby the Buyer will sublease the miraDry office space in Santa Clara, CA. The sublease term is for an initial period of six months, with subsequent option periods for up to a total of twenty four months. During the three and nine months ended September 30, 2021, the Company recognized $0.2 million and $0.3 million, respectively, of sublease income in general and administrative expenses in the condensed consolidated statements of operations.

The Sale met the discontinued operations criteria given that the business is a component and represented a strategic shift. The following table presents the aggregate carrying amounts of major classes of assets and liabilities of discontinued operations (in thousands):

The results of operations for the miraDry business were included in income (loss) from discontinued operations on the accompanying condensed consolidated statements of operations. The following table provides information regarding the results of discontinued operations (in thousands):

The results of the miraDry business, including the results of operations, cashflows, and related assets and liabilities are reported as discontinued operations for all periods presented herein.

The Company generates revenue primarily through the sale and delivery of promised goods or services to customers. Sales prices are documented in the executed sales contract, purchase order or order acknowledgement prior to the transfer of control to the customer. Typical payment terms are 30 days for Breast Products and direct sales of consumable miraDry products and tend to be longer for capital sales of miraDry Systems and sales to miraDry distributors, but do not extend beyond one year.days.

Revenue contracts may include multiple products or services, each of which is considered a separate performance obligation. Performance obligations typically include the delivery of promised products, such as breast implants,

tissue expanders, ~~BIOCORNEUM, miraDry Systems~~ and ~~bioTips,~~BIOCORNEUM, along with service-type warranties. Other

deliverables are sometimes promised but are ancillary and insignificant in the context of the contract as a whole. Revenue is allocated to each performance obligation based on its relative standalone selling price. The Company determines standalone selling prices based on observable prices for all performance obligations with the exception of the service-type warranty under the Platinum20 Limited Warranty Program, or ~~Platinum20.~~Platinum20, which is based on the expected cost plus margin approach. Inputs into the expected cost plus margin approach include historical incidence rates, estimated replacement costs, estimated financial assistance payouts and an estimated margin.

The liability for unsatisfied performance obligations under the service warranty as of ~~March 31,~~September 30, 2021 were as follows:

	Three Months Ended March 31,			Nine Months Ended September 30,
	2021			2021
Balance as of December 31, 2020	$	2,618		$	1,945
Additions and adjustments		427			1,379
Revenue recognized		(373	)		(411	)
Balance as of March 31, 2021	$	2,672
Balance as of September 30, 2021				$	2,913

Revenue for service warranties are recognized ratably over the term of the agreements. Specifically for Platinum20, the performance obligation is satisfied at the time that the benefits are provided and are expected to be satisfied over the following 3 to 24 month period for financial assistance and 20 years for product replacement.

For delivery of promised products, control transfers and revenue is recognized upon shipment, unless the contractual arrangement requires transfer of control when products reach their destination, for which revenue is recognized once the product arrives at its destination. ~~For Breast Products, a~~A portion of the Company’s revenue is generated from the sale of consigned inventory of breast implants and tissue expanders maintained at doctor, hospital, and clinic locations. For these products, revenue is recognized at the time the Company is notified by the customer that the product has been ~~implanted,~~used, not when the consigned products are delivered to the customer’s location.

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

~~For Breast Products, with~~With the exception of the Company’s BIOCORNEUM scar management products, the Company allows for the return of products from customers within six months after the original sale, which is accounted for as variable consideration. A sales return liability is established based on estimated returns using relevant historical experience taking into consideration recent gross sales and notifications of pending returns, as adjusted for changes in recent industry events and trends. The estimated sales returns are recorded as a reduction of revenue and as a sales return liability in the same period revenue is recognized. Actual sales returns in any future period are inherently uncertain and thus may differ from the estimates. If actual sales returns differ significantly from the estimates, an adjustment to revenue in the current or subsequent period would be recorded. The following table provides a rollforward of the sales return liability (in thousands):

	Three Months Ended March 31,						Nine Months Ended September 30,
	2021			2020			2021			2020
Beginning balance	$	9,192		$	8,116		$	9,192		$	8,116
Addition to reserve for sales activity		36,386			28,538			115,374			84,119
Actual returns		(33,700	)		(28,074	)		(110,996	)		(82,110	)
Change in estimate of sales returns		(858	)		127			(1,265	)		(46	)
Ending balance	$	11,020		$	8,707		$	12,305		$	10,079

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, customer deposits and sales return liability are reasonable estimates of their fair value because of the short maturity of these items. The fair value of the common stock warrant liability, contingent consideration, and the convertible feature related to the convertible note are discussed in Note 4.5. The fair value of the debt is based on the amount of future cash flows associated with the instrument discounted using the Company’s market rate. As of ~~March 31,~~September 30, 2021, the carrying value of the long-term debt was not materially different from the fair value. As of ~~March 31,~~September 30, 2021, the carrying value and fair value of the convertible note were as follows (in thousands):

	March 31,		December 31,		September 30,		December 31,
	2021		2020		2021		2020
Raw materials	$	5,985	$	7,138	$	2,669	$	3,788
Work in progress		8,454		12,303		4,325		10,710
Finished goods		32,184		25,791		40,278		21,254
Finished goods - right of return		3,933		3,416		4,257		3,416
	$	50,556	$	48,648	$	51,529	$	39,168

	March 31,			December 31,			September 30,			December 31,
	2021			2020			2021			2020
Leasehold improvements	$	2,909		$	2,857		$	2,605		$	2,523
Manufacturing equipment and toolings		9,598			9,289			9,832			8,529
Computer equipment		3,013			2,776			1,637			2,522
Software		4,206			3,546			6,581			3,010
Office equipment		167			167
Furniture and fixtures		1,243			1,193			1,542			1,040
		21,136			19,828			22,197			17,624
Less accumulated depreciation		(7,748	)		(6,722	)		(7,311	)		(5,323	)
	$	13,388		$	13,106		$	14,886		$	12,301

Depreciation expense for the three months ended ~~March 31,~~September 30, 2021 and 2020 was ~~$1.1~~$0.7 million and ~~$0.7~~$0.9 million, respectively. Depreciation expense for the nine months ended September 30, 2021 and 2020 was $2.2 million and $1.4 million, respectively.

~~The~~Following the sale of the miraDry business, the Company has ~~determined that it has two~~one reporting ~~units,~~unit, Plastic Surgery, formerly known as Breast ~~Products and miraDry, and~~Products. The Company evaluates goodwill for impairment at least annually on October 1^st and whenever circumstances suggest that goodwill may be impaired.

The ~~changes in the~~ carrying amount of goodwill ~~during the three months ended March 31,~~as of September 30, 2021 and ~~the year ended~~ December 31, 2020 were as follows (in thousands):

	Breast Products			miraDry			Total			Plastic Surgery			miraDry			Total
Balances as of December 31, 2020
Goodwill		23,480			7,629			31,109			23,480			7,629			31,109
Accumulated impairment losses		(14,278	)		(7,629	)		(21,907	)		(14,278	)		(7,629	)		(21,907	)
Goodwill, net	$	9,202		$	—		$	9,202		$	9,202		$	—		$	9,202
Balances as of March 31, 2021
Balances as of September 30, 2021
Goodwill		23,480			7,629			31,109			23,480			7,629			31,109
Accumulated impairment losses		(14,278	)		(7,629	)		(21,907	)		(14,278	)		(7,629	)		(21,907	)
Goodwill, net	$	9,202		$	—		$	9,202		$	9,202		$	—		$	9,202

~~As of March 31, 2021, the Breast Products reporting unit had a negative carrying value.~~

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

	Average									Average
	Amortization		March 31, 2021							Amortization		September 30, 2021
	Period		Gross Carrying		Accumulated			Intangible		Period		Gross Carrying		Accumulated			Intangible
	(in years)		Amount		Amortization			Assets, net		(in years)		Amount		Amortization			Assets, net
Intangibles with definite lives
Customer relationships		10	$	4,940	$	(3,948	)	$	992		10	$	4,940	$	(4,132	)	$	808
Trade names - finite life		12		800		(339	)		461		12		800		(372	)		428
Non-compete agreement		2		80		(80	)		—		2		80		(80	)		—
Regulatory approvals		1		670		(670	)		—		1		670		(670	)		—
Acquired FDA non-gel product approval		11		1,713		(1,713	)		—		11		1,713		(1,713	)		—
Manufacturing know-how		19		8,240		(1,062	)		7,178		19		8,240		(1,455	)		6,785
Total definite-lived intangible assets			$	16,443	$	(7,812	)	$	8,631			$	16,443	$	(8,422	)	$	8,021

Intangibles with indefinite lives
Trade names - indefinite life	—			450		—			450	—			450		—			450
Total indefinite-lived intangible assets			$	450	$	—		$	450			$	450	$	—		$	450

Amortization expense for both the three months ended ~~March 31,~~September 30, 2021 and 2020 were $0.3 million. Amortization expense for the nine months ended September 30, 2021 and 2020 was ~~$0.3~~$0.9 million and ~~$0.6~~$1.0 million, respectively. The following table summarizes the future estimated amortization expense relating to the Company's definite-lived intangible assets as of ~~March 31,~~September 30, 2021 (in thousands):

	Amortization		Amortization
Period	Expense		Expense
2021	$	916	$	305
2022		1,163		1,163
2023		1,092		1,092
2024		948		948
2025		805		805
Thereafter		3,707		3,708
	$	8,631	$	8,021

	March 31,		December 31,		September 30,		December 31,
	2021		2020		2021		2020
Payroll and related expenses	$	3,445	$	3,524	$	4,389	$	3,003
Accrued severance		389		2,900		452		2,900
Accrued commissions		3,924		5,561		3,494		4,734
Accrued manufacturing		278		225		252		225
Deferred and contingent consideration, current portion		10,163		10,146		3,195		10,146
Audit, consulting and legal fees		81		48		—		48
Accrued sales and marketing expenses		519		445		96		300
Lease liabilities		1,565		1,588		1,618		1,588
Other		6,571		7,952		8,789		5,464
	$	26,935	$	32,389	$	22,285	$	28,408

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

	Three Months Ended March 31,						Nine Months Ended September 30,
	2021			2020			2021			2020
Balance as of January 1	$	2,001		$	1,562		$	1,934		$	1,397
Warranty costs incurred during the period		(175	)		(185	)		(270	)		(83	)
Changes in accrual related to warranties issued during the period		326			242			673			367
Changes in accrual related to pre-existing warranties		6			(6	)		11			(5	)
Balance as of March 31	$	2,158		$	1,613
Balance as of September 30							$	2,348		$	1,676

As of ~~March 31,~~September 30, 2021 ~~$2.1 million is~~and 2020, both balances are included in “Warranty reserve and other long-term liabilities”, and $0.1 million is included in “Accrued and other current liabilities”. As of March 31, 2020, $1.5 million is included in “Warranty reserve and other long-term liabilities”, and $0.1 million is included in “Accrued and other current liabilities”.

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

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

The Company’s common stock warrant liabilities are carried at fair value determined according to the fair value hierarchy described above. The Company has utilized an option pricing valuation model to determine the fair value of its outstanding common stock warrant liabilities. The inputs to the model include fair value of the common stock related to the warrant, exercise price of the warrant, expected term, expected volatility, risk-free interest rate and dividend yield. The warrants are valued using the fair value of common stock as of the measurement date. The Company estimates its expected stock volatility based on company-specific historical and implied volatility information of its stock. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. The Company has estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends. As several significant inputs are not observable, the overall fair value measurement of the warrants is classified as Level 3. As of the current period ended September 30, 2021, all warrants have expired.

The Company assessed the fair value of the contingent consideration for future royalty payments related to the acquisition of BIOCORNEUM and the contingent consideration for the future milestone payments related to the acquisition of miraDry using a Monte-Carlo simulation model. The contingent consideration related to the acquisition of BIOCORNEUM consist of royalty obligations based on future net sales for a defined term, beginning in 2024. The significant assumption utilized in the fair value measurement was the revenue discount rate, which was 21.0%. The contingent consideration for ~~future~~ milestone payments related to the acquisition of miraDry iswas based on the timing of achievement of target net sales, which is estimated based on an internal management forecast. The significant assumption utilized in the fair value measurement was the miraDry company discount rate, which was 11.2%. As these inputs are not observable, the overall fair value measurement of the contingent consideration is classified as Level 3. As of September 30, 2021, the remaining liability for the miraDry contingent consideration was approximately $31,000.

~~The~~Prior to the amendment, the Company ~~assesses~~assessed on a quarterly basis the fair value of the derivative liability associated with the conversion feature in the convertible note due in 2025. The conversion feature was initially bifurcated and recorded as a derivative liability on the condensed consolidated balance sheets with a corresponding discount at the date of issuance that is netted against the principal amount of the note. The Company ~~utilizes~~utilized a binomial lattice method to determine the fair value of the conversion feature, which ~~utilizes~~utilized inputs including the common stock price, volatility of common stock, the risk-free interest rate and the probability of conversion to common shares at the Base Conversion Rate in the event of a major transaction (e.g. a change in control). As the

probability of conversion is a significant unobservable input, the overall fair value measurement of the conversion feature iswas classified as Level 3. As a result of the amendment, the conversion feature met the criteria for equity classification and has been reclassified to “Additional paid in capital” on the condensed consolidated balance sheet.

The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis as of ~~March 31,~~September 30, 2021 and December 31, 2020 and indicate the level of the fair value hierarchy utilized to determine such fair value (in thousands):

	Fair Value Measurements as of								Fair Value Measurements as of
	March 31, 2021 Using:								September 30, 2021 Using:
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities:
Liability for common stock warrants	$	—	$	—	$	—	$	—
Liability for contingent consideration		—		—		7,044		7,044	$	—	$	—	$	106	$	106
Liability for derivative		—		—		69,310		69,310
	$	—	$	—	$	76,354	$	76,354	$	—	$	—	$	106	$	106

	Fair Value Measurements as of								Fair Value Measurements as of
	December 31, 2020 Using:								December 31, 2020 Using:
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities:
Liability for common stock warrants	$	—	$	—	$	—	$	—
Liability for contingent consideration		—		—		7,026		7,026	$	—	$	—	$	7,026	$	7,026
Liability for derivative		—		—		26,570		26,570		—		—		26,570		26,570
	$	—	$	—	$	33,596	$	33,596	$	—	$	—	$	33,596	$	33,596

The following table provides a rollforward of the aggregate fair values of the Company’s liabilities for which fair value is determined by Level 3 inputs (in thousands):


	Contingent consideration liability		Derivative liability		Contingent consideration liability			Derivative liability
Balance, December 31, 2020	$	7,026	$	26,570	$	7,026		$	26,570
Change in fair value		18		42,740		49			14,460
Balance, March 31, 2021	$	7,044	$	69,310
Settlements						(6,969	)		—
Reclassification to equity						—			(41,030	)
Balance, September 30, 2021					$	106		$	—

The liability for the current portion of contingent consideration is included in “Accrued and other current liabilities” and the long-term portion is included in “Deferred and contingent consideration” in the condensed consolidated balance sheets. ~~The liability for the conversion feature related to the convertible note is included in “Derivative liability” in the condensed consolidated balance sheets.~~

The Company ~~recognizes~~recognized changes in the fair value of the derivative liability in “Change in fair value of derivative liability” in the condensed consolidated statement of operations and changes in the contingent consideration are recognized in “General and administrative” expense in the condensed consolidated statement of operations.

		Three Months Ended March 31,					Three Months Ended September 30,					Nine Months Ended September 30,
Lease Cost	Classification	2021		2020		Classification	2021			2020		2021			2020
Operating lease cost	Operating expenses	$	428	$	413	Operating expenses	$	405		$	428	$	1,239		$	1,270
Operating lease cost	Inventory		100		117	Inventory		154			131		377			364
Sublease income						Operating expenses		(233	)		—		(301	)		—
Total operating lease cost		$	528	$	530		$	326		$	559	$	1,315		$	1,634
Finance lease cost
Amortization of right-of-use assets	Operating expenses		10		10	Operating expenses		8			10		26			31
Amortization of right-of-use assets	Inventory		12		4	Inventory		12			12		35			24
Interest on lease liabilities	Other income (expense), net		2		2	Other income (expense), net		2			3		6			7
Total finance lease cost		$	24	$	16		$	22		$	25	$	67		$	62
Total lease cost		$	552	$	546		$	348		$	584	$	1,382		$	1,696

As mentioned above in Note 2, as part of the sale of the miraDry business the Company entered into a sublease agreement whereby the Buyer will sublease the miraDry office space in Santa Clara, CA. The initial sublease term is for six months, with subsequent option periods for up to a total of twenty four months. During the initial term of six months, the Company expects cash receipts of approximately $0.5 million.

Short-term lease expense for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 was not material.

Supplemental cash flow information related to operating and finance leases for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 was as follows (in thousands):

	Three Months Ended March 31,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	418	$	487	$	1,261	$	1,337
Operating cash outflows from finance leases		24		14		56		61
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—	$	1,105	$	572	$	1,242
Finance leases		—		60		—		157

Supplemental balance sheet information related to operating and finance leases was as follows (in thousands, except lease term and discount rate):

	March 31,			December 31,			September 30,			December 31,
	2021			2020			2021			2020
Reported as:
Other assets
Operating lease right-of-use assets	$	6,765		$	7,176		$	6,524		$	7,176
Finance lease right-of-use assets		137			158			97			158
Total right-of use assets	$	6,902		$	7,334		$	6,621		$	7,334
Accrued and other current liabilities
Operating lease liabilities	$	1,486		$	1,504		$	1,543		$	1,504
Finance lease liabilities		79			84			75			84
Warranty reserve and other long-term liabilities
Operating lease liabilities		5,578			5,946			5,315			5,946
Finance lease liabilities		65			77			41			77
Total lease liabilities	$	7,208		$	7,611		$	6,974		$	7,611
Weighted average remaining lease term (years)
Operating leases		5			5			4			5
Finance leases		2			2			2			2
Weighted average discount rate
Operating leases		7.78	%		7.75	%		8.09	%		7.75	%
Finance leases		6.10	%		6.15	%		6.48	%		6.15	%

As of ~~March 31,~~September 30, 2021, maturities of the Company’s operating and finance lease liabilities are as follows (in thousands):

Period	Operating leases		Finance leases		Total		Operating leases		Finance leases		Total
Remainder of 2021	$	1,570	$	67	$	1,637	$	564	$	27	$	591
2022		1,920		55		1,975		2,035		58		2,093
2023		1,968		30		1,998		2,085		33		2,118
2024		1,507		1		1,508		1,629		4		1,633
2025		579		—		579		704		—		704
2026 and thereafter		955		—		955		1,221		—		1,221
Total lease payments	$	8,499	$	153	$	8,652	$	8,238	$	122	$	8,360
Less imputed interest		1,435		9		1,444		1,380		6		1,386
Total lease liabilities	$	7,064	$	144	$	7,208	$	6,858	$	116	$	6,974

On July 25, 2017, the Company entered into a Term Loan Credit and Security Agreement and a Revolving Loan Credit and Security Agreement with MidCap Financial Trust (“MidCap”), which replaced the Company’s prior Silicon Valley Bank Loan Agreement. Both agreements were amended and restated on July 1, 2019 and further amended on November 7, 2019 (as so amended, the “Restated Term Loan Agreement” and the “Restated Revolving Credit Agreement” and, together, the “Credit Agreements”).

The Restated Term Loan Agreement provided for the following tranches: (i) a $35 million term loan facility drawn at signing, (ii) a $5 million term loan facility drawn at signing, (iii) at any time after September 30, 2020 to December 31, 2020, a $10.0 million term loan facility (subject to the satisfaction of certain conditions, including evidence that the Company’s net revenue for the past 12 months was greater than or equal to $100.0 million), and (iv) until December 31, 2020 and upon the consent of the agent and the lenders following a request from the Company, an additional $15.0 million term loan facility. The loan matures on July 1, 2024 and carries an interest rate of LIBOR plus 7.50%. The Company will make monthly payments of accrued interest from the funding date until July 31, 2021, to be followed by monthly installments of principal and interest through the maturity date. The Company may prepay some or all of the principal prior to its maturity date provided the Company pays MidCap a prepayment fee. The loan provided that the Company shall pay an exit fee equal to 5.0% of the aggregate amount of all term loans funded to the Company.

On May 11, 2020, the Company entered into the Second Amendment to the Amended and Restated Credit and Security Agreement (Term Loan), by and among the Company, certain of the Company’s subsidiaries, the lenders party thereto and MidCap Financial Trust as agent (the “Term Amendment”). The Term Amendment provided for, among other things, the prepayment by the Company of $25.0 million of outstanding principal, $0.1 million of accrued interest, and $1.25 million in prepaid exit fees with the parties agreeing to waive the prepayment fee with respect to these amounts. The Term Amendment increased the tranche 3 commitment amount from $10.0 million to $15.0 million, extended the tranche 3 termination date from December 31, 2020 to June 30, 2021, and amended certain conditions upon which the tranche 3 commitment can be withdrawn~~, including evidence that the Company’s net revenue for the past six months was greater than or equal to $30.0 million~~. In addition, the Term Amendment amended certain financial requirements including reducing the Company’s minimum unrestricted cash amount from $20.0 million to $5.0 million and amended certain minimum net revenue requirements. Further, the monthly minimum net revenue requirements were revised to be calculated on a trailing three-month basis.

On February 5, 2021, the Company entered into a Second Amended and Restated Credit and Security Agreement (Term Loan), by and among the Company, certain of the Company’s subsidiaries, the lenders party thereto from time to time and MidCap Financial Trust, as administrative agent and collateral agent (“Agent”) (the “Restated Term Loan Agreement”). The Restated Term Loan Agreement amends and restates the Company’s existing Amended and Restated Credit and Security Agreement, dated as of July 1, 2019. Pursuant to the Restated Term Loan Agreement, tranche 3 commitments were reduced from $15 million to $1 million and were advanced on the effective date of the Restated Term Loan Agreement and the remaining unfunded tranche of $15 million was revised to 2 $5 million tranche commitments, with tranche 4 availability commencing on July 1, 2021 and tranche 5 availability commencing July 1, 2022. The parties agreed to extend the last day of the interest only period for all tranches from July 31, 2021 in the Existing Term Loan Agreement to December 31, 2022 in the Restated Term Loan Agreement. The Restated Term Loan Agreement contains certain minimum net revenue requirements based on the Company’s 12-month trailing net revenue, as well as certain minimum unrestricted cash requirements that increase upon the funding of the tranche 4 and tranche 5 loans. The exit fee was modified to apply to only to the amount of any tranche 4 and 5 loans advanced. Finally, in connection with the Restated Term Loan Agreement, the Company agreed to pay an amendment fee of $750,000.

As of ~~March 31,~~September 30, 2021, there was $16.0 million of outstanding principal related to the term loans and ~~$1.4~~$1.2 million of unamortized debt issuance costs which are included in “Long-term debt” on the condensed consolidated balance sheets.

The Restated Revolving Credit Agreement provides for, among other things, a revolving loan of up to $10.0 million. The amount of loans available to be drawn under the Revolving Credit Agreement is based on a borrowing base equal to 85% of the net collectible value of eligible accounts receivable plus 40% of eligible finished goods inventory, or the Borrowing Base, provided that availability from eligible finished goods inventory does not exceed 20% of the Borrowing Base. The revolving loan carries an interest rate of LIBOR plus 4.50%. The Company may make (subject to the applicable borrowing base at the time) and repay borrowings from time to time until the maturity of the facility on July 1, 2024.

~~On May 11, 2020,~~ the Company entered into the Second Amendment to Amended and Restated Credit and Security Agreement (Revolving Loan), by and among the Company, certain of the Company’s subsidiaries, the lenders party thereto and MidCap Financial Trust as agent (the “Revolving Amendment”). The Revolving Amendment included conforming changes to reflect the changes in the Term Amendment. In addition, the Revolving Amendment reduced the borrowing base by the portion of the eligible inventory previously included in the calculation.

Also on February 5, 2021, the Company entered into a Third Amendment to the Amended and Restated Credit and Security Agreement (Revolving Loan), by and among the Company, the lenders party thereto from time to time, and the Agent (the “Revolving Loan Amendment”). The Revolving Loan Amendment modified the net revenue requirement in a manner consistent with the modification under the Restated Term Loan Agreement. In addition, the Revolving Loan Amendment made other conforming changes to the Restated Term Loan Agreement.

As of ~~March 31,~~September 30, 2021, there were 0 borrowings outstanding under the Revolving Loan. As of ~~March 31,~~September 30, 2021, the unamortized debt issuance costs related to the revolving loan was approximately $0.1 million and was included in “Other assets” on the condensed consolidated balance sheets.

The amortization of debt issuance costs on the term loan and the revolving loan for the three months ended ~~March 31,~~September 30, 2021 and 2020 were $0.1 million and $0.2 million, respectively. The amortization of debt issuance costs on the term loan and ~~$0.1~~revolving loan for the nine months ended September 30, 2021 and 2020 was $0.4 million and $0.7 million, respectively, and was included in interest expense in the condensed consolidated statements of operations.

The Credit Agreements include customary affirmative and restrictive covenants and representations and warranties, including a financial covenant for minimum revenues, a financial covenant for minimum cash requirements, a covenant against the occurrence of a “change in control,” financial reporting obligations, and certain limitations on indebtedness, liens, investments, distributions, collateral, mergers or acquisitions, taxes, and deposit accounts. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% may be applied to any outstanding principal balances, and MidCap may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Credit Agreements. The Company’s obligations under the Credit Agreements are secured by a security interest in substantially all of the Company’s assets.

On ~~March 11, 2020,~~September 28, 2021, the Company ~~issued $60.0 million of unsecured and subordinated convertible notes with an interest rate of 4.00% (“Note”~~entered into a First Amendment (the “Amendment”) to Facility Agreement (the “Agreement”) with Deerfield Partners, L.P., as agent and lender (“~~Holder”~~Deerfield”) ~~in order to fund ongoing operations.~~. The ~~Note matures on March 11, 2025, subject to earlier conversion by~~Amendment provides for, among other things, the ability, at the sole option of ~~the Holder at any time in whole or in part into common shares of the Company, for a period up~~Deerfield, to ~~five years. Upon conversion by the Holder, the Company shall deliver,~~issue unregistered shares of the Company’s common stock ~~at a~~upon the conversion ~~rate of 14,634 per $1,000 principal amount~~ of the Convertible Note ~~(which represents an initial conversion rate price of $4.10), or~~(as defined in the ~~Base Conversion Rate, in each case subject to customary anti-dilution adjustments.~~Agreement). In addition, to the ~~typical anti-dilution adjustment, the Note also~~Amendment provides ~~the Holder with additional consideration (“Make-Whole Provision”) beyond the settlement of the conversion obligation,~~that, in the event of a ~~major transaction prior to maturity (e.g. a change in control). Upon conversion by the Holder~~Major Transaction (as defined in the ~~event of a major transaction, the Company shall deliver, either cash,~~ Convertible Note), 0 additional

shares of the Company’s common stock shall be issued if the Share Price Result (as defined in the Convertible Note) is greater than $30.00 per share or a combination of cash and common stock at the Base Conversion rate plus the additional consideration from the Make-Whole Provision. The $60.0 million principal amount of the Note is not payable until the maturity date of March 11, 2025, unless converted to equity earlier. Beginning on July 1, 2020, the Company pays quarterly interest in cash on the Note at 4.00%less than $1.50 per ~~annum.~~share.

~~The~~Prior to the amendment, the conversion features in the outstanding convertible debt instrument ~~are~~were accounted for as a free-standing embedded derivative bifurcated from the principal balance of the Note, as (1) the conversion features ~~are~~were not clearly and closely related to the debt instrument and ~~are~~were not considered to be indexed to the Company’s equity, (2) the conversion features standing alone meet the definition of a derivative, and (3) the Note is not remeasured at fair value each reporting period with changes in fair value recorded in the condensed consolidated statement of operations.

~~The initial~~As a result of the amendment, the conversion feature no longer needed to be accounted for as a free-standing embedded derivative as it met the criteria for equity classification. As of the amendment date, the derivative liability was adjusted to a fair value of ~~$16.1~~$41.0 million ~~was recorded as a non-current liability~~and has been reclassified to “Additional paid in capital” on the condensed consolidated balance ~~sheet and is remeasured to fair value at each balance sheet date with a resulting non-cash gain or loss related to the change in the fair value being charged to earnings (loss).~~ sheet.

As of ~~March 31, 2021~~, the fair value of the derivative liability was $69.3 million. A corresponding debt discount to the initial embedded derivative liability of $16.1 million and issuance costs of $1.5 million were recorded on the issuance date and is netted against the principal amount of the Note. As of ~~March 31,~~September 30, 2021, the unamortized debt discount and issuance costs were ~~$14.9 million.~~$13.3 million and included in “Long-term debt” on the condensed consolidated balance sheet. The Company will amortize the debt discount and debt issuance costs to interest expense under the effective interest method over the term of the Note, at a resulting effective interest rate of approximately 12%. For the three months ended ~~March 31,~~September 30, 2021 and 2020, the amortization of the convertible debt discount and issuance costs were ~~$0.7~~$0.8 million and ~~$0.2~~$0.7 million, ~~respectively,~~respectively. For the nine months ended September 30, 2021 and2020, the amortization of the convertible debt discount and issuance costs were $2.2 million and $1.5 million, respectively. Both were included in interest expense in the condensed consolidated statements of ~~operations.~~operations.

On ~~April 20, 2020,~~July 30, 2021, the Company was ~~granted a loan of $6.7 million under the Paycheck Protection Program of the CARES Act, or the PPP Loan, from~~notified by Silicon Valley Bank orthat they received payment in full from the ~~Lender. The~~Small Business Administration for the amount of the Company's PPP Loan ~~matures~~and the Company's PPP Loan had been fully forgiven. For the quarter ended September 30, 2021, the Company recorded a gain on ~~April 20, 2022, or the Maturity Date, and bears interest at a rate of 1.0% per annum. Under the terms~~extinguishment of the PPP Loan ~~the Company will make no payments until the date which forgiveness~~ of ~~the PPP Loan is determined, which can be up to 10 months following the end of the covered period (which is defined as 24 weeks from the date of the loan)~~$6.7 million in “Other income (expense), or the Deferral Period. Commencing one month after the expiration of the Deferral Period, and continuing on the same day of each month until the Maturity Date, the Company will pay to Lender monthly payments of principal and interest, in an amount required to fully amortize the principal amount outstanding on the PPP Loan on the last day of the Deferral Period by the Maturity Date. As of March 31, 2021, $5.8 million is recorded in “Current portion of long-term debt” and $0.8 million is recorded in “Long-term debt” on the Company’s condensed consolidated balance sheets.

All or a portion of the PPP Loan may be forgiven upon submission of documentation of expenditures in accordance with certain specified requirements. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the 24-week period beginning on the date of loan approval. Not more than 40% of the forgiven amount may be for non-payroll costs. The amount of the PPP Loan eligible to be forgiven will be reduced if the Company’s full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. The Company will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest, in accordance with the amortization schedule described above. The Company has elected to account for the PPP loan in accordance with ASC 470 – Debt, and any forgiveness of the loan will be treated as a gain on extinguishmentnet” within the condensed consolidated statement of operations.

The future schedule of principal payments for all outstanding debt as of ~~March 31,~~September 30, 2021 was as follows (in thousands):

Fiscal Year
Remainder of 2021	$	3,326	$	—
2022		3,326		—
2023		10,105		10,105
2024		5,895		5,895
2025		60,000		60,000
Total	$	82,652	$	76,000

The Company’s Amended and Restated Certificate of Incorporation authorizes the Company to issue 210,000,000 shares of common and preferred stock, consisting of 200,000,000 shares of common stock with $0.01 par value and 10,000,000 shares of preferred stock with $0.01 par value. As of ~~March 31,~~September 30, 2021 and December 31, 2020, the Company had 0 preferred stock issued or outstanding.

On January 17, 2013, the Company entered into a Loan and Security Agreement, or the Original Term Loan Agreement, with Oxford Finance, LLC, or Oxford. On June 30, 2014, the Company entered into an Amended and Restated Loan and Security Agreement, or the Amended Term Loan Agreement, with Oxford. In connection with the Original Term Loan Agreement and the Amended Term Loan Agreement, the Company issued to Oxford (i) seven-year warrants in January 2013 to purchase shares of the Company’s common stock with a value equal to 3.0% of the tranche A, B and C term loans amounts, or the Original Warrants, and (ii) seven-year warrants in June 2014 to purchase shares of the Company’s common stock with a value equal to 2.5% of the tranche D term loan amount. The warrants have an exercise price per share of $14.671. The warrants within Tranche A expired on January 17, 2020, the warrants within Tranche B expired on August 1, 2020, ~~and~~ the warrants within Tranche C expired on December 13, ~~2020. As of March 31, 2021, there were~~2020, and the warrants within Tranche D ~~to purchase an aggregate~~expired on June 30, 2021. As of ~~17,040 shares of common stock~~September 30, 2021, there were 0 warrants outstanding.

In April 2007, the Company adopted the 2007 Equity Incentive Plan, or the 2007 Plan. The 2007 Plan provides for the granting of stock options to employees, directors and consultants of the Company. Options granted under the 2007 Plan may either be incentive stock options or nonstatutory stock options. Incentive stock options, or ISOs, may be granted only to Company employees. Nonstatutory stock options, or NSOs, may be granted to all eligible recipients. A total of 1,690,448 shares of the Company’s common stock were initially reserved for issuance under the 2007 Plan.

The Company’s board of directors adopted the 2014 Equity Incentive Plan, or 2014 Plan, in July 2014, and the stockholders approved the 2014 Plan in October 2014. The 2014 Plan became effective upon completion of the IPO on November 3, 2014, at which time the Company ceased granting awards under the 2007 Plan. Under the 2014 Plan, the Company may issue ISOs, NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards and other forms of stock awards, or collectively, stock awards, all of which may be granted to employees, including officers, non-employee directors and consultants of the Company and their affiliates. ISOs may be granted only to employees. A total of 1,027,500 shares of common stock were initially reserved for issuance under the 2014 Plan, subject to certain annual increases. As of ~~March 31,~~September 30, 2021, a total of ~~1,738,359~~1,860,554 shares of the Company’s common stock were available for issuance under the 2014 Plan.

Pursuant to a board-approved Inducement Plan, the Company may issue NSOs and restricted stock unit awards, or collectively, stock awards, all of which may only be granted to new employees of the Company and their affiliates in accordance with NASDAQ Stock Market Rule 5635(c)(4) as an inducement material to such individuals entering into employment with the Company. As of ~~March 31,~~September 30, 2021, inducement grants for ~~1,667,910~~1,904,425 shares of common stock have been awarded, and ~~796,304~~638,710 shares of common stock were available for future issuance under the Inducement Plan.

Options under the 2007 Plan and the 2014 Plan may be granted for periods of up to ten years as determined by the Company’s board of directors, provided, however, that (i) the exercise price of an ISO shall not be less than 100% of the estimated fair value of the shares on the date of grant, and (ii) the exercise price of an ISO granted to a more than 10% shareholder shall not be less than 110% of the estimated fair value of the shares on the date of grant. An NSO has no such exercise price limitations. NSOs under the Inducement Plan may be granted for periods of up to ten years as determined by the board of directors, provided, the exercise price will not be less than 100% of the estimated fair value of the shares on the date of grant. Options generally vest with 25% of the grant vesting on the first anniversary and the balance vesting monthly on a straight-lined basis over the requisite service period of three additional years for the award. Additionally, options have been granted to certain key executives that vest upon achievement of performance conditions based on performance targets as defined by the board of directors, which have included net sales targets and defined corporate objectives over the performance period with possible payout ranging from 0% to 100% of the target award. Compensation expense is recognized on a straight-lined basis over the vesting term of one year based upon the probable performance target that will be met. The vesting provisions of individual options may vary but provide for vesting of at least 25% per year.

The following summarizes all option activity under the 2007 Plan, 2014 Plan and Inducement Plan:

				Weighted		Weighted average					Weighted		Weighted average
				average		remaining					average		remaining
	Option			exercise		contractual		Option			exercise		contractual
	Shares			price		term (year)		Shares			price		term (year)
Balances at December 31, 2020		1,959,501		$	4.79		5.92		1,959,501		$	4.79		5.92
Exercised		(12,727	)		3.99				(36,363	)		3.99
Forfeited		(91,327	)		9.90				(138,859	)		5.15
Balances at March 31, 2021		1,855,447		$	4.54		5.87
Balances at September 30, 2021									1,784,279		$	4.78		5.50

For stock-based awards the Company recognizes compensation expense based on the grant date fair value using the Black-Scholes option valuation model. Stock-based compensation expense related to stock options for the three and nine months ended ~~March 31,~~September 30, 2021 ~~was~~were $0.1 ~~million.~~million and $0.4 million, respectively. There was 0 stock-based compensation expense related to stock options for the three and nine months ended ~~March 31,~~September 30, 2020. As of ~~March 31,~~September 30, 2021, unrecognized compensation costs related to stock options was ~~$1.9~~$1.7 million.

The Company has issued restricted stock unit awards, or RSUs, under the 2014 Plan and the Inducement Plan. The RSUs issued to employees generally vest on a straight-line basis annually over a 3-year requisite service period. RSUs issued to non-employees generally vest either monthly or annually over the service term. In 2020, the Company implemented a sell-to-cover program for employees who elect to sell shares to cover any withholding taxes due upon vesting. For employees who do not elect to sell shares to cover withholding taxes, the Company nets shares upon vesting and pays the withholding taxes directly.

				Weighted average					Weighted average
	Number			grant date		Number			grant date
	of shares			fair value		of shares			fair value
Balances at December 31, 2020		3,093,790		$	6.97		3,093,790		$	6.97
Granted		1,199,518			7.39		1,597,983			7.38
Vested		(554,896	)		6.38		(1,174,753	)		6.99
Forfeited		(176,337	)		4.34		(392,728	)		6.98
Balances at March 31, 2021		3,562,075		$	7.33
Balances at September 30, 2021							3,124,292		$	7.17

Stock-based compensation expense for RSUs for the three months ended ~~March 31,~~September 30, 2021 and 2020 was ~~$2.9~~$2.1 million and ~~$1.9~~$1.5 million, respectively. Stock-based compensation expense for RSUs for the nine months ended September 30, 2021 and 2020 was $7.3 million and $4.9 million, respectively. As of ~~March 31,~~September 30, 2021, there was ~~$15.6~~$11.1 million of total unrecognized compensation costs related to non-vested RSU awards. The cost is expected to be recognized over a weighted average period of approximately ~~2.23~~2.05 years.

The Company’s board of directors adopted the 2014 Employee Stock Purchase Plan, or ESPP, in July 2014, and the stockholders approved the ESPP in October 2014. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation, subject to any plan limitations. The ESPP provides for offering periods not to exceed 27 months, and each offering period will include purchase periods, which will be the approximately six-month period commencing with one exercise date and ending with the next exercise date. Employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the purchase date. A total of 255,500 shares of common stock were initially reserved for issuance under the ESPP, subject to certain annual increases.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, employees purchased ~~95,919~~199,071 shares of common stock at a weighted average price of ~~$3.37~~$3.38 per share. As of ~~March 31,~~September 30, 2021, the number of shares of common stock available for future issuance was ~~1,356,767.~~1,253,615.

The Company estimated the fair value of employee stock purchase rights using the Black-Scholes model. Stock-based compensation expense related to the ESPP was $0.1 million for both the three months ended ~~March 31,~~September 30, 2021 and 2020. Stock-based compensation expense related to the ESPP was $0.4 million for both the nine months ended September 30, 2021 and 2020.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, there were 0 material modifications of equity awards.

Basic ~~net loss~~earnings (loss) per share ~~attributable to common stockholders~~ is ~~computed~~calculated by dividing ~~net loss~~the income (loss) from continuing and discontinued operations by the weighted average outstanding common shares for basic EPS for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

The potentially dilutive impact from stock options and RSUs is calculated under the treasury stock method. Under this method, proceeds based on the exercise price and unearned compensation are assumed to be used to repurchase shares on the open market at the average market price for the period, reducing the number of potential new shares to be issued and sometimes causing an antidilutive effect. The potentially dilutive impact from the Convertible Note is calculated under the if-converted method until the conversion date. After the conversion date, the converted shares are included in weighted-average common shares outstanding during each period. Diluted net loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares and dilutive potential common share equivalents then outstanding, to the extent they are dilutive. Potential common shares consist of shares issuable upon the exercise of stock options and warrants (using the treasury stock method). Dilutive net loss per share is the same asfor basic ~~net loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive.~~EPS.

The Company excluded the following potentially dilutive securities, outstanding ~~as of March 31,~~for the three and nine months ended September 30, 2021 and 2020, from the computation of diluted net loss per share attributable to common stockholders for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 because they had an anti-dilutive impact due to the net loss attributable to common stockholders incurred for the periods.

	March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020		2021		2020
Stock issuable upon conversion of convertible note						—		14,634,146		14,634,146		11,002,710
Stock options to purchase common stock		2,455,504		1,590,903		1,582,901		34,308		1,629,493		862,278
Warrants for the purchase of common stock		17,040		32,375
Equity contingent consideration		607,442		607,442
Stock issuable upon conversion of convertible note		16,175,862		19,733,352
Unvested RSUs						2,322,816		1,445,486		2,049,832		1,531,084
		19,255,848		21,964,072		3,905,717		16,113,940		18,313,471		13,396,072

The Company uses the if-converted method for calculating any potential dilutive effects of the convertible note. The Company did not adjust the net loss for the three months ended March 31, 2021 to eliminate any interest expense or gain/loss for the derivative liability related to the note in the computation of diluted loss per share, as the effects would be anti-dilutive.

The Company operates in several tax jurisdictions and is subject to taxes in each jurisdiction in which it conducts business. To date, the Company has incurred cumulative net losses and maintains a full valuation allowance on its net deferred tax assets due to the uncertainty surrounding realization of such assets. The Company had 0 tax expense for both the three and nine months ended ~~March 31,~~September 30, 2021 and 2020.

~~The~~Following the sale of the miraDry business on June 10, 2021, the Company has 21 reportable ~~segments:~~segment named Plastic Surgery, formally known as Breast ~~Products and miraDry.~~Products. The ~~Breast Products~~Plastic Surgery segment focuses on sales of silicone gel breast implants, tissue expanders and scar management products under the brands ~~OPUS, Luxe, Curve,~~Sientra Round, Sientra Teardrop, AlloX2, Dermaspan, Softspan and BIOCORNEUM. The miraDry segment, acquired on July 25, 2017, focuses on sales of the miraDry System, consisting of a console and a handheld device which uses consumable single-use bioTips. These segments align with the Company’s principal target markets. miraDry has been included in the condensed consolidated results of operations as of the acquisition date and financial performance of the acquired business is reported in the miraDry segment. The Vesta Acquisition, completed on November 7, 2019, has been included in the condensed consolidated results of operations as of the acquisition date and financial performance of the acquired business is reported in the Breast Products segment.

The Company’s Chief Operating Decision Maker, or CODM, assesses the performance of each segment and allocates resources to those segments based on net sales and operating income (loss). Operating income (loss) by segment includes items that are directly attributable to each segment, including sales and marketing functions, as well as finance, information technology, human resources, legal and related corporate infrastructure costs, along with certain benefit-related expenses. There are 0 unallocated expenses for the two segments.

~~The following tables present the~~ net sales, net operating loss and net assets ~~by reportable segment~~ for the ~~periods~~Plastic Surgery segment are presented ~~(in thousands):~~in the condensed consolidated statement of operations and condensed consolidated balance sheets as continuing operations.

The Company is subject to claims and assessment from time to time in the ordinary course of business. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

On October 7, 2019, a lawsuit was filed in the Superior Court of the State of California against the Company and Silimed Industria de Implantes Ltda. (the Company’s former contract manufacturer). The lawsuit alleges that the Company’s textured breast implants caused certain of the plaintiffs to develop a condition known as breast implant associated anaplastic large cell lymphoma (“BIA-ALCL”), and that the Company is liable to the plaintiffs based on claims for strict liability (failure to warn), strict liability (defective manufacture), negligence and loss of consortium. On January 21, 2020, the Company filed a demurrer to the plaintiff’s complaint, which demurrer the Court granted in a tentative ruling dated March 9, 2021 with leave to replead. The Plaintiffs filed an amended complaint on April 6, 2021 and the Company filed a demurrer to that complaint on May 6, 2021. On October 25, 2021, the Court issued a ruling granting the Company’s demurrer in-part and denying it in-part, and gave plaintiffs twenty days to file an amendment complaint. The Company intends to vigorously defend itself in this lawsuit. Given the nature of this case, the Company is unable to estimate the reasonably possible loss or range of loss, if any, arising from this matter.

On September 23, 2020, a lawsuit was filed in the Eastern District of Tennessee against the Company. The lawsuit alleges that the Company’s textured breast implants caused certain of the plaintiffs to develop a condition known as breast implant associated anaplastic large cell lymphoma (“BIA-ALCL”), and that the Company is liable to the plaintiffs based on claims for negligence, strict liability (manufacturing defects), strict liability (failure to warn), breach of express and implied warranties, and punitive damages. The Company filed a motion to dismiss the complaint on December 7, 2020. Briefing on the motion is complete and oral argument is presently scheduled for ~~July 2021.~~January 2022. The Company intends to vigorously defend itself in this lawsuit. Given the nature of this case, the Company is unable to estimate the reasonably possible loss or range of loss, if any, arising from this matter.

On May 11, 2021, the Company and certain of its subsidiaries entered into an Asset Purchase Agreement (the “Purchase Agreement”) with miraDry Acquisition Company, Inc., a Delaware corporation (“Buyer”), and, solely for purposes of Section 8.14 of the Purchase Agreement, 1315 Capital II, LP, pursuant to which Buyer has agreed to acquire certain assets and rights, and assume certain liabilities, comprising the Company’s miraDry business (the “Business”) for a purchase price of $10,000,000 in cash, subject to certain adjustments (the “Asset Purchase”).

The Purchase Agreement includes customary representations and warranties, as well as certain covenants, including, among other things, that: (i) the Company will abide by certain non-solicitation, exclusivity, and non-competition covenants, and (ii) the Company will enter into a transition services agreement to provide certain transition services related to the Business. The Asset Purchase is anticipated to close in the second quarter of 2021. The Company will report the results of the miraDry business as discontinued operations beginning in the second quarter of 2021 and expects to recognize a loss between $2.5 million and $3.5 million in the same period.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2020 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations are contained in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on March 11, 2021, or the Annual Report. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Sientra,” “the Company,” “we,” “us” and “our” refer to Sientra, Inc. and its consolidated subsidiaries.

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.

We are a medical aesthetics company uniquely centered on becoming the leader of transformative treatments and technologies focused on progressing the art of plastic surgery. We were founded to provide greater choices to board-certified plastic surgeons and patients in need of medical aesthetics products. We have developed a broad portfolio of products with technologically differentiated characteristics, supported by independent laboratory testing and strong clinical trial outcomes. We sell our breast implants in the U.S. for augmentation procedures exclusively to board-certified and board-admissible plastic surgeons and tailor our customer service offerings to their specific needs, which we believe helps secure their loyalty and confidence. In 2020, we also began to sell our breast implants in Japan through a distributor partner. We sell our breast tissue expanders for reconstruction procedures predominantly to hospitals and surgery centers, and our BIOCORNEUM scar management products to plastic surgeons, dermatologists and other specialties.

~~We determined that~~As discussed in Recent developments below, we ~~currently conduct our~~completed the sale of the miraDry business on June 10, 2021, and as a result the miraDry business met the criteria to be reported as discontinued operations. Therefore, we are reporting the historical results of miraDry, including the results of operations, cash flows, and related assets and liabilities, as discontinued operations for all periods presented herein through the date of the Sale. Unless otherwise noted, the unaudited condensed consolidated financial statements have all been revised to reflect continuing operations only. Following the Sale, we have one operating segment in ~~two operating segments:~~continuing operations named Plastic Surgery, formerly known as Breast ~~Products and miraDry. The Breast Products~~Products.

Our Plastic Surgery segment focuses on sales of our breast implants, tissue expanders and scar management products. ~~The miraDry segment focuses on sales of bioTips. See the “Recent Developments – Sale of the miraDry Business” section below.~~

We currently sell ~~both~~ our ~~Breast Products and miraDry~~ products in the U.S. through a direct sales organization, which as of ~~March 31,~~September 30, 2021, consisted of 6661 employees, including 8 sales managers. ~~Additionally, we also sell our miraDry products in several international markets where we leverage distributor relationships supported by 2 sales representatives and a number of consultants.~~

On ~~May 11,~~June 10, 2021, we ~~entered into an Asset Purchase Agreement~~completed the sale of the miraDry business (the ~~“Purchase Agreement”~~“Sale”) ~~with~~to miraDry Acquisition Company, Inc., a Delaware corporation (“Buyer”), an entity affiliated with 1315 Capital II, LP, as a result of our strategic decision to focus investment on the core Plastic Surgery segment, formerly known as Breast Products. The Sale was made pursuant to the terms and conditions of the Asset Purchase Agreement (the “Purchase Agreement”), dated May 11, 2021, among us and certain of our subsidiaries, Buyer, and, solely for purposes of Section 8.14 of the Purchase Agreement, 1315 Capital II, ~~LP, pursuant to~~LP. The aggregate purchase price was $10.0 million, which ~~Buyer has~~after certain adjustments for agreed ~~to acquire certain~~upon changes in the estimated net asset value amount of purchased assets and ~~rights,~~assumed liabilities resulted in net cash proceeds to us of approximately $8.1 million. After finalization of post close adjustments, we recognized a loss on sale of $2.5 million for the nine months ended September 30, 2021.

In accordance with the Purchase Agreement, assumed liabilities did not include product liabilities, environmental, and ~~assume certain liabilities, comprising our miraDry business (the “Business”) for a purchase price of $10,000,000 in cash, subject~~employee claims arising prior to ~~certain adjustments (the “Asset Purchase”).~~

the closing date. The Purchase Agreement ~~includes~~also included customary representations and warranties, as well as certain covenants, including, among other things, that: (i) we will abide by certain non-solicitation, exclusivity, and non-competition covenants, and (ii) we ~~will~~would enter into a transition services agreement to provide certain transition services related to the Business. The Asset Purchase is anticipated to close in the second quarter of 2021. We will report the results of the miraDry business as discontinued operations beginning in the second quarter of 2021 and expect to recognize a loss between $2.5 million and $3.5 million in the same period.

Prior to entering into the Purchase Agreement, in April 2020, in part as a result of the impact of COVID-19, we re-focused our miraDry business to drive bioTip utilization to our existing installed base. On December 31, 2020, we eliminated our separate miraDry U.S. salesforce and transitioned miraDry sales responsibility into the ~~Breast Products~~Plastic Surgery Business Development team.

~~The rapid, global spread of COVID-19 has~~ resulted in significant economic uncertainty, significant declines in business and consumer confidence and global demand in the non-essential healthcare industry (among others), a global economic slowdown, and could lead to a global recession. We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, and employee-related amounts, will depend on future developments that are highly uncertain. We continue to monitor and assess new information related to the COVID-19 pandemic, the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

As an aesthetics company, surgical procedures involving our breast ~~and miraDry~~ products are susceptible to local and national government restrictions, such as social distancing, vaccination requirements, “shelter in place” orders and business closures, due to the economic and logistical impacts these measures have on consumer demand as well as the practitioners’ ability to administer such procedures. The inability or limited ability to perform such non-emergency procedures significantly harmed our revenues since the second quarter of 2020 and continued to harm our revenues during the ~~three~~nine months ended ~~March 31,~~September 30, 2021. While ~~some~~many states have lifted certain restrictions on non-emergency procedures, we will likely continue to experience future harm to our revenues while existing or new restrictions remain in place. It is not possible to accurately predict the length or severity of the COVID-19 pandemic or the timing for a broad and sustained ability to perform non-emergency procedures involving the Company’s products. We continue to monitor and assess new information related to the COVID-19 pandemic, the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

Further, the spread of COVID-19 has caused us to modify our workforce practices, and we may take further actions that we determine are in the best interests of our employees or as required by governments. In addition, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that this can lead to a local and/or global economic recession, which may result in further harm to the aesthetics market. Such economic disruption could adversely affect our business. The continued spread of COVID-19, or another infectious disease, could also result in delays or disruptions in our supply chain or adversely affect our manufacturing facilities and personnel. Further, trade and/or national security protection policies may be adjusted as a result of the COVID-19 pandemic, such as actions by governments that limit, restrict or prevent the movement of certain goods into a country and/or region, and current U.S./China trade relations may be further exacerbated by the pandemic.

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

Our ~~Breast Products segment~~ net sales include sales of silicone gel breast implants, tissue expanders and BIOCORNEUM. We recognize revenue on breast implants and tissue expanders, net of sales discounts and estimated returns, as the customer has a standard six-month window to return purchased breast implants and tissue expanders. We defer the value of our service warranty revenue and recognize it once all performance obligations have been met.

Our miraDry segment net sales include sales of the miraDry System and consumable bioTips along with service warranties. We recognize revenue on miraDry Systems and bioTips on delivery to the customer. See the “Recent Developments – Sale of the miraDry Business” section above. We defer the value of our service warranty and recognize it over the term of the service warranty contract.

We expect that, in the future, our net sales will fluctuate on a quarterly basis due to a variety of factors, including seasonality of breast augmentation procedures and the impact of the pandemic. We believe that aesthetic procedures are subject to seasonal fluctuation due to patients planning their procedures leading up to the summer season and in the period around the winter holiday season.

Cost of goods sold consists primarily of raw material, labor, overhead, and variable manufacturing costs, reserve for product assurance warranties, royalty costs, excess and obsolete inventory reserves, and warehouse and other related costs.

With respect to our supplier contracts, all our products and raw materials are manufactured under contracts with fixed unit costs which can increase over time at specified amounts.

~~Under our Breast Products segment, we~~We provide an assurance and service warranty on our silicone gel breast implants. Under our miraDry segment, we provide an assurance and service warranty on our miraDry Systems, and an assurance warranty on our handpieces and bioTips. See the “Recent Developments – Sale of the miraDry Business” section above. The estimated warranty costs are recorded at the time of sale. Costs related to our service warranty are recorded when expense is incurred related to meeting our performance obligations.

We expect our overall gross margin, which is calculated as net sales less cost of goods sold for a given period divided by net sales, to fluctuate in future periods primarily as a result of quantity of units sold, manufacturing price increases, the changing mix of products sold with different gross margins, warranty costs, overhead costs and targeted pricing programs.

Our sales and marketing expenses primarily consist of salaries, bonuses, benefits, incentive compensation, stock-based compensation, consumer marketing, and travel for our sales, marketing and customer support personnel. Our sales and marketing expenses also include expenses for trade shows, our no‑charge customer shipping program ~~for the Breast Products segment~~ and no-charge product evaluation units, ~~for the Breast Products segment,~~ as well as educational and promotional activities. We expect our sales and marketing expenses ~~related to our Breast Products segment~~ to fluctuate in future periods as a result of headcount and timing of our marketing programs. ~~We expect our~~

~~sales and marketing expense related to our miraDry segment to decrease as we have implemented the organizational efficiency initiative and as a result of the Sale of the miraDry Business.~~

Our research and development, or R&D, expenses primarily consist of clinical expenses, product development costs, regulatory expenses, consulting services, outside research activities, quality control and other costs associated with the development of our products and compliance with Good Clinical Practices, or cGCP, requirements. R&D expenses also include related personnel and consultant compensation and stock‑based compensation expense. We expense R&D costs as they are incurred. We expect our R&D expenses to vary as different development projects are initiated, including improvements to our existing products, expansions of our existing product lines, new product acquisitions and our clinical studies.

Our general and administrative, or G&A, expenses primarily consist of salaries, bonuses, benefits, incentive compensation and stock-based compensation for our executive, financial, legal, and administrative functions. Other G&A expenses include contingent consideration fair market value adjustments, bad debt expense, outside legal counsel and litigation expenses, independent auditors and other outside consultants, corporate insurance, facilities and information technologies expenses. We expect future G&A expenses to ~~decrease as we have implemented~~remain consistent with the ~~organizational efficiency initiative~~current period, and ~~the Sale of the miraDry Business, but~~ we also expect to continue to incur G&A expenses in connection with operating as a public company.

Other income (expense), net primarily consists of interest income, interest expense, changes in the fair value of the embedded derivative liability and common stock warrants, gain on extinguishment of the PPP Loan, and amortization of issuance costs associated with our Credit Agreements.

Income tax expense consists of an estimate for income taxes based on the projected income tax expense for the period. We operate in several tax jurisdictions and are subject to taxes in each jurisdiction in which we conduct business. To date, we have incurred cumulative net losses and maintain a full valuation allowance on our net deferred tax assets due to the uncertainty surrounding realization of such assets.

The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the revenues and expenses incurred during the reported periods. We base our estimates on historical experience and on various other factors that we believe 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 apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We discussed accounting policies and assumptions that involve a higher degree of judgment and complexity in Note 1 of the “Notes to Financial Statements” in our audited financial statements included in the Annual Report. There have been no material changes to our critical accounting policies and estimates from those disclosed in the Annual Report.

Please refer to Note 1 ~~- Summary~~ of ~~Significant Accounting Policies~~the “Notes to Financial Statements” in ~~the notes to the unaudited condensed consolidated~~our audited financial statements included in ~~this~~the Annual Report on Form ~~10-Q~~10-K for information on recent accounting pronouncements and the expected impact on our unaudited condensed consolidated financial statements.

The following table sets forth our results of operations for the three months ended ~~March 31,~~September 30, 2021 and 2020:

	Three Months Ended						Three Months Ended
	March 31,						September 30,
	2021			2020			2021			2020
	(In thousands)						(In thousands)
Statement of operations data
Net sales	$	23,236		$	16,932		$	19,620		$	15,329
Cost of goods sold		10,935			6,792			9,030			7,105
Gross profit		12,301			10,140			10,590			8,224
Operating expenses
Sales and marketing		12,375			16,763			12,052			9,969
Research and development		2,392			2,908			2,367			1,778
General and administrative		7,354			9,304			7,865			6,445
Restructuring		—			1,739			—			(442	)
Impairment		—			6,432
Total operating expenses		22,121			37,146			22,284			17,750
Loss from operations		(9,820	)		(27,006	)		(11,694	)		(9,526	)
Other income (expense), net
Interest income		2			180			1			6
Interest expense		(2,004	)		(1,623	)		(2,026	)		(2,055	)
Change in fair value of derivative liability		(42,740	)		(130	)		35,550			10,090
Other income (expense), net		(128	)		(33	)		6,672			(2	)
Total other income (expense), net		(44,870	)		(1,606	)		40,197			8,039
Loss before income taxes		(54,690	)		(28,612	)
Income (loss) from continuing operations before income taxes								28,503			(1,487	)
Income tax		—			—			—			—
Net loss	$	(54,690	)	$	(28,612	)
Income (loss) from continuing operations								28,503			(1,487	)
Loss from discontinued operations, net of income taxes								(93	)		(4,334	)
Net income (loss)							$	28,410		$	(5,821	)

Net sales increased ~~$6.3~~$4.3 million, or ~~37.2%~~28.0%, to ~~$23.2~~$19.6 million for the three months ended ~~March 31,~~September 30, 2021 as compared to ~~$16.9~~$15.3 million for the three months ended ~~March 31,~~September 30, 2020. ~~Net sales of our Breast Products segment~~The increase was ~~$18.3 million, an increase of $5.8 million for the three months ended March 31, 2021, as compared to $12.5 million for the three months ended March 31, 2020,~~ primarily due to an increase in the volume of domestic ~~and international~~ sales of gel implants ~~with additional smaller increases in BioCorneum~~ and expanders. ~~Net~~Additionally, the Company’s net sales ~~of our miraDry segment was $4.9 million, an increase of $0.5 million, as compared to $4.5 million for~~were less impacted by the ~~three months ended March 31, 2020 resulting from an increase~~COVID-19 pandemic in the ~~sales volume of consumable bioTips offset by a decrease~~current period in ~~the sales volume of miraDry systems due~~comparison to the ~~change in the miraDry business strategy.~~prior period.

As of ~~March 31,~~September 30, 2021 and 2020, our sales organization included 66 U.S. employees and 2 international employees, as compared to 89 U.S. employees and 8 international employees as of March 31, 2020. The decrease is primarily attributed to an overall decrease in sales headcount implemented under the organizational efficiency initiative and the change in miraDry business strategy.61 employees.

Cost of goods sold increased ~~$4.1~~$1.9 million, or ~~61.0%~~27.1%, to ~~$10.9~~$9.0 million for the three months ended ~~March 31,~~September 30, 2021 as compared to ~~$6.8~~$7.1 million for the three months ended ~~March 31,~~September 30, 2020. The increase was primarily due to an increase in the sales volume of ~~all products in~~ the ~~Breast Products segment, in addition to higher period costs in the miraDry segment as a result of a decline in manufacturing absorption relating to the change in business strategy.~~Company’s products.

The gross margins for the three months ended ~~March 31,~~September 30, 2021 and 2020 were ~~52.9%~~54.0% and ~~59.9%~~53.6%, respectively. The ~~decrease~~increase was primarily due to ~~higher period costs~~a decrease in the ~~miraDry segment as~~unit cost of gel implants and a ~~result of a decline~~decrease in ~~manufacturing absorption relating to the change~~inventory reserves, partially offset by an increase in ~~business strategy.~~period distribution and production costs.

Sales and marketing expenses ~~decreased $4.4~~increased $2.1 million, or ~~26.2%~~20.9%, to ~~$12.4~~$12.1 million for the three months ended ~~March 31,~~September 30, 2021 as compared to ~~$16.8~~$10.0 million for the three months ended ~~March 31,~~September 30, 2020. The ~~decrease~~increase was primarily due to ~~reductions in marketing events and initiatives, a reduction in consulting fees, and decreases~~increases in employee ~~payroll and~~ incentive compensation, ~~related~~shipping expenses ~~as a result~~associated with the increased volume of ~~the organizational efficiency initiative, the change in the miraDry business strategy~~sales of products, and ~~other cost saving measures implemented in response to COVID-19.~~increased marketing initiatives.

R&D expenses ~~decreased $0.5~~increased $0.6 million, or ~~17.7%~~33.1%, to $2.4 million for the three months ended ~~March 31,~~September 30, 2021 as compared to ~~$2.9~~$1.8 million for the three months ended ~~March 31,~~September 30, 2020. The ~~decrease~~increase was primarily due to ~~decreases~~increases in employee payroll, incentive, stock compensation, and ~~incentive compensation related~~severance expenses, ~~as a result of the organizational efficiency initiative, the change in the miraDry business strategy~~ and ~~other cost saving measures implemented in response to COVID-19.~~product development expense.

G&A expenses ~~decreased $2.0~~increased $1.4 million, or ~~21.0%~~22.0%, to ~~$7.4~~$7.9 million for the three months ended ~~March 31,~~September 30, 2021 as compared to ~~$9.3~~$6.4 million for the three months ended ~~March 31,~~September 30, 2020. The ~~decrease is~~increase was primarily ~~related~~due to increases in employee payroll, incentive and stock compensation expenses, insurance expense, expenses associated with the implementation of information technology systems, and bad debt expense, partially offset by decreases in audit and ~~consulting~~legal expenses ~~bad debt expense,~~ and ~~intangibles amortization expense, offset by increases~~an increase in ~~expenses related to employee payroll and incentive compensation, legal, and insurance.~~sublease income.

There were no restructuring expenses for the three months ended ~~March 31,~~September 30, 2021, as the organizational efficiency initiative was completed as of December 31, 2020. Restructuring expenses for the three months ended ~~March 31,~~September 30, 2020 ~~consisted primarily of~~were ($0.4) million, resulting from a change in estimated severance ~~expenses of employees affected by~~costs to be incurred under the organizational efficiency initiative.

There were no impairment expenses for the three months ended March 31, 2021. Impairment expenses for the three months ended March 31, 2020 consisted of impairments of intangible assets in the miraDry reporting unit.

Other income (expense), net for the three months ended ~~March 31,~~September 30, 2021 increased ~~$43.3~~$32.2 million as compared to the three months ended ~~March~~September 30, 2020 primarily due to a decrease in the fair value of the derivative liability resulting from a decrease in the Company’s stock price during the period, coupled with a gain on extinguishment of the PPP Loan in the current period.

For the three months ended September 30, 2021 and 2020 there was no income tax expense.

Loss from discontinued operations for the three months ended September 30, 2021 decreased $4.2 million due to the sale of the miraDry business.

The following table sets forth our results of operations for the nine months ended September 30, 2021 and 2020:

Net sales increased $20.9 million, or 56.4%, to $58.0 million for the nine months ended September 30, 2021 as compared to $37.1 million for the nine months ended September 30, 2020. The increase was primarily due to an increase in the volume of domestic and international sales of gel implants in addition to increases in the volume of sales of BioCorneum and expanders. Additionally, the Company’s net sales were less impacted by the COVID-19 pandemic in the current period in comparison to the prior period.

Cost of goods sold increased $10.1 million, or 63.8%, to $26.0 million for the nine months ended September 30, 2021 as compared to $15.9 million for the nine months ended September 30, 2020. The increase was primarily due to an increase in the sales volume of the Company’s products, in addition to an increase in period distribution and production costs.

The gross margins for the nine months ended September 30, 2021 and 2020 were 55.2% and 57.2%, respectively. The decrease was primarily due to an increase in period distribution and production costs, partially offset by decreases in inventory reserves and the cost per unit of gel implants.

Sales and marketing expenses increased $9.5 million, or 38.2%, to $34.3 million for the nine months ended September 30, 2021 as compared to $24.9 million for the nine months ended September 30, 2020. The increase was primarily due to increases in employee incentive compensation, shipping expenses associated with the increased volume of sales of products, and increased marketing initiatives.

R&D expenses increased $0.8 million, or 13.4%, to $7.0 million for the nine months ended September 30, 2021 as compared to $6.1 million for the nine months ended September 30, 2020. The increase was primarily due to increases in employee payroll, incentive, stock compensation, and severance expenses, and product development expense.

G&A expenses increased $2.1 million, or 10.1%, to $23.3 million for the nine months ended September 30, 2021 as compared to $21.2 million for the nine months ended September 30, 2020. The increase was primarily due to increases employee payroll, incentive, and stock compensation expenses, insurance expense, expenses associated with the implementation of information technology systems, bad debt expense and legal expense, partially offset by decreases in audit expenses, severance expenses, and an increase in sublease income.

There were no restructuring expenses for the nine months ended September 30, 2021, as the organizational efficiency initiative was completed as of December 31, 2020. Restructuring expenses for the nine months ended September 30, 2020 consisted primarily of severance expenses of employees affected by the initiative.

Other income (expense), net for the nine months ended September 30, 2021 decreased $1.4 million as compared to the nine months ended September 30, 2020 primarily due to the increase in the fair value of the derivative liability resulting from an increase in the Company’s stock price during the period, and an increase in ~~interest expense and~~the amortization of debt issuance costs and debt discounts associated with our Credit Agreements and convertible ~~note.~~note, partially offset by a decrease in interest expense due to interest and fees associated with the amendment of our Credit Agreement incurred in the prior period which did not reoccur in the current period, coupled with a gain on extinguishment of the PPP Loan in the current period.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 there was no income tax expense.

Income from discontinued operations for the nine months ended September 30, 2021 increased $22.1 million, due to the Company’s change in business strategy to focus on bioTips prior to the sale of the miraDry business, offset by the loss recognized on the sale of the miraDry business.

Since our inception, we have incurred significant net operating losses and anticipate that our losses will continue in the near term. We expect our operating expenses will ~~continue to decrease following the completion of the organizational efficiency initiative in 2020~~remain consistent and ~~the sale of the miraDry business, but~~ we will need to generate

significant net sales to achieve profitability. To date, we have funded our operations primarily with proceeds from the sales of preferred stock, borrowings under our term loans and convertible note, sales of our products since 2012, and the proceeds from the sale of our common stock in public offerings.

Refer to Note 2 to the condensed consolidated financial statements for details on the sale of the miraDry business.

On February 5, 2021, we entered into a Second Amended and Restated Credit and Security Agreement (Term Loan), by and among the Company, certain of our subsidiaries (together with Sientra, the “Borrowers”), the lenders party thereto from timeRefer to time and MidCap Financial Trust, as administrative agent and collateral agent (“Agent”) (the “Restated Term Loan Agreement”). The Restated Term Loan Agreement amends and restates our existing Amended and Restated Credit and Security Agreement (Term Loan), dated as of July 1, 2019.

Also on February 5, 2021, we entered into a Third Amendment to Amended and Restated Credit and Security Agreement (Revolving Loan), by and among the Borrowers, the lenders party thereto from time to time, and the Agent (the “Revolving Loan Amendment”). The Revolving Loan Amendment modified the Net Revenue (as defined therein) requirement in a manner consistent with the modification under the Restated Term Loan Agreement. In addition, the Revolving Loan Amendment made other conforming changes to the Restated Term Loan Agreement.

~~See~~ Note 67 to the condensed consolidated financial statements for a full description ofand updates to all of our long-term debt, revolving line of credit, convertible note, and PPP ~~loan.~~Loan.

On February 8, 2021, we completed a follow-on public offering of 5,410,628 shares of common stock at $6.75 per share, as well as 811,594 additional shares of common stock pursuant to the full exercise of the over-allotment option granted to the underwriters. Net proceeds were approximately $39.2 million after deducting underwriting discounts and commissions of approximately $2.5 million and offering expenses of approximately $0.3 million.

As of ~~March 31,~~September 30, 2021, we had ~~$80.4~~$66.1 million in cash and cash equivalents. Our historical cash outflows have primarily been associated with research and development activities and activities relating to commercialization and increases in working capital. In addition, we have used cash to fund the acquisitions of miraDry, BIOCORNEUM, Vesta, and the tissue expander portfolio.

To fund our ongoing operating and capital needs, we may need to raise additional equity or debt capital. We believe we have sufficient capital resources to continue as a going concern through the next twelve months.

The following table shows a summary of our cash flows (used in) provided by operating, investing and financing activities from continuing operations, as well as from discontinued operations for the periods ~~indicated:~~indicated (in thousands):

Net cash used in operating activities was ~~$12.7~~$28.6 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 as compared to ~~$27.2~~$38.4 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2020. The decrease in cash used in operating activities between the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020 was primarily associated with ~~a decrease~~increases in ~~operating expenses in addition to a smaller increase~~the fair value of the derivative liability and stock based compensation, coupled with increases in working ~~capital.~~capital, offset by a gain on extinguishment of the PPP Loan and payments related to the miraDry contingent consideration.

Net cash used in investing activities was ~~$1.3~~$4.9 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 ~~and~~as compared to $3.1 million used during the nine months ended September 30, 2020. The ~~slight~~ increase in cash used ~~in investing activities~~ was due to an increase in ~~property and equipment purchases.~~capitalized costs associated with the implementation of information technology systems.

Net cash provided by financing activities was ~~$39.4~~$34.3 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 as compared to ~~$52.8~~$31.8 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2020. The ~~decrease~~increase in cash provided by financing activities was ~~primarily the result of the~~due to an increase in proceeds from issuance of common stock, increase in borrowings under the ~~convertible note~~Term Loan, and a decrease in payments under the Term Loan, Revolving Loan, and deferred financing costs, offset by borrowings under the Convertible Note and PPP Loan in the prior period which did not reoccur in the current period, ~~offset~~and payments related to the miraDry contingent consideration.

Net cash provided by ~~increases~~discontinued operations was $10.3 million during the nine months ended September 30, 2021 as compared to $14.4 million used during the nine months ended September 30, 2020. The change in cash flows was primarily driven by a decrease in cash used from operating activities as a result of the change in miraDry business strategy, in addition to an increase in cash provided by investing activities resulting from the proceeds ~~from~~of the ~~issuance~~sale of ~~common stock from~~ the ~~follow-on offering in the current period.~~miraDry business.

Our liquidity position and capital requirements are subject to a number of factors. For example, our cash inflow and outflow may be impacted by the following:

Our primary short-term capital needs, which are subject to change, include expenditures related to:

Although we believe the foregoing items reflect our most likely uses of cash in the short-term, we cannot predict with certainty all of our particular short-term cash uses or the timing or amount of cash used. If cash generated from operations is insufficient to satisfy our working capital and capital expenditure requirements, we may be required to sell additional equity or debt securities or obtain credit facilities. Additional capital, if needed, may not be available on satisfactory terms, if at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may include restrictive covenants. For a discussion of other factors that may impact our future liquidity and capital funding requirements, see “Risk Factors — Risks Related to Our Financial Results” in our Annual Report on Form 10-K.

During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.

As of ~~March 31,~~September 30, 2021, we had ~~$80.4~~$66.1 million in cash and cash equivalents. We generally hold our cash in checking accounts and interest-bearing money market accounts. Our exposure to market risk related to interest rate sensitivity is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash equivalents and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents. We have established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC 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, or CEO, and Chief Financial Officer, or CFO, as appropriate, to allow timely decisions regarding required disclosure.

As of ~~March 31,~~September 30, 2021, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and ~~interim~~ CFO, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, the CEO and ~~interim~~ CFO concluded that the Company’s disclosure controls and procedures were effective as of such date.

~~There~~During the quarter ended September 30, 2021, the Company implemented a new enterprise resource planning system which has a material impact on the Company’s internal control over financial reporting. In connection with the implementation, the Company made changes to its internal controls over financial reporting to accommodate modifications to business processes.

Other than the change disclosed, there have been no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we are involved in legal proceedings and regulatory proceedings arising out of our operations. We establish reserves for specific liabilities in connection with legal actions that we deem to be probable and estimable. The ability to predict the ultimate outcome of such matters involves judgments, estimates, and inherent uncertainties. The actual outcome of such matters could differ materially from management’s estimates. Information regarding certain legal proceedings is provided in this Quarterly Report in Note 1112 of the condensed consolidated financial statements.

~~Except as set forth below, there~~There have been no material changes from the risk factors disclosed in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which are incorporated herein by reference.

~~Failure to complete the sale of our miraDry Business could negatively impact us and our business, prospects, financial condition, cash flow or results of operations.~~

On May 11, 2021, we entered into an Asset Purchase Agreement pursuant to which we will sell substantially all of the assets of the miraDry business, or “sale of the miraDry Business”. Such sale is subject to numerous closing conditions, some of which are out of our control, and there can be no assurances that the sale of the miraDry Business will be completed in the expected timeline or at all. The price of our common stock may decline to the extent that its current market price reflects a market assumption that the sale of the miraDry Business will be completed. In addition, substantial resources have been diverted and will continue to be diverted toward the completion of the sale of the miraDry Business, for which we will have received little or no benefit if the sale of the miraDry Business does not close. We have incurred, and expect to incur, significant costs, expenses and fees for professional services and other transaction and transition costs in connection with the sale of the miraDry Business. We must pay these costs whether or not the sale is completed, and they could adversely affect our financial condition and results of operations. Furthermore, we may experience negative reactions from our stockholders, partners, employees, suppliers, dealers and others who deal with us, and the failure to consummate the sale of the miraDry Business could result in negative publicity and a negative impression of us in the investment community, any of which could have an adverse effect on our business, prospects, financial condition, cash flow and results of operations.

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.

		Page

Part I — Financial Information		3

Item 1. Condensed Consolidated Financial Statements - Unaudited		3
Condensed Consolidated Balance Sheets as of ~~March 31,~~September 30, 2021 and December 31, 2020		3
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended ~~March 31,~~September 30, 2021 and 2020		4
Condensed Consolidated Statement of Stockholders' Equity (Deficit) for the Period from December 31, 2019 through ~~March 31,~~September 30, 2020 and December 31, 2020 through ~~March 31,~~September 30, 2021		5
Condensed Consolidated Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2021 and 2020		6
Notes to the Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3. Quantitative and Qualitative Disclosures About Market Risk		3436
Item 4. Controls and Procedures		3437

Part II — Other Information		3538

Item 1. Legal Proceedings		3538
Item 1A. Risk Factors		3538
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3538
Item 3. Defaults Upon Senior Securities		3538
Item 4. Mine Safety Disclosures		3538
Item 5. Other Information		3538
Item 6. Exhibits		3639

	March 31, 2021
	Carrying Value		Fair Value
Convertible note	$	45,131	$	39,080

	September 30, 2021
	Carrying Value		Fair Value
Convertible note	$	46,657	$	42,330

Number		Description

~~10.1~~†10.1+		~~Second Amended and Restated Credit and Security~~Employment Agreement, ~~(Term Loan),~~ dated ~~February 5,~~July 12, 2021, by and ~~among Sientra, Inc., certain of its wholly-owned subsidiaries,~~between the ~~lenders party thereto from time to time~~Company and ~~MidCap Financial Trust, as administrative agent and collateral agent~~Andrew Schmidt (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on ~~February 8, 2021).~~
~~10.2~~†		Third Amendment to Amended and Restated Credit and Security Agreement (Revolving Loan), dated February 5, 2021 by and among Sientra, Inc., certain of its wholly-owned subsidiaries, the lenders party thereto from time to time and MidCap Financial Trust, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on February 8,July 12, 2021).

~~10.3~~†10.2		~~Employment~~First Amendment to Second Amended and Restated Credit and Security Agreement (term loan), dated July 14, 2021, between the Company, Mist Holdings, Inc., Mist, Inc., Mist International, Inc, MidCap Financial Trust, and the other lenders party thereto (incorporated by reference to Exhibit 10.4 to the Company’s Form 10-Q filed on August 10, 2021).

10.3		Fourth Amendment to Amended and Restated Credit and Security Agreement (Revolving Loan), dated July 14, 2021, between the Company, Mist Holdings, Inc., Mist, Inc., Mist International, Inc, MidCap Financial Trust, and the other lenders party thereto (incorporated by reference to Exhibit 10.5 to the Company’s Form 10-Q filed on August 10, 2021).

10.4		First Amendment to Facility Agreement, dated September ~~18, 2017,~~28, 2021, by and between ~~the Company~~Sientra, Inc. and ~~Valerie Miller~~Deerfield Partners, L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on ~~March 11,~~October 4, 2021).

31.1*		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2*		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1*		Certification of Principal Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant Section 906 of the Sarbanes-Oxley Act of 2002.

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101.SCH		Inline XBRL Taxonomy Extension Schema Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

	SIENTRA, INC.

~~May 11,~~November 12, 2021	By:	/s/ Ronald Menezes
		Ronald Menezes
		President and Chief Executive Officer

~~May 11,~~November 12, 2021	By:	/s/ ~~Valerie Miller~~Andrew C. Schmidt
		~~Valerie Miller~~Andrew C. Schmidt
		~~Interim~~ Chief Financial Officer and ~~VP Corporate Controller~~Treasurer

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

	Average
	Amortization		December 31, 2020
	Period		Gross Carrying		Accumulated			Intangible
	(in years)		Amount		Amortization			Assets, net
Intangibles with definite lives
Customer relationships		10	$	4,940	$	(3,856	)	$	1,084
Trade names - finite life		12		800		(322	)		478
Non-compete agreement		2		80		(80	)		—
Regulatory approvals		1		670		(670	)		—
Acquired FDA non-gel product approval		11		1,713		(1,713	)		—
Manufacturing know-how		19		8,240		(865	)		7,375
Total definite-lived intangible assets			$	16,443	$	(7,506	)	$	8,937

Intangibles with indefinite lives
Trade names - indefinite life	—			450		—			450
Total indefinite-lived intangible assets			$	450	$	—		$	450


†	Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Company has determined that such omitted information is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed.