| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include the accounts of Antares Pharma, Inc. and its two wholly-owned foreign subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Our most significant accounting estimates relate to revenue recognition and variable consideration, inventory valuation, the carrying value of deferred tax assets and the valuation of equity instruments used in the computation of share-based compensation. Actual results could differ from these estimates, and significant variances could materially impact our financial condition and results of operations. Reclassifications Certain reclassifications have been made to prior year amounts to conform with the current year presentation. As of and for the year ended December 31, 2020, the cost of product sales and the cost of development revenue were classified under the heading Operating expenses in the Consolidated Statements of Operations, and the corresponding prior period amount was reclassified to conform to this presentation. The reclassifications had no impact on our operating income (loss), net income (loss) or cash flows as previously reported. Accounting Pronouncements Recently Adopted We adopted FASB ASU No. 2018-15, Customers’ Accounting for Implementation Costs Incurred in Cloud Computing Arrangement that is a Service Contract, effective January 1, 2020, which provides new guidance on a customer’s accounting for implementation, set-up, and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor (i.e., a service contract). Under the new guidance, entities apply the same criteria for capitalizing implementation costs as they would for an arrangement that has a software license. Adoption of this standard did not have a material impact on our financial condition, results of operations or disclosures. We adopted FASB ASU No. 2018-18, Clarifying the Interaction Between Topic 808 and 606 , effective January 1, 2020, which clarifies that certain transactions between collaborative arrangement participants should be accounted for under the revenue guidance, adds unit of account guidance to the collaborative arrangement guidance to align with the revenue standard, and clarifies presentation guidance for transactions with a collaborative arrangement participant that is not accounted for under the revenue standard. Adoption of this standard did not have a material impact on our financial condition, results of operations or disclosures. Recently Issued Accounting Pronouncements Not Yet Adopted as December 31, 2021 In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , followed by related amendments, which changes the accounting for credit losses on instruments measured at amortized cost by adding an impairment model that is based on expected losses rather than incurred losses. Any entity will recognize as an allowance its estimate of expected credit losses, which is believed to result in more timely recognition of such losses as the standard eliminates the probable initial recognition threshold. The new guidance is required to be adopted using a modified retrospective approach with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period of adoption. Adoption of the new guidance was originally required for annual periods beginning after December 15, 2019, including interim periods within the annual period. In October 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates , which deferred the effective date of ASU 2016-13 for certain entities, including those that are eligible for smaller reporting company classification. Determination of eligibility for deferral was a one-time assessment as of November 15, 2019 based on the entity’s most recent smaller reporting company eligibility determination as of the last business day of its most recently completed second quarter. Based on this determination, we qualified as a smaller reporting entity and was therefore eligible for the adoption deferral resulting in a new effective date of January 1, 2023. The impact on our financial condition, results of operations and disclosures is being evaluated but is not expected to be significant as we have historically had minimal credit losses on financial instruments. In April 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides relief for companies preparing for discontinuation of interest rates such as LIBOR. The standard can be applied immediately through December 31, 2022. We have not yet evaluated the impact the adoption of this guidance may have on our financial condition, results of operations or disclosures. Foreign Currency Translation The majority of our foreign subsidiaries’ revenues are denominated in U.S. dollars, and any required funding of the subsidiaries is provided by the U.S. parent. Nearly all operating expenses of our foreign subsidiaries are denominated in Swiss Francs. Additionally, bank accounts held by foreign subsidiaries are denominated in Swiss Francs, there is a low volume of intercompany transactions and there is not an extensive interrelationship between the operations of the subsidiaries and the parent company. As such, we have determined that the Swiss Franc is the functional currency for our foreign subsidiaries. Our reporting currency is the United States Dollar (“USD”). The financial statements of our foreign subsidiaries are translated into USD for consolidation purposes. All assets and liabilities are translated using period-end exchange rates. Statements of operations items are translated using average exchange rates for the period. The resulting translation adjustments are recorded as a separate component of stockholders’ equity, comprising all of the accumulated other comprehensive income (loss). Sales to certain customers and purchases from certain vendors by the U.S. parent are in currencies other than USD and are subject to foreign currency exchange rate fluctuations. Foreign currency transaction gains and losses are included in other income (expense) in the Consolidated Statements of Operations. Cash and Cash Equivalents Cash and cash equivalents represent demand deposits at commercial banks and highly liquid investments with an original maturity of three months or less. Cash equivalents, consisting of investments in money market funds and bank certificate of deposits, are remeasured and reported at fair value each reporting period based on quoted market prices, which is a Level 1 input within the three-level valuation hierarchy for disclosure of fair value measurements, and totaled $26,889 and $36,133 as of December 31, 2021 and 2020, respectively. Investments From time to time, we also invest in bank certificates of deposit that are classified as held-to-maturity because of our intent and ability to hold securities to maturity. Investments with original maturities greater than three months but less than one year are classified as short-term investments on the Consolidated Balance Sheets. The investment securities are carried at their amortized cost and fair value is determined by quoted market prices for identical or similar securities. The carrying value of our short-term investments as of December 31, 2021 approximate fair value. Fair Value Measurements Financial assets and liabilities are required to be measured and reported at fair value each reporting period. 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. When considering market participant assumptions in fair value measurement, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels. • Level 1: Unadjusted quoted prices which are available in active markets for identical assets or liabilities accessible to us at the measurement date. • Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The hierarchy gives the highest priority to Level 1, as this level provides the most reliable measure of fair value, while given the lowest priority to Level 3. Financial assets and liabilities that are not measured at fair value on a recurring basis include held-to-maturity investments and long-term debt as the carrying values of which approximate fair value. The estimated fair value of debt is based on Level 2 inputs, including our understanding of current market rates we could obtain for similar loans. The fair value of our cash and cash equivalents, accounts receivable, other receivables, contract assets, accounts payable and accrued liabilities approximate fair value due to their short-term nature. We measure certain financial instruments at fair value on a nonrecurring basis. These assets primarily include goodwill and intangible assets, as well as property and equipment and right-of-use lease assets. These assets were initially measured and recognized at amounts equal to the fair value determined as of the date of acquisition or purchase. Periodically, these assets are tested for impairment, by comparing their respective carrying values to the estimated fair value of the reporting unit or asset group in which they reside. In the event any of these assets were to become impaired, we would recognize an impairment loss equal to the amount by which the carrying value of the reporting unit, impaired asset or asset group exceeds its estimated fair value. Fair value measurement of the reporting unit associated with our goodwill balance is estimated at least annually in the fourth quarter of each calendar year for purposes of impairment testing if a quantitative analysis is performed. Fair value measurements associated with our intangible assets, other long-lived assets and property and equipment are estimated when events or changes in circumstances such as market value, asset utilization, physical change, legal factors or other matters indicate that the carrying value may not be recoverable. Accounts Receivable Trade accounts receivable represents amounts billed to customers and are stated at the amount we expect to collect. Customer creditworthiness, past transaction history with the customer and changes in customer payment terms are factors considered when determining collectability of specific customer accounts. As of December 31, 2021, our trade accounts receivable balance was due primarily from Teva and major wholesale distributors. Each of these customers have historically paid in a timely manner and demonstrated creditworthiness. Accordingly, we believe the risk of accounts being uncollectible is minimal and no significant allowances for doubtful accounts was established as of December 31, 2021 or 2020. If the financial condition of our customers were to deteriorate, adversely affecting their ability to make payments, additional allowances may be required. We had no material write-offs to bad debt expense in the years ended December 31, 2021, 2020 or 2019. Royalties receivable from partners are included in accounts receivable and are typically payable to us within 45 to 60 days after the end of each quarter in which they were earned. Inventories Inventories are stated at the lower of cost or net realizable value with cost determined on a first-in, first-out basis. Certain components of our products are provided by a limited number of vendors, and our production, assembly, warehousing and distribution operations are outsourced to third-party suppliers where substantially all of our inventory is located. Disruption of supply from key vendors or third-party suppliers may have a material adverse impact on our operations and financial results. We record reserves for potentially excess, dated or obsolete inventories based on forecasted product demand estimates and the likelihood of consumption in the normal course of business, considering the expiration dates of the inventories on hand, planned production volumes and lead times required for restocking of customer inventories. Although every effort is made to ensure that forecasts and assessments are reasonable, changes to these assumptions are possible. In such cases, estimates may prove inaccurate and result in an understatement or overstatement of the reserves required to fairly state such inventories. Contract Assets Contract assets are recognized when control of goods or services has transferred to the customer, and corresponding revenue is recognized on an over time basis but is not yet billable to the customer in accordance with the terms of the contract. Costs that have been incurred in connection with development services provided to partners for which the associated revenue has not yet been recognized are also recorded as contract assets and totaled $564 and $1,685 as of December 31, 2021 and 2020, respectively. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over an asset ’ s estimated useful life as follows: Useful Life Computer equipment and software 3-5 years Furniture, fixtures and office equipment 5-7 years Production molds, tooling and equipment 3-10 years Leasehold improvements Lesser of useful life or lease term Expenditures, including interest costs, for assets under construction and internal-use software that are not yet ready for their intended use are capitalized and will be depreciated based on the above guidelines when placed in service. Costs associated with repairs and maintenance activities are expensed as incurred. Leases We recognize right-of-use (“ROU”) assets a nd lease liabilities when we obtain the right to control the asset under a leasing arrangement with an initial term greater than twelve months. We evaluate the nature of each lease at the inception of an arrangement to determine whether it is an operating or financing lease and recognize the ROU asset and lease liability based on the present value of future minimum lease payments over the expected lease term. Our leases do not generally contain an implicit interest rate; therefore, we use the incremental borrowing rate we would expect to pay to borrow on a similar collateralized basis over a similar term in order to determine the present value of our lease payments. The incremental borrowing rate is used in determining the present value of lease payments, unless an implicit rate is specified. Certain lease arrangements contain renewal options that have not been included in the determination of the lease term, as they are not reasonably certain of exercise. For contracts that contain lease and non-lease components, we account for both components as a single lease component. Variable lease payments are expensed as incurred. Intangible Assets We capitalize and include the costs of acquired product licenses and trademark rights as intangible assets. These intangible assets with finite useful lives are presented net of accumulated amortization. Amortization is computed on a straight-line basis over the shorter of the contractual or estimated economic life of the underlying contract, which generally ranges from five Impairment of Long-Lived Assets and Intangible Assets Long-lived assets and intangible assets are reviewed for impairment whenever events or changes in circumstances such as market value, asset utilization, physical change, legal factors or other matters indicate that the carrying value of an asset or asset group may not be recoverable. The impairment test is based on a comparison of the undiscounted cash flows expected to be generated from the use of the asset or asset group and its eventual disposition to the carrying value of the asset. If impairment is indicated, the asset is written down by the amount by which the carrying value of the asset exceeds the related fair value of the asset with the related impairment charge recognized within the Consolidated Statement of Operations. The determination of an asset’s fair value requires management to make certain estimates and judgements. Goodwill Goodwill is evaluated for impairment annually as of December 31, or more frequently if an event occurs or circumstances change such as market value, asset utilization, legal factors or other matters that indicate the carrying value may not be recoverable. Evaluating goodwill for impairment involves the determination of the fair value of each reporting unit in which goodwill is recorded using a qualitative or quantitative analysis. A reporting unit is an operating segment or a component of an operating segment for which discrete financial information is available and reviewed by management on a regular basis. As of December 31, 2021 and 2020, we have goodwill with a carrying value of $1,095, attributable to our single reporting unit. Based on the results of our qualitative analysis, we determined that goodwill was not impaired, and no impairment loss was recognized in the years ended December 31, 2021, 2020, and 2019, r espectively. Revenue Recognition We generate revenue from proprietary and partnered product sales, license and development activities and royalty arrangements. Revenue is recognized when or as we transfer control of the promised goods or services to the customer at the transaction price, which is the amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services. At inception of each contract, we identify the goods and services that have been promised to the customer and each of those that represent a distinct performance obligation, determine the transaction price including any variable consideration, allocate the transaction price to the distinct performance obligations and determine whether control transfers to the customer at a point in time or over time. Variable consideration is included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We reassess our reserves for variable consideration at each reporting date and make adjustments, if necessary, which may affect revenue and earnings in periods in which any such changes become known. We have elected to recognize the cost for freight and shipping activities as a fulfillment cost. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying goods are transferred to the customer. The related shipping and freight charges incurred are included in cost of product sales in the Consolidated Statements of Operations. Proprietary Product Sales We sell our proprietary commercial products primarily to wholesale and specialty distributors. Revenue is recognized when control has transferred to the customer, which is typically upon delivery, at the net selling price, which reflects the variable consideration for which reserves and sales allowances are established for estimated returns, wholesale distribution fees, prompt payment discounts, government rebates and chargebacks, plan rebate arrangements and patient discount and support programs. The determination of certain reserves and sales allowances requires us to make a number of judgements and estimates to reflect our best estimate of the transaction price and the amount of consideration to which we believe we would be ultimately entitled to receive. The expected value is determined based on unit sales data, contractual terms with customers and third-party payers, historical and estimated future percentage of rebates incurred on sales, historical and future insurance plan billings, any new or anticipated changes in programs or regulations that would impact the amount of the actual rebates, customer purchasing patterns, product expiration dates and levels of inventory in the distribution channel. Reserves for prompt payment discounts are recorded as a reduction in accounts receivable in the Consolidated Balance Sheets. Reserves for returns, distributor fees, rebates and customer co-pay support programs are included within current liabilities in the Consolidated Balance Sheets. Wholesaler Distribution Fees – Distribution fees are paid to certain wholesalers based on contractually determined rates and units purchased. Since the fee paid to the customer is not for a distinct good or service, the consideration is recognized as a reduction of the transaction price of the goods delivered. We accrue the estimated fee due at the time of sale based on the contracted price and adjust the accrual at each reporting period, if necessary, to reflect actual experience. Prompt Pay D iscounts – We offer cash discounts to our customers, generally 2% of the sales price, as an incentive for prompt payment. Based on historical experience, customers take advantage of this discount and accordingly we accrue 100% of the ca sh discounts offered by reducing accounts receivable and recognizing the discount as a reduction of revenue in the same period the related sales are made. The accrual is reviewed at each reporting period and adjusted if actual experience differs from estimates. Chargebacks – We provide discounts primarily to authorized users of the Federal Supply Schedule (“FSS”) of the General Services Administration under an FSS contract negotiated by the Department of Veterans Affairs and various organizations under Medicaid contracts and regulations. These entities purchase products from the wholesale distributors at a discounted price, and the wholesale distributors then charge us back the difference between the current wholesale acquisition cost and the price the entity paid for the product. We estimate and accrue chargebacks based on estimated wholesaler inventory levels, current contract prices and historical chargeback activity. Chargebacks are recognized as a reduction of revenue in the same period the related revenue is recognized. Rebates – We participate in certain government and insurance plan rebate programs, which provide discounted prescriptions to qualified insured patients. Under these rebate programs, we pay a rebate to the third-party administrators of the programs. The rebate payments are generally made in periods subsequent to the quarter in which prescriptions subject to the rebate are filled, generally on a two three Patient Discount Programs – We offer discount cards, co-pay coupons and free trial programs to off-set the cost of prescriptions to patients. We estimate the total amount that will be redeemed or used based on historical redemption experience and on levels of inventory in the distribution and retail channels, and recognize the discount as a reduction of revenue in the same period the related revenue is recognized. Product Returns – Consistent with industry practice, we generally offer wholesalers and specialty distributors a limited right to return products, generally within six months prior to an d 12 months following the product’s expiration date. Our proprietary products generally have expiration dates ranging from 24 to 33 months. Product returns are estimated and recorded at the time of sale based on historical return patterns. Actual return s are tracked by individual production lots and charged against reserves. Returns reserves may be adjusted, if necessary, if actual returns differ from historical estimates. We also monitor and take into consideration the amount of estimated product inventory in the distribution channel, product dating and any known or expected changes in the marketplace when establishing the estimated rate of returns. Changes in reserves for product returns and sales allowances are as follows: Rebates and Patient Returns Wholesaler Prompt Balance as of December 31, 2019 $ 6,308 $ 845 $ 370 $ 1,683 $ 320 Accruals and adjustments 34,947 12,422 2,657 11,619 2,494 Payments and other reserve reductions (34,068) (11,975) (2,569) (10,804) (2,378) Balance as of December 31, 2020 7,187 1,292 458 2,498 436 Accruals and adjustments 52,243 15,629 4,163 15,683 3,423 Payments and other reserve reductions (46,129) (13,971) (3,992) (14,498) (3,222) Balance as of December 31, 2021 $ 13,301 $ 2,950 $ 629 $ 3,683 $ 637 Partnered Product Sales We are party to several license, development, supply and distribution arrangements with pharmaceutical partners, under which we produce and are the exclusive supplier of certain products, devices and/or components. Revenue is recognized when or as control of the goods transfers to the customer as discussed below. We are the exclusive supplier of the Makena ® subcutaneous auto injector product to Covis and beginning in December 2021, OTREXUP ® to Otter . Because these products are custom manufactured for each customer with no alternative use and we have a contractual right to payment for performance completed to date, control is continuously transferred to the customer as the product is produced pursuant to firm purchase orders. Revenue is recognized over time using the output method based on the contractual selling price and number of units produced. The amount of revenue recognized in excess of the amount shipped/billed to the customer, if any, is recorded as contract assets in the Consolidated Balance Sheets due to the short-term nature in which the amount is ultimately expected to be billed and collected from the customer. All other partnered product sales are recognized at the point in time in which control is transferred to the customer, which is typically upon shipment. Sales terms and pricing are governed by the respective supply and distribution agreements, and there is generally no right of return. Revenue is recognized at the transaction price, which includes the contractual per unit selling price and estimated variable consideration, such as volume-based pricing arrangements or profit-sharing arrangements, if any. We recognize revenue, including the estimated variable consideration we expect to receive for contract margin on future commercial sales, upon shipment of the goods to our partner. The estimated variable consideration is recognized at an amount we believe is not subject to significant reversal based on historical experience and is adjusted at each reporting period if the most likely amount of expected consideration changes or becomes fixed. Licensing and Development Revenue We have entered into several license, development and supply arrangements with pharmaceutical partners under which we grant a license to our device technology and know-how and provide research and development services that often involve multiple performance obligations and highly customized deliverables. For such arrangements, we identify each of the promised goods and services within the contract and the distinct performance obligations at inception and allocate consideration to each performance obligation based on relative standalone selling price, which is generally determined based on the expected cost plus mark-up. If the contract includes an enforceable right to payment for performance completed to date and performance obligations are satisfied over time, we recognize revenue over the development period using either the input or output method depending on which is most appropriate given the nature of the distinct deliverable. For other contracts that do not contain an enforceable right to payment for performance completed to date, revenue is recognized when control is transferred to the customer. Factors that may indicate that the transfer of control has occurred include the transfer of legal title, transfer of physical possession, the customer has obtained the significant risks and rewards of ownership of the assets and we have a present right to payment. Our typical payment terms for development contracts may include an upfront payment equal to a percentage of the total contract value with the remaining portion to be billed upon completion and transfer of the individual deliverables or satisfaction of the individual performance obligations. We record a liability for cash received in advance of performance, which is presented within deferred revenue in the Consolidated Balance Sheets and recognized as revenue when the associated performance obligations have been satisfied. We recogniz ed $3,889 in licensing and development revenue in connection with contract liabilities that were outstanding as of December 31, 2020 and satisfied during the year ended December 31, 2021. License fees and milestones received in exchange for the grant of a license to our functional intellectual property (“IP”) such as patented technology and know-how in connection with a partnered development arrangement are generally recognized at inception of the arrangement, or over the development period depending on the facts and circumstances, as the license is generally not distinct from the non-licensed goods or services to be provided under the contract. Milestone payments that are contingent upon the occurrence of future events, are evaluated and recorded at the most likely amount, and to the extent that it is probable that a significant reversal will not occur when the associated uncertainty is resolved. Royalties We earn royalties in connection with licenses granted under license and development arrangements with partners. Royalties are based upon a percentage of commercial sales of partnered products with rates ranging from mid-single digits to low double digits and are tiered based on levels of net sales. These sales-based royalties, for which the license was deemed the predominant element to which the royalties relate, are estimated and recognized in the period in which the partners’ commercial sales occur. The royalties are generally reported and payable to us w ithin 45 to 60 days of the end of the period in which the commercial sales are made. We base our estimates of royalties earned on actual sales information from our partners when available or estimated prescription sales from external sources and estima ted net selling price. If actual royalties received are different than amounts estimated, we would adjust the royalty revenue in the period in which the adjustment becomes known. Remaining Performance Obligations Remaining performance obligations represent the transaction price of firm orders and development contract deliverables for which work has not been completed or orders fulfilled, and excludes potential purchase orders under ordering-type supply contracts with indefinite delivery or quantity. As of December 31, 2021, the aggregate value of remaining performance obligations, excluding contracts with an original expected length of one year or less, wa s $14,879. We expect to recognize revenue on the remaining performance obligations over the next three years, with the majority being recognized in the next twelve months . Share-Based Compensation We use share-based compensation in the form of stock options, restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”). We record compensation expense associated with share-based awards granted to employees at the fair value of the award on the date of grant. Th e Black-Scho |
