Description of Business (Policies) | 9 Months Ended |
Sep. 30, 2013 |
Fair Value Disclosures [Abstract] | ' |
Description of Business | ' |
1 | Description of Business | | | | | | | | | | | | | | | |
NanoString Technologies, Inc. (the “Company”) was incorporated in Delaware in June 2003 and is headquartered in Seattle, Washington. |
The Company’s technology enables direct detection, identification and quantification of individual target molecules in a biological sample by attaching a unique color coded fluorescent reporter to each target molecule of interest. The Company markets its proprietary nCounter Analysis System, consisting of instruments and consumables, to academic, government, biopharmaceutical and clinical laboratories. |
The Company has incurred losses to date and expects to incur additional losses in the foreseeable future. The Company continues to devote the majority of its resources to the growth of the Company’s business in accordance with its business plan. The Company’s activities have been financed primarily through the sale of equity securities and incurrence of indebtedness, and to a lesser extent, capital leases and other borrowings. |
Basis of Presentation | ' |
Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements reflect the accounts of the Company and its wholly-owned subsidiaries, NanoString Technologies International, Inc., NanoString Technologies Asia Pacific Limited, NanoString Technologies Europe Limited and NanoString Technologies SAS. The condensed consolidated balance sheet data as of December 31, 2012 were derived from audited financial statements not included in this report. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) for unaudited condensed consolidated financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the Company’s financial position and results of its operations, as of and for the periods presented. |
Unless indicated otherwise, all amounts presented in financial tables are presented in thousands, except for per share and par value amounts. |
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the prospectus that forms a part of the Company’s Registration Statement on Form S-1 (File No. 333-188704), which prospectus was filed with the SEC pursuant to Rule 424 promulgated under the Securities Act of 1933, as amended, on June 26, 2013. |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of the Company’s operations for the three and nine month periods ended September 30, 2013 are not necessarily indicative of the results to be expected for the full year or for any other period. |
Revenue Recognition | ' |
Revenue Recognition |
The Company recognizes revenue when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the price to the customer is fixed or determinable and (4) collectability is reasonably assured. The Company generates revenue from the sale of products and services. The Company’s products consist of its proprietary nCounter Analysis System and related consumables. Services consist of extended warranties and service fees for assay processing. A delivered product or service is considered to be a separate unit of accounting when it has value to the customer on a stand-alone basis. Products or services have value on a stand-alone basis if they are sold separately by any vendor or the customer could resell the delivered product. |
Systems product revenue is recognized upon installation and calibration in geographic regions where such services are only available from specialized Company technicians. In these regions, systems and related installation and calibration are considered to be one unit of accounting, as systems are required to be professionally installed and calibrated before use. In certain geographic regions, installation and calibration services are available from other vendors, and in such regions they are considered separate revenue elements. Consumables are considered to be separate units of accounting as they are sold separately. Consumables product revenue is recognized upon shipment. |
Service revenue is recognized when earned, which is generally upon the rendering of the related services. Extended warranties and service fees for assay processing are each considered separate units of accounting as they are sold separately. The Company offers extended warranties on its nCounter Analysis System for periods ranging from 12 to 36 months after the end of the standard 12-month warranty period. Extended warranties are generally separately priced. Revenue from extended warranties are deferred and recognized in income on a straight-line basis over the warranty period. |
The Company allocates the contract consideration at the inception of the contract to the deliverables based upon their relative selling prices. To date, selling prices have been established by reference to vendor specific objective evidence based on stand-alone sales transactions for each deliverable. Vendor specific objective evidence is considered to have been established when a substantial majority of individual sales transactions within the previous 12 month period fall within a reasonably narrow range, which the Company has defined to be plus or minus 15% of the median sales price of actual stand-alone sales transactions. The Company uses its best estimate of selling price for individual deliverables when vendor specific objective evidence or third-party evidence is unavailable. Allocated revenue is only recognized for each deliverable when the revenue recognition criteria have been met. |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements |
In February 2013, the Financial Accounting Standards Board issued “ASU 2013-02 Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” that revises the disclosure requirements related to significant reclassifications of items out of accumulated other comprehensive income and into the line items included in net income. The Company adopted this standard in the third quarter of 2013 and its adoption did not impact the Company’s consolidated financial statements. |
Net Loss Per Share, policy | ' |
Net loss attributable to common stockholders per share is computed by dividing the net loss allocable to common stockholders by the weighted average number of shares of common stock outstanding. Outstanding stock options, warrants and preferred stock have not been included in the calculation of the diluted net loss attributable to common stockholders per share because to do so would be anti-dilutive. Accordingly, the numerator and the denominator used in computing both basic and diluted net loss per share for each period are the same. |
Fair Value Measurements, policy | ' |
The Company establishes the fair value of its assets and liabilities using the price that would be received to sell an asset or paid to transfer a financial liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is used to measure fair value. The three levels of the fair value hierarchy are as follows: |
| Level 1 | Quoted prices in active markets for identical assets and liabilities. | | | | | | | | | | | | | | |
| Level 2 | Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. | | | | | | | | | | | | | | |
| Level 3 | Valuations derived from valuation techniques in which one or more significant inputs and significant value drivers are unobservable. | | | | | | | | | | | | | | |
The recorded amounts of certain financial instruments, including cash, accounts receivable, prepaid expenses and other, accounts payable and accrued liabilities, approximate fair value due to their relatively short-term maturities. The recorded amount of the Company’s long-term debt approximates fair value because the related interest rates approximate rates currently available to the Company. |
The Company’s available-for-sale securities by level within the fair value hierarchy were as follows (in thousands): |
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| | Fair value measurement using: | |
As of September 30, 2013 | | Quoted prices in | | | Other observable | | | Significant | | | Total | |
active markets | inputs (Level 2) | unobservable |
for identical | | inputs (Level 3) |
assets (Level 1) | | |
Cash equivalents: | | | | | | | | | | | | | | | | |
Money market fund | | $ | 18,734 | | | $ | — | | | $ | — | | | $ | 18,734 | |
Short-term investments: | | | | | | | | | | | | | | | | |
U.S. government-related debt securities | | | — | | | | 1,583 | | | | — | | | | 1,583 | |
Corporate debt securities | | | — | | | | 31,339 | | | | — | | | | 31,339 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 18,734 | | | $ | 32,922 | | | $ | — | | | $ | 51,656 | |
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| |
| | Fair value measurement using: | |
As of December 31, 2012 | | Quoted prices in | | | Other observable | | | Significant | | | Total | |
active markets | inputs (Level 2) | unobservable |
for identical | | inputs (Level 3) |
assets (Level 1) | | |
Cash equivalents: | | | | | | | | | | | | | | | | |
Money market fund | | $ | 20,510 | | | $ | — | | | $ | — | | | $ | 20,510 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 20,510 | | | $ | — | | | $ | — | | | $ | 20,510 | |
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Prior to the Company’s initial public offering, the Company had mandatorily redeemable convertible preferred stock which contained certain redemption provisions which precluded equity classification. Accordingly, warrants to purchase this mandatorily redeemable convertible preferred stock were classified as liabilities for the periods presented. These preferred stock warrants were subject to remeasurement at each balance sheet date and any change in fair value was recognized as a component of other income (expense). |
The Company’s preferred stock warrants were categorized as Level 3 because they were valued based on unobservable inputs and management judgment due to the absence of quoted market prices, inherent lack of liquidity and the long-term nature of such financial instruments. The Company performed a fair value assessment of the preferred stock warrant inputs on a quarterly basis using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes option pricing model are inherently subjective and involve significant judgment. Any change in fair value was recognized as a component of other income (expense) in the condensed consolidated statements of operations. Upon the closing of the Company’s initial public offering, all warrants to purchase preferred stock were converted to warrants to purchase common stock and these warrants are no longer remeasured to fair value at each reporting date. |
Reserve for Product Warranties, policy | ' |
The Company generally provides a one-year warranty on its nCounter Analysis Systems and establishes an accrual based on historical product failure rates and actual warranty costs incurred. Warranty expense is recorded as a component of cost of revenue in the condensed consolidated statements of operations. |
Segment Reporting, policy | ' |
Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. |
The Company develops, manufactures and sells products that unlock genetic information from very small amounts of tissue. The Company is organized as, and operates in, two reportable segments: life sciences segment and diagnostics segment. The life sciences business provides instruments, consumables and services to researchers in the life sciences industry. The diagnostics business provides instruments and molecular diagnostic kits to pathology labs enabling complex molecular testing on a distributed basis. |