Sientra (SIENQ) 10-Q 13 Aug 15 2015 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 07, 2015
Document and Entity Information
Entity Registrant Name	Sientra, Inc.
Entity Central Index Key	1,551,693
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		14,986,946
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q2

Condensed Balance Sheets

Condensed Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 89,659	$ 96,729
Accounts receivable, net of allowances of $10,771 and $10,330 at June 30, 2015 and December 31, 2014, respectively	6,936	5,198
Inventories, net	19,814	20,174
Prepaid expenses and other current assets	2,427	1,782
Total current assets	118,836	123,883
Property and equipment, net	985	555
Goodwill	14,278	14,278
Other intangible assets, net	83	114
Other assets	231	248
Total assets	134,413	139,078
Current liabilities:
Current portion of long-term debt	8,441	3,757
Accounts payable	2,067	2,589
Accrued and other current liabilities	6,691	5,772
Customer deposits	8,198	8,614
Total current liabilities	25,397	20,732
Long-term debt, net of current portion	17,245	21,671
Warranty reserve and other long-term liabilities	1,334	1,036
Total liabilities	$ 43,976	$ 43,439
Commitments and contingencies (note 10)
Stockholders' equity:
Preferred Stock, $0.01 par value - Authorized 10,000,000 shares; none issued or outstanding
Common stock, $0.01 par value - Authorized 200,000,000; issued 15,015,423 and 14,985,704 and outstanding 14,942,696 and 14,912,977 shares at June 30, 2015 and December 31, 2014, respectively	$ 150	$ 150
Additional paid-in capital	230,969	229,795
Treasury stock, at cost (72,727 shares at June 30, 2015 and December 31, 2014)	(260)	(260)
Accumulated deficit	(140,422)	(134,046)
Total stockholders' equity	90,437	95,639
Total liabilities and stockholders' equity	$ 134,413	$ 139,078

Condensed Balance Sheets (Paren

Condensed Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Condensed Balance Sheets
Accounts receivable, allowances (in dollars)	$ 10,771	$ 10,330
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	15,015,423	14,985,704
Common stock, shares outstanding	14,942,696	14,912,977
Treasury stock, shares	72,727	72,727

Condensed Statements of Operati

Condensed Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Condensed Statements of Operations
Net sales	$ 14,206	$ 11,719	$ 26,640	$ 21,947
Cost of goods sold	3,937	2,881	7,174	5,455
Gross profit	10,269	8,838	19,466	16,492
Operating expenses:
Sales and marketing	6,951	6,289	13,805	11,863
Research and development	1,497	1,112	2,753	2,305
General and administrative	3,943	2,641	7,664	4,908
Total operating expenses	12,391	10,042	24,222	19,076
Loss from operations	(2,122)	(1,204)	(4,756)	(2,584)
Other (expense) income, net:
Interest income	7		7
Interest expense	(671)	(411)	(1,339)	(842)
Other (expense) income, net:	(206)	1,455	(288)	2,264
Total other (expense) income, net	(870)	1,044	(1,620)	1,422
Loss before income taxes	(2,992)	(160)	(6,376)	(1,162)
Net loss	$ (2,992)	$ (160)	$ (6,376)	$ (1,162)
Basic and diluted net loss per share attributable to common stockholders (in dollars per share)	$ (0.20)	$ (0.77)	$ (0.43)	$ (5.58)
Weighted average outstanding common shares used for net loss per share attributable to common stockholders:
Basic and diluted (in shares)	14,931,931	208,799	14,927,558	208,294

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Net loss	$ (6,376)	$ (1,162)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	153	125
Provision for sales return reserve	527	1,906
Provision for (recovery of) doubtful accounts	4	(64)
Provision for warranties	286	246
Provision for inventory	55
Change in fair value of warrants	288	93
Noncash interest expense	288	208
Stock-based compensation expense	1,082	199
Changes in assets and liabilities:
Accounts receivable	(2,269)	(841)
Prepaid expenses, other current assets and other assets	(657)	(421)
Inventories	305	2,025
Accounts payable	(520)	(1,269)
Accrued and other liabilities	670	(237)
Customer deposits	(416)	1,395
Net cash (used in) provided by operating activities	(6,580)	2,203
Cash flows from investing activities:
Purchase of property and equipment	(511)	(149)
Net cash used in investing activities	(511)	(149)
Cash flows from financing activities:
Proceeds from exercise of stock options	92	9
Proceeds from issuance of long-term debt		10,000
Deferred financing costs		(148)
Deferred equity issuance costs	(71)
Net cash provided by financing activities	21	9,861
Net (decrease) increase in cash and cash equivalents	(7,070)	11,915
Cash and cash equivalents at:
Beginning of period	96,729	9,722
End of period	89,659	21,637
Cash paid during the year for:
Interest	1,051	596
Supplemental disclosure of noncash investing and financing activities:
Accrued equity issuance costs		$ 759
Property and equipment in accounts payable	$ 85

Formation and Business of the C

Formation and Business of the Company	6 Months Ended
	Jun. 30, 2015
Formation and Business of the Company
Formation and Business of the Company	1. Formation and Business of the Company a. Formation Sientra, Inc., or the Company, was incorporated in the State of Delaware on August 29, 2003 under the name Juliet Medical, Inc. and subsequently changed its name to Sientra, Inc. in April 2007. The Company acquired substantially all the assets of Silimed, Inc., on April 4, 2007. The purpose of the acquisition was to acquire the rights to the silicone breast implant clinical trials. Following this acquisition, the Company focused on completing the clinical trials to gain Food and Drug Administration, or FDA, approval to offer its silicone gel breast implants in the United States. In March 2012, Sientra announced it had received approval from the FDA for its portfolio of silicone gel breast implants, and in the second quarter of 2012 the Company began commercial efforts to sell its products in the United States. The Company, based in Santa Barbara, California, is a medical aesthetics company that focuses on serving board-certified plastic surgeons and offers a portfolio of silicone shaped and round breast implants, tissue expanders, and body contouring products. b. Reverse Stock Split On October 10, 2014, our board of directors and stockholders approved an amendment to the Company’s fourth amended and restated certificate of incorporation, which was filed on October 17, 2014, which effected a 2.75-to-1 reverse stock split of the Company’s issued and outstanding shares of common stock. The par value of the common stock was not adjusted as a result of the reverse stock split. All issued and outstanding shares of common stock, stock options and warrants and the related per share amounts contained in the Company’s condensed financial statements have been retroactively adjusted to reflect this reverse stock split for all periods presented. Also, as a result of the reverse stock split of the common stock, the conversion ratios for all of the Company’s convertible preferred stock have been adjusted such that the preferred stock became convertible into shares of common stock at a conversion rate of 2.75-to-1 instead of 1-to-1. c. Initial Public Offering On November 3, 2014, the Company completed an initial public offering, or IPO, whereby it sold a total of 5,750,000 shares of common stock at $15.00 per share inclusive of 750,000 shares sold to underwriters for the exercise of their option to purchase additional shares. The Company received net proceeds from the IPO of approximately $77,035, after deducting underwriting discounts and commissions and offering expenses of approximately $9,215. These expenses were recorded against the proceeds received from the IPO. The interest-only period for the tranche D term loan (see Note 8) was extended from August 1, 2015 to August 1, 2016 as a result of having raised at least $50,000 in gross proceeds in the IPO and the completion of the IPO before June 30, 2015. The outstanding shares of convertible preferred stock were converted on a 2.75-to-1 basis into shares of common stock concurrent with the closing of the IPO. All of the outstanding shares of Series A, Series B and Series C preferred stock converted into 8,942,925 shares of common stock. Following the closing of the IPO, there were no shares of preferred stock outstanding.

Summary of Significant Accounti

Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2015
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies	2. Summary of Significant Accounting Policies a. Basis of Presentation The accompanying unaudited condensed financial statements 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 financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 18, 2015, or the Annual Report. The results for the three and six months ended June 30, 2015 are not necessarily indicative of results to be expected for the year ending December 31, 2015, any other interim periods, or any future year or period. b. Use of Estimates The preparation of the condensed 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 financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. c. Significant Accounting Policies There have been no significant changes to the accounting policies during the three and six months ended June 30, 2015, as compared to the significant accounting policies described in the “Notes to Financial Statements” in the Annual Report. d. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB, issued accounting standard update 2014-09, Revenue from Contracts with Customers . The standard was issued to provide a single framework that replaces existing industry and transaction specific US GAAP with a five step analysis of transactions to determine when and how revenue is recognized. The accounting standard update will replace most existing revenue recognition guidance in US GAAP when it becomes effective. In July 2015, the FASB voted to approve the deferral of the effective date of ASU 2014-09 by one year. Therefore, ASU 2014-09 will become effective for the Company beginning in fiscal year 2018. Under the exposure draft, early adoption would be permitted for the Company beginning in fiscal year 2017. The standard permits the use of either the retrospective or cumulative transition method. The Company is currently evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption. In April 2015, the FASB issued accounting standard update 2015-03, Interest — Imputation of Interest . The standard was issued to simplify the presentation of debt issuance costs and require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This accounting standard update will be effective for the Company beginning in fiscal year 2016. The Company anticipates there will be no material impact on its financial statement upon adoption of this guidance. In April 2015, the FASB issued accounting standard update 2015-05, Intangibles — Goodwill and Other — Internal-Use Software . The standard was issued to provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This accounting standard update will be effective for the Company beginning in fiscal year 2016. The Company anticipates there will be no material impact on its financial statement upon adoption of this guidance.

Fair Value of Financial Instrum

Fair Value of Financial Instruments	6 Months Ended
	Jun. 30, 2015
Fair Value of Financial Instruments
Fair Value of Financial Instruments	3. Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and customer deposits are reasonable estimates of their fair value because of the short maturity of these items. The fair value of the common stock warrant liability is discussed in Note 4. The fair value of our long-term debt is based on the amount of future cash flows associated with the instrument discounted using our current market rate. At June 30, 2015, the carrying value of the long-term debt was not materially different from the fair value.

Fair Value Measurements

Fair Value Measurements	6 Months Ended
	Jun. 30, 2015
Fair Value Measurements
Fair Value Measurements	4. Fair Value Measurements 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: · Level 1 — Quoted prices in active markets for identical assets or liabilities. · Level 2 — Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. · Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. 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. Prior to the IPO, the Company determined the fair value per share of the underlying common stock by taking into consideration its most recent sale of its convertible preferred stock as well as additional factors that the Company deems relevant. Subsequent to the IPO, the warrants are valued using the fair value of common stock as of the measurement date. The Company historically has been a private company and lacks company-specific historical and implied volatility information of its stock. Therefore, it estimates its expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants. 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. The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014 and indicate the level of the fair value hierarchy utilized to determine such fair value: Fair Value Measurements as of June 30, 2015 Using: Level 1 Level 2 Level 3 Total Liabilities: Liability for common stock warrants $ — — Fair Value Measurements as of December 31, 2014 Using: Level 1 Level 2 Level 3 Total Liabilities: Liability for common stock warrants $ — — The liability for common stock warrants is included in “accrued and other current liabilities” in the balance sheet. The following table provides a rollforward of the aggregate fair values of the Company’s common stock warrants for which fair value is determined by Level 3 inputs: Balance, December 31, 2014 $ Increase in fair value through June 30, 2015 Balance, June 30, 2015 $ The company recognized changes in the fair value of these warrants in “other (expense) income, net” in the statement of operations.

Product Warranties

Product Warranties	6 Months Ended
	Jun. 30, 2015
Product Warranties
Product Warranties	5. Product Warranties The Company offers a limited warranty and a lifetime product replacement program for the Company’s silicone gel breast implants. Under the limited warranty, the Company will reimburse patients for certain out-of-pocket costs related to revision surgeries performed within ten years from the date of implantation in a covered event. Under the lifetime product replacement program, the Company provides no-charge replacement breast implants if a patient experiences a covered rupture. The programs are available to all patients implanted with the Company’s silicone breast implants after April 1, 2012 and are subject to the related program’s terms, conditions, claim procedures, limitations and exclusions. Timely completion of a device tracking and warranty enrollment form by the patient’s Plastic Surgeon is required to activate the programs and for the patient to be able to receive benefits under either program. The following table provides a rollforward of the accrued warranties: June 30, 2015 2014 Beginning balance $ $ Payments made during the period ) — Changes in accrual related to warranties issued during the period Changes in accrual related to pre-existing warranties ) ) Ending balance $ $

Net Loss Per Share

Net Loss Per Share	6 Months Ended
	Jun. 30, 2015
Net Loss Per Share
Net Loss Per Share	6. Net Loss Per Share Basic loss per share attributable to common stockholders is computed by dividing net loss by the weighted average number of common shares outstanding during each period. Diluted 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), and the weighted average conversion of the convertible preferred stock into shares of common stock (using the if-converted method). Dilutive loss per share is the same as basic loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive. Three months ended June 30, Six months ended June 30, 2015 2014 2015 2014 Net loss $ ) $ ) $ ) $ ) Weighted average common shares outstanding, basic and diluted Net loss per share attributable to common stockholders $ ) $ ) $ ) $ ) The Company excluded the following potentially dilutive securities, outstanding as of June 30, 2015 and 2014, from the computation of diluted net loss per share attributable to common stockholders for the three and six months ended June 30, 2015 and 2014 because they had an anti-dilutive impact due to the net loss attributable to common stockholders incurred for the periods. June 30, 2015 2014 Stock options to purchase common stock Warrants for the purchase of common stock Convertible preferred stock (as converted to common stock) —

Balance Sheet Components

Balance Sheet Components	6 Months Ended
	Jun. 30, 2015
Balance Sheet Components
Balance Sheet Components	7. Balance Sheet Components a. Allowance for Sales Returns and Doubtful Accounts The Company has established an allowance for sales returns of $10,544 and $10,018 as of June 30, 2015 and December 31, 2014, respectively, recorded net against accounts receivable in the balance sheet. The Company has established an allowance for doubtful accounts of $227 and $312 as of June 30, 2015 and December 31, 2014, respectively, recorded net against accounts receivable in the balance sheet. b. Property and Equipment Property and equipment, net consist of the following: June 30, December 31, 2015 2014 Leasehold improvements $ $ Computer equipment Software Office equipment Furniture and fixtures Less accumulated depreciation ) ) $ $ Depreciation expense for the three months ended June 30, 2015 and 2014 was $54 and $39, respectively. Depreciation expense for the six months ended June 30, 2015 and 2014 was $122 and $79, respectively. c. Goodwill and Other Intangible Assets, net The goodwill on the condensed balance sheets was $14,278 for all periods presented. The components of the Company’s intangible assets are as follows: June 30, December 31, 2015 2014 Acquired FDA non-gel product approval $ $ Less accumulated amortization ) ) $ $ Amortization expense for the three months ended June 30, 2015 and 2014 was $16 and $23, respectively. Amortization expense for the six months ended June 30, 2015 and 2014 was $31 and $46, respectively. d. Accrued and Other Current Liabilities Accrued and other current liabilities consist of the following: June 30, December 31, 2015 2014 Accrued clinical trial and research and development expenses $ $ Audit, consulting and legal fees Payroll and related expenses Accrued commission Warrant liability Other $ $

Long-term Debt

Long-term Debt	6 Months Ended
	Jun. 30, 2015
Long-term Debt
Long-term Debt	8. Long-term Debt 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, providing for a $15,000 term loan facility consisting of original term loans of (i) a $7,500 tranche A term loan, (ii) a $2,500 tranche B term loan and (iii) a $5,000 tranche C term loan, maturing on February 1, 2017. The term loan facility is collateralized by a first-priority security interest in substantially all of the Company’s assets. Borrowings under the term loan facility bear interest at a rate equal to 8.4% per annum and the Original Term Loan Agreement provides for interest-only payments through June 30, 2015. The term loans include an additional lump sum payment of $975 due on February 1, 2017. On June 30, 2014, the Company entered into the Amended and Restated Loan and Security Agreement, or the Amended Term Loan Agreement, with Oxford, under which the interest-only period for the original term loans was extended to August 1, 2015 and borrowed an additional $10,000 in a fourth tranche (tranche D) loan maturing on January 1, 2019. The term loans are collateralized by a first-priority security interest in substantially all of the Company’s assets. The term loans bear interest at a rate equal to 8.4% per annum. The interest-only period for the tranche A, B and C term loans ends on August 1, 2015 and the interest-only period for the tranche D term loan would have ended on the same date, but was extended another year as the Company raised at least $50,000 in gross proceeds as part of an initial public offering before June 30, 2015 (see Note 1). The tranche D term loan includes an additional lump sum payment of $650 due on January 1, 2019. The Amended Term Loan Agreement contains various negative and affirmative covenants, including certain restrictive covenants that limit the Company’s ability to transfer or dispose of certain assets, engage in new lines of business, change the composition of Company management, merge with or acquire other companies, incur additional debt, create new liens and encumbrances, pay dividends or subordinated debt and enter into material transactions with affiliates, among others. The Amended Term Loan Agreement also contains financial reporting requirements. The aggregate maturities of long-term debt as of June 30, 2015 are: $3,757 in the remaining six months of 2015, $11,094 in 2016, $5,558 in 2017, $4,223 in 2018 and $368 in 2019. 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 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.

Stockholders' Equity

Stockholders' Equity	6 Months Ended
	Jun. 30, 2015
Stockholders' Equity
Stockholders' Equity	9. Stockholders’ Equity a. Authorized Stock 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 June 30, 2015 and December 31, 2014, the Company had no preferred stock issued or outstanding. b. Stock Option Plan 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 reserved for issuance for the 2007 Plan. Our board of directors adopted our 2014 Equity Incentive Plan, or 2014 Plan, in July 2014, and our stockholders approved the 2014 Plan in October 2014. The 2014 Plan became effective upon completion of the IPO, at which time the Company ceased granting awards under the 2007 Plan. Under the 2014 Plan, the Company may issue ISO, 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 us and our 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. On January 1, 2015, the 2014 Plan reserved an additional 298,259 shares of common stock for issuance. Options under the 2007 Plan and the 2014 Plan may be granted for periods of up to ten years as determined by our 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. The 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 which vest upon achievement of performance conditions based on net sales targets over the performance period. 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 and 2014 Plan: Option Shares Weighted average exercise price Weighted average remaining contractual term(years) Balances at December 31, 2014 $ 5.48 Granted Exercised ) Forfeited ) Balances at June 30, 2015 $ 6.25 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 was $444 and $121 for the three months ended June 30, 2015 and 2014, respectively. Stock-based compensation expense was $889 and $199 for the six months ended June 30, 2015 and 2014, respectively. As of June 30, 2015, there was $4,933 of unrecognized compensation costs related to stock options. The expense is recorded within the operating expense captions in the statement of operations based on the employees receiving the awards. These costs are expected to be recognized over weighted average period of 2.93 years. c. Employee Stock Purchase Plan The Company’s board of directors adopted the 2014 Employee Stock Purchase Plan, or ESPP, in July 2014, and our 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 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, except that the first offering period commenced on the first trading day following the effective date of the Company’s registration statement. 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 exercise date. A total of 255,500 shares of common stock were initially reserved for issuance under the ESPP, subject to certain annual increases. On January 1, 2015, the ESPP reserved an additional 149,129 shares of common stock for issuance. 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 $95 for the three months ended June 30, 2015, and $193 for the six months ended June 30, 2015.

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Jun. 30, 2015
Commitments and Contingencies
Commitments and Contingencies	10. Commitments and Contingencies a. Operating Leases The Company’s lease for its general office facility in Santa Barbara, California expires in February 2020. The Company also leases additional industrial space for warehouse, research and development and additional general office use. Rent expense was $141 and $90 for the three months ended June 30, 2015 and 2014, respectively, and $264 and $181 for the six months ended June 30, 2015 and 2014, respectively. The Company recognizes rent expense on a straight-line basis over the lease term. b. Contingencies 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. There were no contingent liabilities requiring accrual at June 30, 2015. In 2012, the Company filed a claim with the Hartford Insurance Company, or Hartford, for reimbursement of legal costs incurred in connection with litigation with a competitor that was resolved in 2013. The Company held a D&O insurance policy with Hartford, and the Company and Hartford settled the matter in May of 2014. The Company received settlement payments from Hartford and recovery of costs associated with the litigation of $0 and $1,500 for the three months ended June 30, 2015 and 2014, respectively, and $0 and $2,358 for the six months ended June 30, 2015 and 2014, respectively.

Summary of Significant Accoun16

Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2015
Summary of Significant Accounting Policies
Basis of Presentation	a. Basis of Presentation The accompanying unaudited condensed financial statements 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 financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC on March 18, 2015, or the Annual Report. The results for the three and six months ended June 30, 2015 are not necessarily indicative of results to be expected for the year ending December 31, 2015, any other interim periods, or any future year or period.
Use of Estimates	b. Use of Estimates The preparation of the condensed 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 financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Significant Accounting Policies	c. Significant Accounting Policies There have been no significant changes to the accounting policies during the three and six months ended June 30, 2015, as compared to the significant accounting policies described in the “Notes to Financial Statements” in the Annual Report.
Recent Accounting Pronouncements	d. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB, issued accounting standard update 2014-09, Revenue from Contracts with Customers . The standard was issued to provide a single framework that replaces existing industry and transaction specific US GAAP with a five step analysis of transactions to determine when and how revenue is recognized. The accounting standard update will replace most existing revenue recognition guidance in US GAAP when it becomes effective. In July 2015, the FASB voted to approve the deferral of the effective date of ASU 2014-09 by one year. Therefore, ASU 2014-09 will become effective for the Company beginning in fiscal year 2018. Under the exposure draft, early adoption would be permitted for the Company beginning in fiscal year 2017. The standard permits the use of either the retrospective or cumulative transition method. The Company is currently evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption. In April 2015, the FASB issued accounting standard update 2015-03, Interest — Imputation of Interest . The standard was issued to simplify the presentation of debt issuance costs and require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This accounting standard update will be effective for the Company beginning in fiscal year 2016. The Company anticipates there will be no material impact on its financial statement upon adoption of this guidance. In April 2015, the FASB issued accounting standard update 2015-05, Intangibles — Goodwill and Other — Internal-Use Software . The standard was issued to provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This accounting standard update will be effective for the Company beginning in fiscal year 2016. The Company anticipates there will be no material impact on its financial statement upon adoption of this guidance.

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	6 Months Ended
	Jun. 30, 2015
Fair Value Measurements
Schedule of Company's liabilities that are measured at fair value on a recurring basis	Fair Value Measurements as of June 30, 2015 Using: Level 1 Level 2 Level 3 Total Liabilities: Liability for common stock warrants $ — — Fair Value Measurements as of December 31, 2014 Using: Level 1 Level 2 Level 3 Total Liabilities: Liability for common stock warrants $ — —
Schedule of aggregate fair values of the Company's common stock warrants for which fair value is determined by Level 3 inputs	Balance, December 31, 2014 $ Increase in fair value through June 30, 2015 Balance, June 30, 2015 $

Product Warranties (Tables)

Product Warranties (Tables)	6 Months Ended
	Jun. 30, 2015
Product Warranties
Schedule of rollforward of the accrued warranties	June 30, 2015 2014 Beginning balance $ $ Payments made during the period ) — Changes in accrual related to warranties issued during the period Changes in accrual related to pre-existing warranties ) ) Ending balance $ $

Net Loss Per Share (Tables)

Net Loss Per Share (Tables)	6 Months Ended
	Jun. 30, 2015
Net Loss Per Share
Schedule of net loss per share, basic and diluted	Three months ended June 30, Six months ended June 30, 2015 2014 2015 2014 Net loss $ ) $ ) $ ) $ ) Weighted average common shares outstanding, basic and diluted Net loss per share attributable to common stockholders $ ) $ ) $ ) $ )
Schedule of potentially dilutive securities excluded from the computation of diluted net loss per share attributable to common stockholders	June 30, 2015 2014 Stock options to purchase common stock Warrants for the purchase of common stock Convertible preferred stock (as converted to common stock) —

Balance Sheet Components (Table

Balance Sheet Components (Tables)	6 Months Ended
	Jun. 30, 2015
Balance Sheet Components
Schedule of property and equipment, net	June 30, December 31, 2015 2014 Leasehold improvements $ $ Computer equipment Software Office equipment Furniture and fixtures Less accumulated depreciation ) ) $ $
Schedule of intangible assets	June 30, December 31, 2015 2014 Acquired FDA non-gel product approval $ $ Less accumulated amortization ) ) $ $
Schedule of accrued and other current liabilities	June 30, December 31, 2015 2014 Accrued clinical trial and research and development expenses $ $ Audit, consulting and legal fees Payroll and related expenses Accrued commission Warrant liability Other $ $

Stockholders' Equity (Tables)

Stockholders' Equity (Tables)	6 Months Ended
	Jun. 30, 2015
Stockholders' Equity
Summary of option activity	Option Shares Weighted average exercise price Weighted average remaining contractual term(years) Balances at December 31, 2014 $ 5.48 Granted Exercised ) Forfeited ) Balances at June 30, 2015 $ 6.25

Formation and Business of the22

Formation and Business of the Company (Details) $ / shares in Units, $ in Thousands	Nov. 03, 2014USD ($)$ / sharesshares	Oct. 10, 2014	Oct. 09, 2014	Jun. 30, 2015USD ($)	Jun. 30, 2014USD ($)
Payment of underwriting discounts and commissions and offering expenses				$ 71
Convertible preferred stock, shares outstanding | shares	0
Tranche D term loan
Threshold amount of gross proceeds in IPO to determine extended interest period of debt instruments					$ 50,000
Tranche D term loan | IPO
Threshold amount of gross proceeds in IPO to determine extended interest period of debt instruments	$ 50,000
Common stock
Conversion rate		0.364
Shares issued on conversion of Series A, Series B and Series C preferred stock | shares	8,942,925
Common stock | IPO
Shares issued | shares	5,750,000
Initial public offering price (in dollars per share) | $ / shares	$ 15
Net proceeds after deducting underwriting discounts and commissions and offering expenses	$ 77,035
Payment of underwriting discounts and commissions and offering expenses	$ 9,215
Common stock | Over allotment option exercised by underwriters
Shares issued | shares	750,000
Convertible preferred stock
Conversion rate	2.75
Preferred Stock
Conversion rate		2.75	1

Fair Value Measurements (Detail

Fair Value Measurements (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Fair Value Measurements
Estimated dividend yield	0.00%
Recurring | Warrants
Fair Value Measurements
Liability for common stock warrants	$ 708	$ 420
Recurring | Level 3 | Warrants
Fair Value Measurements
Liability for common stock warrants	$ 708	$ 420

Fair Value Measurements (Deta24

Fair Value Measurements (Details 2) - Warrants $ in Thousands	6 Months Ended
	Jun. 30, 2015USD ($)
Fair values of the Company's common stock warrants determined by Level 3 inputs.
Balance at beginning of the period	$ 420
Balance at the end of the period	708
Other (expense) income net
Fair values of the Company's common stock warrants determined by Level 3 inputs.
Increase in fair value	$ 288

Product Warranties (Details)

Product Warranties (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Product Warranties
Period to claim reimbursement under limited warranty program	10 years
Beginning balance	$ 961	$ 515
Payments made during the period	(11)
Changes in accrual related to warranties issued during the period	287	250
Changes in accrual related to pre-existing warranties	(1)	(4)
Ending balance	$ 1,236	$ 761

Net Loss Per Share (Details)

Net Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Net loss per share
Net loss	$ (2,992)	$ (160)	$ (6,376)	$ (1,162)
Weighted average common shares outstanding, basic and diluted	14,931,931	208,799	14,927,558	208,294
Net loss per share attributable to common stockholders	$ (0.20)	$ (0.77)	$ (0.43)	$ (5.58)
Potentially dilutive securities
Potentially dilutive securities	2,279,458	10,557,305	2,279,458	10,557,305
Stock options to purchase common stock
Potentially dilutive securities
Potentially dilutive securities	2,231,748	1,566,670	2,231,748	1,566,670
Warrants
Potentially dilutive securities
Potentially dilutive securities	47,710	47,710	47,710	47,710
Convertible preferred stock
Potentially dilutive securities
Potentially dilutive securities		8,942,925		8,942,925

Balance Sheet Components (Detai

Balance Sheet Components (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Balance Sheet Components
Allowance for sales returns	$ 10,544	$ 10,018
Allowance for doubtful accounts	$ 227	$ 312

Balance Sheet Components (Det28

Balance Sheet Components (Details 2) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Property and equipment, net
Property and equipment, gross	$ 1,699		$ 1,699		$ 1,176
Less accumulated depreciation	(714)		(714)		(621)
Property and equipment, net	985		985		555
Depreciation expense	54	$ 39	122	$ 79
Leasehold improvements
Property and equipment, net
Property and equipment, gross	70		70		69
Computer equipment
Property and equipment, net
Property and equipment, gross	237		237		138
Software
Property and equipment, net
Property and equipment, gross	463		463		166
Office equipment
Property and equipment, net
Property and equipment, gross	215		215		167
Furniture and fixtures
Property and equipment, net
Property and equipment, gross	$ 714		$ 714		$ 636

Balance Sheet Components (Det29

Balance Sheet Components (Details 3) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Goodwill and intangible assets
Goodwill	$ 14,278		$ 14,278		$ 14,278
Other intangible assets
Less accumulated amortization	(1,630)		(1,630)		(1,599)
Intangible assets, net	83		83		114
Amortization expense	16	$ 23	31	$ 46
Accrued and other current liabilities
Accrued clinical trial and research and development expenses	103		103		109
Audit, consulting and legal fees	462		462		72
Payroll and related expenses	2,197		2,197		2,497
Accrued commission	1,580		1,580		1,969
Warrant liability	708		708		420
Other	1,641		1,641		705
Total	6,691		6,691		5,772
Acquired FDA non-gel product approval
Other intangible assets
Intangible assets, gross	$ 1,713		$ 1,713		$ 1,713

Long-term Debt (Details)

Long-term Debt (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended
	Jun. 30, 2014	Jan. 31, 2013	Jun. 30, 2015	Jan. 17, 2013
Aggregate maturities of long-term debt
Remaining 6 months of 2015			$ 3,757
2,016			11,094
2,017			5,558
2,018			4,223
2,019			$ 368
Term loan agreement
Long-term Debt
Face amount				$ 15,000
Interest rate (as a percent)				8.40%
Additional lump sum payment				$ 975
Term loan agreement | Warrants
Warrants
Term of warrants	7 years	7 years
Share price (in dollars per share)	$ 14.671	$ 14.671
Tranche A term loan
Long-term Debt
Face amount				7,500
Tranche A term loan | Warrants
Warrants
Value of common stock that can be purchased as a percentage of term loan		3.00%
Tranche B term loan
Long-term Debt
Face amount				2,500
Tranche B term loan | Warrants
Warrants
Value of common stock that can be purchased as a percentage of term loan		3.00%
Tranche C term loan
Long-term Debt
Face amount				$ 5,000
Tranche C term loan | Warrants
Warrants
Value of common stock that can be purchased as a percentage of term loan		3.00%
Tranche D term loan
Long-term Debt
Face amount	$ 10,000
Interest rate (as a percent)	8.40%
Additional lump sum payment	$ 650
Threshold amount of gross proceeds in IPO to determine extended interest period of debt instruments	$ 50,000
Tranche D term loan | Warrants
Warrants
Value of common stock that can be purchased as a percentage of term loan	2.50%

Stockholders' Equity (Details)

Stockholders' Equity (Details) - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Stock other disclosures
Shares authorized	210,000,000	210,000,000
Common stock, shares authorized	200,000,000	200,000,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

Stockholders' Equity (Details 2

Stockholders' Equity (Details 2) - USD ($) $ / shares in Units, $ in Thousands	Jan. 01, 2015	Nov. 03, 2014	Apr. 30, 2007	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
2007 Plan
Stockholders' Equity
Common stock reserved for issuance (in shares)			1,690,448
2014 Plan
Stockholders' Equity
Common stock reserved for issuance (in shares)		1,027,500
Additional common stock reserved for issuance (in shares)	298,259
Maximum | 2007 Plan
Stockholders' Equity
Grant period of stock awards			10 years
Maximum | 2014 Plan
Stockholders' Equity
Grant period of stock awards		10 years
Stock options
Stockholders' Equity
Number of additional years of requisite service period						3 years
Number of options
Balance at the beginning of period (in shares)	1,654,906					1,654,906
Options granted (in shares)						622,285
Options exercised (in shares)						(29,719)
Options forfeited (in shares)						(15,724)
Balance at the end of the period (in shares)				2,231,748		2,231,748		1,654,906
Weighted average exercise price
Balance at the beginning of period (in dollars per share)	$ 4.25					$ 4.25
Options granted (in dollars per share)						16.36
Options exercised (in dollars per share)						3.08
Options forfeited (in dollars per share)						12.47
Balance at the end of period (in dollars per share)				$ 7.58		$ 7.58		$ 4.25
Weighted average remaining contractual term						6 years 3 months		5 years 5 months 23 days
Additional information
Stock-based compensation expense				$ 444	$ 121	$ 889	$ 199
Unrecognized compensation costs (in dollars)				$ 4,933		$ 4,933
Weighted average period over which unrecognized compensation costs are expected to be recognized						2 years 11 months 5 days
Stock options | Minimum
Stockholders' Equity
Vesting percentage						25.00%
Stock options | First anniversary
Stockholders' Equity
Vesting percentage						25.00%
Incentive stock options | Minimum
Stockholders' Equity
Purchase price of awards expressed as a percentage of fair value of shares on the date of grant						100.00%
Incentive stock options | Minimum | Shareholder owning more than 10% voting power
Stockholders' Equity
Purchase price of awards expressed as a percentage of fair value of shares on the date of grant						110.00%
Percentage of voting power owned by shareholder				10.00%		10.00%

Stockholders' Equity (Details 3

Stockholders' Equity (Details 3) - 2014 Employee Stock Purchase Plan - USD ($) $ in Thousands	Jan. 01, 2015	Oct. 31, 2014	Jun. 30, 2015	Jun. 30, 2015
Stockholders' Equity
Purchase period of offering		6 months
Rate of purchase price of stock on fair value (as a percent)		85.00%
Number of shares available for future issuance		255,500
Additional common stock reserved for issuance (in shares)	149,129
Stock-based compensation expense			$ 95	$ 193
Maximum
Stockholders' Equity
Discount rate on the value of shares through payroll deductions (as a percent)		15.00%
Expiration period of each offering		27 months

Commitments and Contingencies (

Commitments and Contingencies (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Operating Leases
Rent expense	$ 141	$ 90	$ 264	$ 181
Contingencies
Contingent liabilities	0		0
Mentor litigation
Contingencies
Settlement payments received	$ 0	$ 1,500	$ 0	$ 2,358