Stablecoin Development Corp Revenue Disclosure

 

On the Company adopted Topic using the modified retrospective method applied to those contracts that were completed as of In addition, the Company has accounted for all contract modifications retrospectively for contracts in transition at the date of adoption by electing the contract modification practical expedient. Contract consideration has been adjusted for the effects of a significant financing component if the time between the transfer of the good or service and payment timing is year or less. Results for reporting periods beginning after are presented under Topic while prior period amounts are adjusted and continue to be reported in accordance with the Company's historical accounting under Topic

 

Transactions under the Company's major distribution agreements, which under prior guidance, were recognized upon shipment from its distributors to the final customers, are now recognized upon transfer of control to its major distribution partners at the amount of consideration that the Company expects to be entitled to. As a result, the Company now records contract liabilities for the invoiced amounts that are estimated to be subject to significant reversal, including product revenue allowances for cash consideration paid to customers for services, discounts, rebate programs, chargebacks, and product returns. The constraint on variable consideration for product returns is a new estimation resulting from the earlier recognition under the new guidance. Based on this change, the entire deferred revenue and deferred cost of goods sold balances related to its distribution agreements were allocated to either contract liabilities and other liabilities associated with invoicing in periods prior to adoption or included in the cumulative adjustment to retained earnings upon adoption. 

 

Milestone payments, which under the prior milestone recognition methodology were recognized until they were substantively achieved, are included in the estimated transaction price when they are considered probable of being achieved. This result in earlier recognition of revenue for the portion of milestone payments deemed probable which are allocated to performance obligations that are satisfied before the milestones are achieved. For license and collaboration revenue for which contract deliverables were previously accounted for as a combined unit of accounting because products or services were separable, the Company has identified that under the new guidance the separate performance obligations are capable of being distinct. As a result, the transaction price under these arrangements, including upfront fees and milestone payments, are allocated differently to each performance obligation and be recognized at earlier points in time or with a different pattern of performance over time.

 

The following table shows the reconciliation of assets and liabilities disclosed in the Form -K for the year ended as adjusted, due to the modified retrospective adoption of Topic on in thousands):

 

		As Reported				Effect of				As Adjusted
		Under				Change				Under
		Topic 605								Topic 606
Accounts receivable		$	3,629			$	530			$	4,159
Inventory		$	504			$	(25	)		$	479
Accrued liabilities		$	1,672			$	1,166			$	2,838
Deferred revenue		$	2,841			$	(2,766	)		$	75
Deferred revenue, non-current		$	534			$	(534	)		$	-
Accumulated deficit		$	(111,074	)		$	2,638			$	(108,436	)

 

As a result of adopting Topic using the modified retrospective approach, the following table shows the financial statement line items for the year ended as if revenue from contracts with customers had been accounted for under Topic (in thousands, except per share data):

 

		As Reported				Effect of				As Revised
		Under Topic				Change				Under
		606								Topic 605
Consolidated Balance Sheet:
Accounts receivable		$	3,385			$	(358	)		$	3,027
Inventory		$	280			$	36			$	316
Accrued liabilities		$	3,255			$	(1,979	)		$	1,276
Deferred revenue		$	41			$	3,853			$	3,894
Accumulated deficit		$	(114,981	)		$	(2,196	)		$	(117,177	)
Total net sales		$	12,508			$	431			$	12,939
Cost of product sales		$	1,503			$	(11	)		$	1,492
Loss from operations		$	(7,871	)		$	442			$	(7,429	)
Net loss		$	(6,545	)		$	442			$	(6,103	)
Basic net loss per share		$	(0.39	)		$	0.03			$	(0.36	)
Diluted net loss per share		$	(0.46	)		$	0.03			$	(0.43	)
Consolidated Statement of Cash Flows:
Net loss		$	(6,545	)		$	442			$	(6,103	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accounts receivable		$	774			$	(172	)		$	602
Inventory		$	198			$	(11	)		$	187
Accounts payable and accrued liabilities		$	516			$	(844	)		$	(328	)
Deferred revenue		$	(34	)		$	584			$	550

 

 

At approximately thousand of transaction prices were allocated to unsatisfied performance obligations that the Company expects to be recognized during

 

For additional detail on the Company's accounting policy regarding revenue recognition, refer to Note above.

 

The following table presents changes in the Company's contract assets and liabilities for the year ended

		Balance at												Balance at
		Beginning												the end of
		of												the
		the year				Additions				Deductions				year
		(in thousands)
Contract Liabilities: Deferred Revenue		$	75			$	-			$	(34	)		$	41
Contract Liabilities: Accrued Liabilities			1,458				13,716				(12,817	)			2,357
Total		$	1,533			$	13,716			$	(12,851	)		$	2,398

 

During the year ended the Company recognized the following revenue (in thousands):

 

 

 

Revenue recognized in the year from:
Amounts included in contract liabilities at the beginning of the year:
Performance obligations satisfied		$	1,453
New activities in the year:
Performance obligations satisfied			11,055
Total revenue		$	12,508

 

 

In the Company entered into a distribution agreement with China Pioneer, a Shanghai-based company that markets high-end pharmaceutical products into China and an affiliate of Pioneer Pharma (Singapore) Pte. Ltd. ("Pioneer Singapore"), for the commercialization of NeutroPhase in this territory. Under the terms of the agreement, NovaBay received an upfront payment of NovaBay also received in related to the submission of the marketing approval for the product to the Chinese Food and Drug Administration ("CFDA"). The deferred revenue was recognized as the purchase discounts were earned, with the remaining deferred revenue recognized ratably over the product distribution period. During the year ended NovaBay received upon receipt of a marketing approval of the product from the CFDA.

 

In the Company entered into agreements with China Pioneer: () an international distribution agreement ("Distribution Agreement") and () a unit purchase agreement ("Purchase Agreement"). These agreements were combined and accounted for as arrangement with unit of accounting for revenue recognition purposes.

 

Pursuant to the terms of the Distribution Agreement, China Pioneer has the right to distribute NeutroPhase, upon a marketing approval from a Regulatory Authority (as defined in the Distribution Agreement) in certain territories in Asia (other than China). Upon execution of the Distribution Agreement, the Company received an upfront payment, which was recorded as deferred revenue. China Pioneer is also obligated to make certain additional payments to the Company upon receipt of the marketing approval. The Distribution Agreement further provides that China Pioneer is entitled to a cumulative purchase discount to exceed upon the purchase of NeutroPhase products, payable in NovaBay unregistered restricted common stock.

 

Pursuant to the Purchase Agreement, the Company also received million from China Pioneer for the purchase of restricted units (with each restricted unit comprising share of common stock and a warrant for the purchase of share of common stock). The unit purchase was completed in tranches: () units in and () units in with both tranches at a purchase price of per unit. The fair value of the total units sold was million, based upon the trading price of our common stock on the dates the units were purchased and the fair value of the warrants based on the Black-Scholes Merton option pricing model. Because the aggregate fair value of the units on the dates of purchase exceeded the million in proceeds received from the unit purchase by approximately million, we reallocated from deferred revenue to stockholders' equity as consideration for the purchase of the units.

 

In the Company announced it had expanded its NeutroPhase commercial partnership agreement with China Pioneer. The expanded agreement includes licensing rights to Avenova and CelleRx, which were developed internally by NovaBay. The expanded partnership agreement covers the commercialization and distribution of these products in China and countries in Southeast Asia.

 

On the Company entered into a distribution agreement with Integrated Healing Technologies, LLC ("IHT") to distribute NeutroPhase. NovaBay received an upfront payment of

 

In the Company entered into a collaboration and license agreement with Virbac. Under this agreement, Virbac acquired exclusive worldwide rights to develop the Company's proprietary compound, auriclosene (NVC-), for global veterinary markets for companion animals. The Company received an upfront payment of

 

On the Company entered into a distribution agreement with Principal Business Enterprise Inc. ("PBE") to distribute NeutroPhase. NovaBay received an upfront payment of

  

Revenue has been recognized under these agreements as follows:

 

		Year Ended
		December 31,
(in thousands)		2018				2017
Amortization of upfront technology and access fees		$	34			$	103
Product revenue			169				1,956
Total revenue recognized		$	203			$	2,059

 

The Company had a deferred revenue balance of million at related to these agreements, which consisted of the unamortized balances from upfront technology and access fees. Upon the adoption of Topic deferred revenue decreased by million and was recorded as part of the cumulative adjustment to the accumulated deficit. The decrease in deferred revenue related primarily to the identification of the licenses as "right of use" licenses under the current guidance for which control transferred to the customer at the onset of each contract. At the Company had deferred revenue of thousand that relates to unsatisfied performance obligations of sample supply due to Pioneer China and PBE and an incremental discount on future product sales due to Pioneer China.

 

In the Company signed a nationwide distribution agreement for its Avenova product with McKesson Corporation ("McKesson") as part of the Company's commercialization strategy. McKesson makes Avenova widely available in local pharmacies and major retail chains across the U.S., such as Wal-Mart, Costco, CVS and Target. In the Company signed a nationwide distribution agreement with Cardinal Health. In the Company also signed a distribution agreement with AmerisourceBergen to distribute Avenova nationwide. 

 

During the years ended and the Company earned million and million,respectively, in sales revenue for its Avenova product from its distribution agreements.

 

The Company had a deferred revenue balance of million at related to these agreements, which consisted of product sales that our customers had resold to end users (sell-through approach). Upon the adoption of Topic deferred revenue decreased by million, with a portion associated with the constraint on variable consideration related to service fees/chargebacks, prompt payment discounts, rebates and returns in the amount of million being reclassified as a contract liability. The remaining million, including the net effect of deferred cost of goods sold, was recorded as part of the cumulative adjustment to the accumulated deficit. With the adoption of Topic we recognize product sales as revenue when our products are sold to our customers.

 

At under the Avenova product distribution arrangements, the Company had a contract liability balance of million. The contract liability is included in accounts payable and accrued liabilities in the balance sheet (see Note ).