stro-10q_20190930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-38662

 

SUTRO BIOPHARMA, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-0926186

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

310 Utah Avenue, Suite 150

South San Francisco, California

94080

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 392-8412

Not Applicable:

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common stock, $0.001 par value

 

STRO

 

Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of November 4, 2019, the registrant had 23,090,150 shares of common stock, $0.001 par value per share, outstanding.

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Balance Sheets

1

 

Condensed Statements of Operations

2

 

Condensed Statements of Comprehensive Loss

3

 

Condensed Statements of Stockholders’ (Deficit) Equity

4

 

Condensed Statements of Cash Flows

5

 

Notes to Unaudited Condensed Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

75

Item 3.

Defaults Upon Senior Securities

75

Item 4.

Mine Safety Disclosures

75

Item 5.

Other Information

75

Item 6.

Exhibits

76

Signatures

77

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Sutro Biopharma, Inc.

Condensed Balance Sheets

(In thousands, except share and per share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

(See Note 2)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,954

 

 

$

125,298

 

Marketable securities—current

 

 

113,209

 

 

 

79,194

 

Accounts receivable, net (including amounts from related parties of

   $2,059 and $959 as of September 30, 2019 and December 31, 2018,

   respectively)

 

 

7,531

 

 

 

2,489

 

Prepaid expenses and other current assets

 

 

2,873

 

 

 

2,965

 

Total current assets

 

 

135,567

 

 

 

209,946

 

Property and equipment, net

 

 

8,522

 

 

 

10,934

 

Marketable securities, non—current

 

 

25,223

 

 

 

 

Other long-term assets

 

 

2,351

 

 

 

2,244

 

Restricted cash

 

 

15

 

 

 

15

 

Total assets

 

$

171,678

 

 

$

223,139

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,549

 

 

$

3,061

 

Accrued compensation

 

 

4,628

 

 

 

6,217

 

Deferred revenue—current

 

 

20,250

 

 

 

21,574

 

Debt—current

 

 

5,843

 

 

 

4,724

 

Other current liabilities

 

 

589

 

 

 

847

 

Total current liabilities

 

 

35,859

 

 

 

36,423

 

Deferred revenue, non—current

 

 

19,849

 

 

 

44,599

 

Deferred rent

 

 

435

 

 

 

476

 

Debt—non-current

 

 

5,500

 

 

 

10,000

 

Other noncurrent liabilities

 

 

129

 

 

 

102

 

Total liabilities

 

 

61,772

 

 

 

91,600

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value — 300,000,000 shares authorized

   as of September 30, 2019 and December 31, 2018; 23,090,002 and

   22,848,184 shares issued and outstanding as of September 30, 2019

   and December 31, 2018, respectively

 

 

23

 

 

 

23

 

Additional paid-in-capital

 

 

290,616

 

 

 

281,891

 

Accumulated other comprehensive gain (loss)

 

 

223

 

 

 

(47

)

Accumulated deficit

 

 

(180,956

)

 

 

(150,328

)

Total stockholders’ equity

 

 

109,906

 

 

 

131,539

 

Total liabilities and stockholders’ equity

 

$

171,678

 

 

$

223,139

 

 

See accompanying notes to unaudited interim condensed financial statements.

1


 

Sutro Biopharma, Inc.

Condensed Statements of Operations

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues (including amounts from related

   parties of $6,274 and $16,687 during the three and nine

   months ended September 30, 2019, respectively, and

   $6,086 and $13,907 during the three and nine months

   ended September 30, 2018, respectively)

 

$

12,277

 

 

$

7,836

 

 

$

31,431

 

 

$

19,333

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

16,897

 

 

 

12,642

 

 

 

48,220

 

 

 

39,475

 

General and administrative

 

 

8,115

 

 

 

5,351

 

 

 

23,897

 

 

 

13,806

 

Total operating expenses

 

 

25,012

 

 

 

17,993

 

 

 

72,117

 

 

 

53,281

 

Loss from operations

 

 

(12,735

)

 

 

(10,157

)

 

 

(40,686

)

 

 

(33,948

)

Interest income

 

 

964

 

 

 

403

 

 

 

3,264

 

 

 

483

 

Interest and other expense, net

 

 

(1,141

)

 

 

(483

)

 

 

(3,533

)

 

 

(359

)

Net loss

 

$

(12,912

)

 

$

(10,237

)

 

$

(40,955

)

 

$

(33,824

)

Net loss per share, attributable to common

   stockholders, basic and diluted

 

$

(0.56

)

 

$

(21.26

)

 

$

(1.79

)

 

$

(71.06

)

Weighted-average shares used in computing net loss per

   share attributable to common stockholders

 

 

22,946,989

 

 

 

481,613

 

 

 

22,913,118

 

 

 

476,023

 

 

See accompanying notes to unaudited interim condensed financial statements.

2


 

Sutro Biopharma, Inc.

Condensed Statements of Comprehensive Loss

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

 

$

(12,912

)

 

$

(10,237

)

 

$

(40,955

)

 

$

(33,824

)

Other comprehensive income (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain/(loss) on available-for-sale securities

 

 

10

 

 

 

(27

)

 

 

270

 

 

 

(27

)

Comprehensive loss

 

$

(12,902

)

 

$

(10,264

)

 

$

(40,685

)

 

$

(33,851

)

 

See accompanying notes to unaudited interim condensed financial statements.

3


 

Sutro Biopharma, Inc.

Condensed Statements of Stockholders’ (Deficit) Equity

(Unaudited)

(In thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In-

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

(Deficit) Equity

 

Balances at December 31, 2018

 

 

22,848,184

 

 

$

23

 

 

$

281,891

 

 

$

(47

)

 

$

(150,328

)

 

$

131,539

 

Exercise of common stock options

 

 

8,347

 

 

 

 

 

 

42

 

 

 

 

 

 

 

 

 

42

 

Issuance of common stock under Employee Stock

   Purchase Plan

 

 

68,910

 

 

 

 

 

 

671

 

 

 

 

 

 

 

 

 

671

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,286

 

 

 

 

 

 

 

 

 

2,286

 

Net unrealized gain on available-for- sale securities

 

 

 

 

 

 

 

 

 

 

 

103

 

 

 

 

 

 

103

 

Adoption of new accounting standards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,327

 

 

 

10,327

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,250

)

 

 

(14,250

)

Balances at March 31, 2019

 

 

22,925,441

 

 

$

23

 

 

$

284,890

 

 

$

56

 

 

$

(154,251

)

 

$

130,718

 

Exercise of common stock options

 

 

1,762

 

 

 

 

 

 

10

 

 

 

 

 

 

 

 

 

10

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,463

 

 

 

 

 

 

 

 

 

2,463

 

Net unrealized gain on available-for- sale securities

 

 

 

 

 

 

 

 

 

 

 

157

 

 

 

 

 

 

157

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,793

)

 

 

(13,793

)

Balances at June 30, 2019

 

 

22,927,203

 

 

$

23

 

 

$

287,363

 

 

$

213

 

 

$

(168,044

)

 

$

119,555

 

Exercise of common stock options

 

 

16,128

 

 

 

 

 

 

81

 

 

 

 

 

 

 

 

 

81

 

Issuance of common stock under Employee Stock

   Purchase Plan

 

 

63,029

 

 

 

 

 

 

589

 

 

 

 

 

 

 

 

 

589

 

Vesting of restricted stock units

 

 

114,103

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock transaction associated with taxes withheld on

   restricted stock units

 

 

(30,461

)

 

 

 

 

 

(297

)

 

 

 

 

 

 

 

 

(297

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,880

 

 

 

 

 

 

 

 

 

2,880

 

Net unrealized gain on available-for- sale securities

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,912

)

 

 

(12,912

)

Balances at September 30, 2019

 

 

23,090,002

 

 

$

23

 

 

$

290,616

 

 

$

223

 

 

$

(180,956

)

 

$

109,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Redeemable Convertible

 

 

 

 

 

 

 

 

 

 

Receivable

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

from

 

 

Paid-In-

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Stockholder

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

(Deficit) Equity

 

Balances at December 31, 2017

 

 

173,750,421

 

 

$

102,505

 

 

 

465,330

 

 

$

 

 

$

(208

)

 

$

6,218

 

 

$

 

 

$

(115,011

)

 

$

(109,001

)

Exercise of common stock options

 

 

 

 

 

 

 

 

6,619

 

 

 

 

 

 

 

 

 

38

 

 

 

 

 

 

 

 

 

38

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

249

 

 

 

 

 

 

 

 

 

249

 

Vesting of early exercised shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

14

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,046

)

 

 

(12,046

)

Balances at March 31, 2018

 

 

173,750,421

 

 

$

102,505

 

 

 

471,949

 

 

$

 

 

$

(208

)

 

$

6,519

 

 

$

 

 

$

(127,057

)

 

$

(120,746

)

Issuance of Series E redeemable convertible

   preferred stock, net of issuance costs of $168

 

 

 

 

 

33,215

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of common stock options

 

 

 

 

 

 

 

 

7,428

 

 

 

 

 

 

 

 

 

36

 

 

 

 

 

 

 

 

 

36

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

232

 

 

 

 

 

 

 

 

 

232

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,541

)

 

 

(11,541

)

Balances at June 30, 2018

 

 

173,750,421

 

 

$

135,720

 

 

 

479,377

 

 

$

 

 

$

(208

)

 

$

6,787

 

 

$

 

 

$

(138,598

)

 

$

(132,019

)

Issuance of Series E redeemable convertible

   preferred stock, net of issuance costs of $476

 

 

319,865,282

 

 

 

51,526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of common stock options and warrants

 

 

 

 

 

 

 

 

5,720

 

 

 

 

 

 

 

 

 

322

 

 

 

 

 

 

 

 

 

322

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

321

 

 

 

 

 

 

 

 

 

321

 

Vesting of early exercised shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

(2

)

Payment of note receivable by stockholder

 

 

 

 

 

 

 

 

 

 

 

 

 

 

208

 

 

 

 

 

 

 

 

 

 

 

 

208

 

Net unrealized loss on available-for- sale

   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27

)

 

 

 

 

 

(27

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,237

)

 

 

(10,237

)

Balances at September 30, 2018

 

 

493,615,703

 

 

$

187,246

 

 

 

485,097

 

 

$

 

 

$

 

 

$

7,428

 

 

$

(27

)

 

$

(148,835

)

 

$

(141,434

)

 

 

See accompanying notes to unaudited interim condensed financial statements.

4


 

Sutro Biopharma, Inc.

Condensed Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2019

 

 

2018

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(40,955

)

 

$

(33,824

)

Adjustments to reconcile net loss to net cash (used in) provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,560

 

 

 

3,404

 

Accretion of discount on marketable securities

 

 

(1,328

)

 

 

(166

)

Stock-based compensation

 

 

7,629

 

 

 

802

 

Change in estimated fair value of the liability attributable to a research,

   development and commercialization agreement

 

 

(119

)

 

 

 

Revaluation of redeemable convertible preferred stock warrant liability

 

 

 

 

 

(839

)

Loss on disposal of property and equipment

 

 

295

 

 

 

35

 

Other

 

 

82

 

 

 

307

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(5,042

)

 

 

(819

)

Prepaid expenses and other assets

 

 

92

 

 

 

(901

)

Accounts payable

 

 

1,477

 

 

 

(135

)

Accrued compensation

 

 

(1,589

)

 

 

446

 

Other liabilities

 

 

(180

)

 

 

1,097

 

Deferred rent

 

 

(42

)

 

 

45

 

Deferred revenue

 

 

(15,747

)

 

 

49,166

 

Net cash (used in) provided by operating activities

 

 

(51,867

)

 

 

18,618

 

Investing activities

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

(191,717

)

 

 

(81,456

)

Maturities of marketable securities

 

 

114,076

 

 

 

 

Sales of marketable securities

 

 

20,000

 

 

 

 

Purchases of property and equipment

 

 

(1,432

)

 

 

(759

)

Net cash used in investing activities

 

 

(59,073

)

 

 

(82,215

)

Financing activities

 

 

 

 

 

 

 

 

Payment of deferred offering costs

 

 

 

 

 

(2,413

)

Payments of debt

 

 

(3,500

)

 

 

 

Proceeds from payment of note receivable by stockholder

 

 

 

 

 

208

 

Proceeds from exercise of common stock options and warrants

 

 

133

 

 

 

396

 

Taxes paid related to net share settlement of restricted stock units

 

 

(297

)

 

 

 

Proceeds from employee stock purchase plan

 

 

1,260

 

 

 

 

 

Proceeds from issuance of redeemable convertible preferred stock,

   net of issuance costs

 

 

 

 

 

84,739

 

Net cash (used in) provided by financing activities

 

 

(2,404

)

 

 

82,930

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(113,344

)

 

 

19,333

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

125,313

 

 

 

22,035

 

Cash, cash equivalents and restricted cash at end of period

 

$

11,969

 

 

$

41,368

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

898

 

 

$

942

 

Supplemental disclosure of non-cash investing and financing information:

 

 

 

 

 

 

 

 

Purchase of property and equipment included in accounts payable

 

$

11

 

 

$

610

 

Deferred initial public offering costs included in accounts payable

 

$

 

 

$

1,659

 

Embedded interest associated with program fees

 

$

2,477

 

 

$

 

 

See accompanying notes to unaudited interim condensed financial statements.

5


 

Sutro Biopharma, Inc.

Notes to Unaudited Interim Condensed Financial Statements

1. Organization and Principal Activities

Description of Business

Sutro Biopharma, Inc. (the “Company”) is a clinical stage drug discovery, development and manufacturing company focused on leveraging its integrated cell-free protein synthesis and site-specific conjugation platform, XpressCF+™, to create a broad variety of optimally designed, next-generation protein therapeutics for cancer and autoimmune disorders. The Company was incorporated on April 21, 2003 and is headquartered in South San Francisco, California.

The Company operates in one business segment, the development of biopharmaceutical products.

 

Liquidity

The Company has incurred significant losses and has negative cash flows from operations. As of September 30, 2019, there was an accumulated deficit of $181.0 million. Management expects to continue to incur additional substantial losses in the foreseeable future as a result of the Company’s research and development activities and costs to operate as a public company.

As of September 30, 2019, the Company had unrestricted cash, cash equivalents and marketable securities of $150.4 million, which are available to fund future operations. The Company will need to raise additional capital to support the completion of its research and development activities and its operations.

The Company believes that its unrestricted cash, cash equivalents and marketable securities as of September 30, 2019 will be sufficient for the Company to continue as a going concern for at least one year from the issuance date of its unaudited interim condensed financial statements.

 

2. Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying interim condensed financial statements of the Company are unaudited. These interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The December 31, 2018 condensed balance sheet was derived from the audited financial statements as of that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates on historical experience and market-specific or other relevant assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities reported in the Company’s balance sheets and the amount of expenses and income reported for each of the periods presented are affected by estimates and assumptions, which are used for, but are not limited to, determining research and development periods under multiple element arrangements, stock-based compensation expense, fair value of redeemable convertible preferred stock warrant liabilities (prior to closing of the Company’s IPO), income taxes and certain accrued liabilities. Actual results could differ from such estimates or assumptions.

The accompanying unaudited interim condensed financial statements have been prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly the Company's financial position, results of operations, comprehensive income (loss), and cash flows for the interim periods. The interim results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019, or for any other future annual or interim period.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's audited financial statements included in the Annual Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, for the year ended December 31, 2018.

6


 

Adoption of New Accounting Principles

Revenue Recognition

On January 1, 2019, the Company adopted Accounting Standards Update (ASU) No. 2014-09 (Topic 606), Revenue from Contracts with Customers (“ASC 606”). ASC 606 supersedes the guidance in ASC 605, Revenue Recognition. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

Upon adoption of ASC 606, the Company used the practical expedients to analyze only those contracts that were still active contracts as of January 1, 2019 and evaluated those contracts based on the cumulative contract modifications through that date. The Company does not believe that the use of the practical expedients has or will have a material impact on its transition adjustment or its prospective accounting. The Company adopted ASC 606 on a modified retrospective basis under which it recognized the cumulative effect of adoption of $10.3 million as a transition adjustment to reduce opening accumulated deficit; therefore, the periods prior to the adoption date of ASC 606 have not been restated. If the Company had continued to use ASC 605 during 2019, revenue would have been $12.7 million and $31.8 million in the three and nine months ended September 30, 2019, respectively, as compared to the $12.3 million and $31.4 million reported in the three and nine months ended September 30, 2019, respectively.

The impact of the adoption of Topic 606 on select unaudited condensed balance sheet as of January 1, 2019 was as follows (in thousands):

 

 

 

December 31, 2018

 

 

Adjustments Due to

the Adoption of

Topic 606

Increase/(Decrease)

 

 

January 1, 2019

 

 

 

(in thousands)

 

Condensed Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

$

2,489

 

 

$

 

 

$

2,489

 

Total current assets

 

 

209,946

 

 

 

 

 

 

209,946

 

Deferred revenue, current

 

 

21,574

 

 

 

(2,124

)

 

 

19,450

 

Deferred revenue, non-current

 

 

44,599