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Oxford Immunotec Global PLC - FORM 10-Q - May 2, 2017
EX-32 - EXHIBIT 32 - Oxford Immunotec Global PLC ex32.htm
EX-31.2 - EXHIBIT 31.2 - Oxford Immunotec Global PLC ex31-2.htm
For the transition period from ____ to ____
Commission File Number 001-36200
OXFORD IMMUNOTEC GLOBAL PLC
94C Innovation Drive, Milton Park, Abingdon
OX14 4RZ, United Kingdom
(Registrant's Telephone Number, Including Area Code)
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
(Do not check if a smaller reporting company)
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 April 25, 2017, there were 22,926,903 Ordinary Shares, nominal value £0.006705, of Oxford Immunotec Global PLC outstanding.
Quarterly Period Ended March 31, 2017
PART I – FINANCIAL INFORMATION
Condensed consolidated balance sheets as of March 31, 2017 (unaudited) and December 31, 2016
Condensed consolidated statements of operations (unaudited) for the three months ended March 31, 2017 and 2016
Condensed consolidated statements of other comprehensive loss (unaudited) for the three months ended March 31, 2017 and 2016
Condensed consolidated statements of cash flows (unaudited) for the three months ended March 31, 2017 and 2016
Notes to the unaudited condensed consolidated financial statements
Quantitative and Qualitative Disclosures About Market Risk
PART II – OTHER INFORMATION
Defaults Upon Senior Securities
Mine Safety Disclosures
This Quarterly Report on Form 10-Q, and exhibits hereto, contains or incorporates by reference estimates, predictions, opinions, projections and other statements that may be interpreted as "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The forward-looking statements are contained principally in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Part II, Item 1A, "Risk Factors," but are also contained elsewhere in this Quarterly Report. In some cases, you can identify forward-looking statements by the words "may," "might," "will," "would," "could," "should," "intend," "plan," "contemplate," "expect," "anticipate," "believe," "estimate," "predict," "project," "target," "potential," "continue," and "ongoing" and other comparable expressions intended to identify statements about the future, although not all forward-looking statements contain these identifying words. These statements involve substantial known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievements to differ materially from those currently anticipated. Forward-looking statements are neither historical facts nor assurances of future performance. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain and that involve substantial risks and uncertainties. Such risks and uncertainties include, but are not limited to:
our history of losses, our ability to achieve or sustain profitability and our ability to manage our growth;
our ability to effectively use our current financial resources and our ability to obtain additional capital resources;
our ability to service our debt and meet the obligations thereunder;
our ability to further develop, commercialize and achieve market acceptance of our current and future products;
our ability to obtain regulatory body clearance to market any of our products;
our ability to successfully develop and complete the acquired in process research and development, or IPR&D, program and profitably commercialize the underlying product candidates before our competitors develop and commercialize similar products, or at all;
continued demand for diagnostic products for tuberculosis and the development of new market opportunities;
our ability to compete successfully and to maintain and expand our sales network;
decisions by insurers and other third party payors with respect to coverage and reimbursement;
our dependence on certain of our customers, suppliers and service providers;
disruptions to our business, including disruptions at our laboratories and manufacturing facilities;
the integrity and uninterrupted operation of our information technology and storage systems;
the impact of currency fluctuations on our business;
the impact of global economic and political developments, including the referendum to leave the European Union, passed by the United Kingdom, or U.K., on June 23, 2016, on our business;
potential changes in the United States, or U.S., social, political, regulatory and economic conditions or laws and policies governing the health care system, U.S. tax laws, foreign trade, immigration, manufacturing, and development and investment in the territories and countries where we or our customers and suppliers operate;
our ability to make successful acquisitions or investments and to manage the integration of such acquisitions or investments;
our ability to retain key members of our management;
the impact of taxes on our business, including our ability to use net operating losses;
the impact of legislative and regulatory developments, including healthcare reform, on our business;
potential changes to the Patient Protection and Affordable Care Act of 2010, or PPACA;
the impact of product liability, intellectual property and commercial litigation on our business;
our ability to comply with Securities and Exchange Commission, or SEC, reporting, antifraud, anti-corruption, environmental, health and safety laws and regulations;
our ability to maintain our licenses to sell our products around the world, including in countries such as China and the U.S. and in the several U.S. states requiring licensure;
our ability to protect and enforce our intellectual property rights;
our status as an emerging growth company and as an English company listing ordinary shares in the U.S.;
the volatility of the price of our shares, substantial future sales of our shares and the fact that we do not pay dividends; and
the impact of anti-takeover provisions under U.K. law and our articles of association.
You should refer to Part I, Item 1A, "Risk Factors" in our 2016 Annual Report on Form 10-K for a discussion of other important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Further, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us that we will achieve our objectives and plans in any specified time frame, or at all. The forward-looking statements in this Quarterly Report represent our views only as of the date of this Quarterly Report. Subsequent events and developments may cause our views to change. While we may elect to update these forward-looking statements at some point in the future, we undertake no obligation to publicly update any forward-looking statements, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report.
Where you can find more information
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You can inspect, read and copy these reports, proxy statements and other information at the SEC's Public Reference Room, which is located at 100 F Street, N.E., Washington, D.C. 20549. You can obtain information regarding the operation of the SEC's Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that makes available reports, proxy statements and other information regarding issuers that file electronically.
We make available free of charge on our corporate website at www.oxfordimmunotec.com (in the "Investors" section) copies of materials we file with, or furnish to, the SEC. By referring to our corporate website, www.oxfordimmunotec.com, we do not incorporate such website or its contents into this Quarterly Report.
Inventory, net
Restricted cash, non-current
In-process research and development
$ 114,266 $ 124,012
Liabilities and shareholders' equity
$ 3,668 $ 3,201
Accrued liabilities
Contingent purchase price consideration
Deferred income
Current portion of loans payable
Long-term portion of loans payable
— 2,593
Commitments and contingencies (Note 2)
Shareholders' equity:
Ordinary shares, £0.006705 nominal value; 36,183,293 shares authorized at March 31, 2017 and December 31, 2016, and 22,735,980 and 22,635,431 shares issued and outstanding at March 31, 2017 and December 31, 2016, respectively
(176,728 ) (168,656 )
(7,532 ) (7,751 )
Total liabilities and shareholders' equity
See accompanying notes to these unaudited condensed consolidated financial statements.
Cost of revenue:
Total cost of revenue
Change in fair value of contingent purchase price consideration
(2,357 ) 55
Other expense:
Interest expense, net
(823 ) (17 )
Foreign exchange (losses) gains
(106 ) 363
(140 ) (166 )
(47 ) (35 )
$ (8,072 ) $ (7,049 )
Net loss per share attributable to ordinary shareholders—basic and diluted
$ (0.36 ) $ (0.32 )
Weighted-average shares used to compute net loss attributable to ordinary shareholders—basic and diluted
22,533,531 22,284,392
Condensed consolidated statements of other comprehensive loss
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustment, net of taxes
219 (326 )
Other comprehensive income (loss), net of taxes
Total comprehensive loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of intangible assets
Accretion and amortization of loan fees
Share-based compensation expense
(806 ) (1,490 )
(1,406 ) 128
522 (1,308 )
6 (1,496 )
Net cash used in operating activities
(14,638 ) (13,982 )
Cash flows from investing activities
Purchases of property and equipment
(1,301 ) (731 )
Cash flows from financing activities
Proceeds from exercise of share options
Payments of tax withheld on vesting of restricted share units
(186 ) —
Payments on loan
Net cash used in financing activities
(148 ) (8 )
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents, excluding restricted cash
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Notes to Unaudited Condensed Consolidated Financial Statements
1. Business and basis of presentation
Oxford Immunotec Global PLC, or the Company, is a global, high-growth diagnostics company focused on developing and commercializing proprietary tests for under-served immune-regulated conditions. The Company's current product lines and development activities principally focus on four areas: infectious diseases, transplantation, autoimmune and inflammatory disease and immune-oncology. The Company believes these areas are particularly attractive because they involve large patient populations and chronic conditions that present the opportunity for both initial diagnosis and additional testing to monitor the conditions. These immune-regulated conditions also tend to be characterized by wide variation in presentation and progression and often require expensive therapies, making diagnostic tests that can better categorize patients and inform treatment pathways particularly useful. Lastly, the Company believes these conditions to be under-served as the industry lacks the appropriate techniques to prosecute the immune responses which are driving these conditions.
On July 1, 2016, we acquired substantially all of the assets of Imugen, Inc., or Imugen, a privately owned Massachusetts corporation specializing in developing and commercializing proprietary tests for tick-borne diseases, including Lyme disease.
On October 12, 2016, we acquired Immunetics, Inc., or Immunetics, a privately owned Massachusetts corporation focused on developing specialized tests for infectious diseases, including tick-borne diseases, such as Lyme disease.
Unaudited interim financial statements
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the interim condensed consolidated financial statements reflect all adjustments, of a normal recurring nature, necessary for a fair statement of the financial position at March 31, 2017, the results of operations for the three-month periods ended March 31, 2017 and 2016, and the cash flows for the three-month periods ended March 31, 2017 and 2016. Interim results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 2016, has been derived from the audited consolidated financial statements as of that date. The consolidated financial statements and notes included in this report should be read in conjunction with the 2016 consolidated financial statements and notes included in the Company's Annual Report on Form 10-K, as filed with the Securities and Exchange Commission on February 28, 2017, or the Company's 2016 Form 10-K.
Note 1 to the consolidated financial statements included in the Company's 2016 Form 10-K describes the significant accounting estimates and policies used in preparation of the consolidated financial statements. There have been no material changes in the Company's significant accounting policies during the three-month period ended March 31, 2017.
In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2014-09, Revenue from Contracts with Customers, or ASU 2014-09, which converges the FASB and the International Accounting Standards Board standards on revenue recognition. Under ASU 2014-09, a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In addition, ASU 2014-09 requires certain additional disclosures around the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This guidance will be effective for the Company for annual and interim periods beginning after December 15, 2017. Early adoption is permitted for annual and interim periods beginning after December 15, 2016. The guidance allows for either "full retrospective" adoption, meaning the standard is applied to all of the periods presented, or "modified retrospective" adoption, meaning the standard is applied only to the most current period presented in the financial statements. The FASB has recently issued several amendments to the standard, including clarification on accounting for licenses of intellectual property, identifying performance obligations and other technical corrections. The Company currently anticipates adopting ASU 2014-09 in the first quarter of 2018 and currently intends to apply the "modified retrospective" approach. The Company is still evaluating certain aspects of ASU 2014-09 and has not yet determined how it may impact its financial position, results of operations or related disclosures.
In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, or ASU 2015-11. ASU 2015-11 requires that an entity should measure inventory within the scope of ASU 2015-11 at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted ASU 2015-11 prospectively as of January 1, 2017. The adoption of ASU 2015-11 did not have a material impact on the Company's financial position, results of operations or related disclosures. The Company updated its accounting policies to state that "inventory is stated at the lower of cost and net realizable value."
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, or ASU 2015-17. ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The Company adopted ASU 2015-17 prospectively as of January 1, 2017. The adoption of ASU 2015-17 did not have a material impact on the Company's financial position, results of operations or related disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases, or ASU 2016-02. ASU 2016-02 requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current accounting. The guidance also eliminates real estate-specific provisions for all entities. The new guidance will be effective for the Company for annual and interim periods beginning after December 15, 2018. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Early adoption is permitted. The Company is currently evaluating ASU 2016-02 and has not yet determined how it may impact its financial position, results of operations or related disclosures.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, or ASU 2016-09. ASU 2016-09 is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. The Company adopted ASU 2016-09 as of January 1, 2017 using a modified retrospective, retrospective, or prospective transition method, depending on a specific amendment. The adoption of ASU 2016-09 did not have a material impact on the Company's financial position, results of operations or related disclosures. The Company made the accounting policy election to continue to estimate the number of awards that are expected to vest, as opposed to accounting for forfeitures when they occur. The Company updated its accounting policies to classify cash paid when withholding shares for tax-withholding purposes as a financing activity in its consolidated statements of cash flows.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses, or ASU 2016-13. ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. Under current U.S. GAAP, a company only considered past events and current conditions in measuring an incurred loss. Under ASU 2016-13, the information that a company must consider is broadened in developing an expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss. The new guidance will be effective for the Company for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for annual and interim periods beginning after December 15, 2018. The guidance is applied using a modified retrospective, or prospective approach, depending on a specific amendment. The Company is currently evaluating ASU 2016-13 and has not yet determined how it may impact its financial position, results of operations or related disclosures.
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, or ASU 2016-15. ASU 2016-15 is intended to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new guidance will be effective for the Company for annual and interim periods beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The guidance should be applied retrospectively. The Company is currently evaluating ASU 2016-15 and has not yet determined how it may impact its statement of cash flows.
In October 2016, the FASB issued ASU 2016-16, Income Taxes, or ASU 2016-16. The guidance requires companies to recognize the income tax effects of intercompany sales and transfers of assets, other than inventory, in the income statement as income tax expense (or benefit) in the period in which the transfer occurs. The guidance is effective for annual periods beginning after December 15, 2017, and early adoption is permitted as of the beginning of an annual reporting period. ASU 2016-16 amendments should be applied on a modified retrospective basis. The Company is currently evaluating ASU 2016-16 and has not yet determined how it may impact its financial position, results of operations or related disclosures.
In November 2016, the FASB issued ASU 2016-18, Restricted Cash, or ASU 2016-18. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The guidance should be applied retrospectively and is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of ASU 2016-18 to have a material effect on its statement of cash flows.
In January 2017, the FASB issued ASU 2017-01, Business Combinations, or ASU 2017-01. ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new guidance will be effective for the Company for annual periods beginning after December 15, 2017, including interim periods within those periods. The guidance should be applied on a prospective basis and early adoption is not permitted. The Company is currently evaluating ASU 2017-01 and has not yet determined how it may impact its financial position, results of operations or related disclosures.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other, or ASU 2017-04. ASU 2017-04 simplifies subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The new guidance will be applied on a prospective basis. ASU 2017-04 will be effective for the Company for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is currently evaluating ASU 2017-04, but does not expect its adoption to have a material impact on the Company's financial position, results of operations, or related disclosures.
Under the U.S. Jumpstart our Business Startups Act, or the JOBS Act, emerging growth companies that become public can delay adopting new or revised accounting standards until such time as those standards apply to private companies. The Company irrevocably elected not to avail itself of this exemption from new or revised accounting standards and, therefore, it is subject to the same new or revised accounting standards as public companies that are not emerging growth companies.
2. Fair value measurement
As a basis for determining the fair value of certain of the Company's financial instruments, the Company utilizes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The carrying amount of certain of the Company's financial instruments, including cash, accounts receivable, prepaid expenses and other assets, accounts payable, and accrued liabilities approximate fair value due to their short maturities.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the entire fair value measurement requires management to make judgments and consider factors specific to the asset or liability.
The following tables present information about the balances of liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates, and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The Company did not have any financial assets measured at fair value on a recurring basis.
Fair value measurements at March 31, 2017 using
Quoted prices in active markets for identical assets
(Level 1)
unobservable
Liabilities:
$ 1,118 $ — $ — $ 1,118
Fair value measurements at December 31, 2016 using
The following table provides a summary of changes in the fair value of the Company's Level 3 financial liabilities for the three-month period ended March 31, 2017:
Balance – beginning
(2,357 )
Balance – ending
On October 12, 2016, the Company acquired Immunetics, a Massachusetts based diagnostics company focused on developing specialized tests for infectious diseases, including tick-borne diseases, such as Lyme disease. The terms of the purchase agreement included contingent purchase price consideration consisting of up to an additional $6.0 million in cash payable on the achievement of certain revenue thresholds and pipeline related milestones over the following three years. The fair value of these milestone payments was estimated to be $3.4 million on the date of acquisition based on significant assumptions, including the probabilities of milestone occurrence, the expected timing of milestone payments, and a discount rate of 4.4%, which are considered as Level 3 inputs. During March 2017, as a result of events subsequent to the acquisition, the Company determined that the timing for Food and Drug Administration approval of the Babesia product acquired from Immunetics would be more likely to occur after the milestone due date. As a result, the Company reduced the related contingent purchase price consideration liability by $2.4 million.
The Company has a term loan outstanding under the MidCap agreement. The amount outstanding on its 2016 term loan is reported at its carrying value in the accompanying balance sheet. The estimated fair value of the term loan as of March 31, 2017, based upon current market rates for similar borrowings, as measured using Level 2 inputs, approximates the carrying amount as presented on the condensed consolidated balance sheet.
3. Accounts receivable, net
Accounts receivable, net, consisted of the following as of:
Less allowance for uncollectible accounts receivable
4. Inventory, net
Inventory, net consisted of the following as of:
5. Goodwill and acquired intangible assets
The carrying amount of goodwill reflected in the Company's condensed consolidated balance sheets was $3.8 million at each of March 31, 2017 and December 31, 2016.
Acquired intangible assets consisted of the following as of March 31, 2017 and December 31, 2016:
As of March 31, 2017
Net carrying
Imugen in-process research and development
$ 9,200 $ — $ 9,200
Imugen technology - clinical
15 5,100 255 4,845
Imugen customer relationships
Imugen trademarks / trade names
16 1,900 89 1,811
Immunetics in-process research and development
6,970 — 6,970
Immunetics technology - clinical
Immunetics customer relationships
5 - 11 400 31 369
Immunetics trade name
Immunetics grants
5 - 10 640 532 108
$ 28,110 $ 1,176 $ 26,934
As of December 31, 2016
Accumulated Amortization
$ 28,102 $ 915 $ 27,187
The weighted average amortization period of our finite-lived intangible assets is 13 years. Amortization expense related to acquired intangible assets is estimated at $1.0 million per year for the years ending 2017 and 2018 and $0.9 million per year for each of the years ending 2019 through 2021.
The acquired IPR&D assets include $9.2 million for IPR&D acquired in conjunction with the Imugen acquisition and $7.0 million for IPR&D acquired in conjunction with the Immunetics acquisition.
IPR&D acquired in a business combination is capitalized at fair value and is subject to impairment testing at least annually until the underlying project is completed. Once the project is completed, the carrying value of IPR&D is amortized over the estimated useful life of the asset. Post-acquisition research and development expenses related to the acquired IPR&D are expensed as incurred.
The acquisition of Immunetics was accounted for under the acquisition method of accounting and the purchase price allocation was provisionally prepared during the fourth quarter of 2016. The Company has recorded provisional amounts for the assets acquired and liabilities assumed, based upon their estimated fair values at the date of the business acquisition. These provisional amounts may be adjusted as necessary during the measurement period (up to one year from the acquisition date) while the accounting is finalized.
6. Accrued liabilities
Accrued liabilities consisted of the following as of:
Employee related expenses
Other accrued liabilities
Total accrued liabilities
7. Share option and equity incentive plan
The impact on the Company's results of operations from share-based compensation was as follows:
Cost (benefit) of revenue
$ 43 $ (52 )
Total share-based compensation
In November 2013, in connection with the Company's initial public offering, the Company adopted the 2013 Share Incentive Plan, or the 2013 Plan, which provides for the grant of share options, restricted shares, restricted share units, or RSUs, and other share-based awards to employees, officers, directors and consultants of the Company.
During the three month-period ended March 31, 2017, the Company granted to certain employees 535,098 share options with exercise prices ranging from $13.50 to $14.77 per share under the 2013 Plan. The weighted-average grant date fair value related to share options granted under the 2013 Plan during the three month-period ended March 31, 2017 was $6.11 per share. Share options generally vest based on the grantee's continued service with the Company during a specified period following the vesting start date and expire after ten years.
During the three-month period ended March 31, 2017, the Company awarded to certain employees 94,991 RSUs with a weighted average grant date fair value of $13.50 per share under the 2013 Plan. The RSUs vest based on the grantee's continued service with the Company during a specified period following grant as follows: 40% on the second anniversary of the grant date; 30% on the third anniversary of the grant date; and 30% on the fourth anniversary of the grant date. Share-based compensation expense for these restricted shares is calculated based on the grant date market price of the shares and is being recognized over the vesting period.
For the three month-period ended March 31, 2017, the Company incurred shared-based compensation expense related to share options and restricted shares/RSUs of $784,000 and $542,000, respectively. For the three-month period ended March 31, 2016, the Company incurred shared-based compensation expense related to share options and restricted shares/RSUs of $765,000 and $339,000, respectively.
As of March 31, 2017, there was $7.6 million and $4.3 million of total unrecognized compensation cost related to unvested share options and restricted shares/RSUs, respectively. These costs are expected to be recognized over weighted-average periods of 2.7 years for share options and 2.5 years for restricted shares/RSUs.
8. Share capital
During the first three months of 2017, 78,190 ordinary shares were issued upon the exercise of options and 22,359 shares were issued upon the vesting of RSUs. As of March 31, 2017, there were 36,183,293 ordinary shares authorized and 22,735,980 ordinary shares issued and outstanding.
9. Net loss per share
The following numbers of outstanding ordinary share options and unvested restricted shares and unvested RSUs were excluded from the computation of diluted net loss per share for the periods presented because their effect would have been anti-dilutive:
Options to purchase ordinary shares
Unvested restricted shares
Unvested RSUs
10. Subsequent events
In May 2017, the Company entered into a lease amendment for the Company's location in Norwood, Massachusetts to extend the term of the lease through March 31, 2023. In accordance with the lease amendment, the Company will move to a larger space in an adjacent building in Norwood containing about 39,000 square feet of rentable space. The base rent for the new space over the lease term will range from an initial low of $73,000 per month to a high of $83,000 per month. The Company will have two options to extend the lease term, each for a five-year period. During the transition, the Company will also be responsible for the lease payments on the existing space.
This management's discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. Please see "Special note regarding forward-looking statements" in this Quarterly Report on Form 10-Q for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report. In addition to our historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and in the Company's 2016 Form 10-K, particularly in Part I, Item 1A, "Risk Factors."
Oxford Immunotec Global PLC is a global, high-growth diagnostics company focused on developing and commercializing proprietary tests for under-served immune-regulated conditions. Our current product lines and development activities principally focus on four areas: infectious diseases, transplantation, autoimmune and inflammatory disease and immune-oncology. We believe these areas are particularly attractive because they involve large patient populations and chronic conditions that present the opportunity for both initial diagnosis and additional testing to monitor the conditions. These immune-regulated conditions also tend to be characterized by wide variation in presentation and progression and often require expensive therapies, making diagnostic tests that can better categorize patients and inform treatment pathways particularly useful and cost-effective. Lastly, we believe these conditions to be under-served as the industry lacks the appropriate techniques to prosecute the immune responses which are driving these conditions.
Our first product, the T-SPOT®.TB test, is used to test for tuberculosis, or TB, infection and leverages our proprietary T-SPOT technology platform, which allows us to measure the response of specific immune cells to inform the diagnosis, prognosis and monitoring of patients with immune-regulated conditions. Our T-SPOT.TB test has been approved for sale in over 50 countries, including the U.S., where we have received premarket approval, or PMA, from the Food and Drug Administration, or FDA, in Europe, where we have obtained a CE mark, as well as in Japan and China. Interferon-gamma release assays, or IGRAs, such as our T-SPOT.TB test have been included in clinical guidelines for TB testing in at least 34 countries, including the U.S., several European countries and Japan. In addition, we have established reimbursement for our test in the U.S., as well as a Current Procedural Terminology, or CPT, code that is unique to our test. Outside the U.S., we have established reimbursement in several countries where reimbursement applies, including Japan, Switzerland, Germany, and South Korea. We have also established the cost-effectiveness of our test in several published studies.
Our second product line is a range of assays for tick-borne diseases, such as Lyme disease, obtained through the acquisitions of Imugen, Inc., or Imugen, and Immunetics, Inc., or Immunetics, in 2016. Tick-borne disease is the collective name for diseases passed to humans through the bite of an infected tick. The most prevalent and well known tick-borne disease is Lyme disease, but there are others such as anaplasmosis, ehrlichiosis, and babesiosis. If left unrecognised, and therefore untreated, they may go on to cause significant downstream morbidity, including in rare cases death. Our diagnostic tests for tick-borne infections include multiple proprietary laboratory developed tests, or LDTs, offered from our Clinical and Laboratory Improvement Amendments, or CLIA, certified and College of American Pathologists, or CAP, accredited laboratory in Massachusetts and an FDA cleared test kit utilizing the C6 peptide, which is a marker specific to Lyme disease. Our C6 Lyme ELISATM kit is also CE marked in the European Union. Our tick-borne disease tests utilize molecular methods (such as polymerase chain reaction) and techniques to prosecute the immune system, and offer advantages over current tests and are widely reimbursed in the U.S. using existing codes on fee schedules.
Our third product line is a series of assays for use in blood screening, building upon our expertise in tick-borne disease. The parasite Babesia microti which causes babesiosis can be transmitted through the transfusion of infected blood, as well as by the bite of an infected tick. We are developing three assays for use in screening the U.S. blood supply for Babesia microti. We have submitted biological license applications for these three assays and they are currently under review by the FDA.
Babesiosis is a tick-borne disease characterized by a wide spectrum of clinical manifestations that range from asymptomatic to severe acute or even fatal illness. While the disease is generally mild to moderate in children and young healthy adults, it is more severe in neonates, the elderly and immunocompromised individuals such as those undergoing treatment for cancer. Babesiosis is predominately caused by a parasite called Babesia microti. While it is primarily transmitted through a tick bite, babesiosis can also be transmitted by blood transfusion. In fact, transfusion-transmitted babesiosis is responsible for the highest percentage (38%) of transfusion-related infectious fatalities reported to the FDA in transfusion recipients and Babesia microti is the highest ranking pathogen in the U.S. transmitted by blood transfusion for which no donor screening is available. The transmission risk of Babesia microti is comparable to the transmission risk of HIV, HBV, and HCV prior to the implementation of routine blood screening programs for these pathogens. Screening for Babesia microti, therefore, has become a priority for the FDA.
Our T-SPOT. CMV and T-SPOT. PRT tests are part of our fourth product line focused on the transplantation market. Both tests utilize our T-SPOT technology platform and are laboratory developed tests, or LDTs, performed in our CLIA certified, CAP accredited laboratory in Tennessee. Both the T-SPOT.CMV and T-SPOT.PRT tests are CE marked in the European Union. The T-SPOT.CMV test measures the strength of a patient's cellular immune response to CMV specific antigens and provides information that may be useful in informing management strategies of patients at risk of CMV infection and disease, such as transplant patients. The T-SPOT.PRT test assesses a solid organ transplant candidate's T cell response to foreign tissue, or alloreactivity, and may help clinicians identify patients at increased risk of T cell mediated rejection post-transplant. We continue to take a measured approach to market introduction of these tests as we await final results of our two pivotal clinical studies involving these tests.
In addition to our existing product lines, we continue to pursue development programs targeting other immune-regulated conditions, as well as applications of our T-SPOT technology platform in immune-oncology. Product development activities are inherently uncertain, and there can be no assurance that we will be able to obtain regulatory body clearance to market any of our products, or if we obtain clearances that we will successfully commercialize any of our products. In addition, we may terminate our development efforts with respect to one or more of our products under development at any time, including before or during clinical trials.
We have incurred significant losses from inception and as of March 31, 2017 had an accumulated deficit of $176.7 million. We anticipate that our operating losses will continue for the next few years as we continue to invest to grow our customer base and invest in research and development to expand our product portfolio. Our revenue for the three months ended March 31, 2017 was $21.5 million and for the three months ended March 31, 2016 was $17.1 million. Our net loss for the three months ended March 31, 2017 was $8.1 million and for the three months ended March 31, 2016 was $7.0 million.
We generate revenue from sales associated with our T-SPOT technology platform via our direct sales force and also through distributors. Our T-SPOT.TB test is our first commercialized product based on this technology and accounted for $18.5 million of our revenue in the first quarter of 2017. In addition, U.S. results for the first quarter of 2017 include revenue of $3.0 million from assays for tick-borne diseases, such as Lyme disease, obtained through our acquisitions of Imugen on July 1, 2016 and Immunetics on October 12, 2016.
Revenue mix
We currently offer our T-SPOT.TB test as both an in vitro diagnostic kit and a service. In the former, we sell test kits and associated accessories to distributors for resale and directly to institutions and laboratories that perform TB testing. In the latter, we have established clinical testing laboratories in the U.S. and the U.K., where we perform our T-SPOT.TB test on samples sent to us by customers. In these markets, we have found that many of our customers prefer to send samples to us rather than perform their own analysis on-site.
Our U.S. business derived 92% and 96% of its revenue from our service offering, as opposed to kit sales, for the three months ended March 31, 2017 and 2016, respectively. These results reflect our experience that our U.S. customers prefer to send IGRA tests out for processing and analysis rather than run them in-house. For the majority of our U.S. customers in the hospital and public health segments, TB testing programs are funded primarily from institutional budgets. We receive payment from these customers according to our pre-negotiated prices. For other segments of the U.S. market (notably, for example, the physicians' office segment) third-party reimbursement is often available to cover the cost of our T-SPOT.TB test. In addition, U.S. results for 2017 include revenue from operations acquired from Imugen, which is included in U.S. service revenue. For a portion of these tests, we receive payment from customers according to pre-negotiated rates. For other customers we seek third party reimbursement. U.S. results for 2017 also include revenue from Immunetics, which is included in product revenue. Immunetics kits are sold to customers at pre-negotiated rates.
Outside the U.S., we derived 91% and 93% of our revenue from the sale of our in vitro diagnostic kits and associated accessories for the three months ended March 31, 2017 and 2016, respectively. For the majority of our customers outside the U.S., we primarily negotiate pricing directly with our customers; our prices are influenced to some degree by the mechanism and level of funding our customers receive for performing tests for TB infection.
Revenue by indication
With the acquisitions of Imugen and Immunetics in the second half of 2016, we evolved from a single-product company to a multi-product company. By indication, total revenues were as summarized in the table below.
Tick-borne disease and other
Revenue by geography
We have a direct sales force in the U.S., certain European countries and Japan and market development personnel in China and South Korea. In parts of the world where we do not maintain a direct sales force, we market and sell our products through distributors. As a result, our revenue is denominated in multiple currencies.
The following table reflects total revenue by geography (United States, Europe and rest of world, or Europe and ROW, and Asia) and as a percentage of total product revenue, based on the billing address of our customers. Revenue from operations acquired from Imugen is included in United States revenue for the first quarter of 2017. Revenue from operations acquired from Immunetics is included in both United States and Europe and ROW revenue for the first quarter of 2017.
(in thousands, except percentages)
$ 13,536 63 % $ 8,747 51 %
Europe and ROW
1,806 8 % 1,606 9 %
6,163 29 % 6,757 40 %
$ 21,505 100 % $ 17,110 100 %
Cost of revenue and operating expenses
Cost of revenue and gross margin
Cost of revenue consists of direct labor expenses, including employee benefits and share-based compensation expenses, overhead expenses, material costs, cost of laboratory supplies, freight costs, royalties paid under license agreements, depreciation of laboratory equipment and leasehold improvements.
We expect our overall cost of revenue to increase as we continue to increase our volume of kits manufactured and tests performed. However, we also believe that through these increased volumes, we can achieve certain efficiencies in our manufacturing and laboratory operations that could help maintain or improve our overall margins.
During the three months ended March 31, 2017 and 2016, our cost of revenue represented 49% and 48%, respectively, of our total revenue.
$ 10,497 $ 8,165
Our gross profit represents total revenue less total cost of revenue, and gross margin is gross profit expressed as a percentage of total revenue. Our gross margins were approximately 51% and 52% for the three month periods ended March 31, 2017 and 2016, respectively. The lower gross margin in 2017 reflects the lower gross margins from our operations acquired from Imugen and Immunetics. All cost of revenue from operations acquired from Imugen and Immunetics are reflected in service cost of revenue and product cost of revenue, respectively.
Research and development expenses
Our research and development efforts have historically focused on developing multiple new diagnostic tests that use our quantitative T cell measurement technology, including assays that may help transplant physicians better manage patients at risk of rejection and infection. On July 1, 2016, we completed our acquisition of substantially all of the assets of Imugen, a privately owned Massachusetts corporation focused on the development and performance of tests for tick-borne diseases. Additionally, on October 12, 2016, we acquired Immunetics, a Massachusetts based diagnostics company focused on developing specialized tests for infectious diseases, including tick-borne diseases, such as Lyme disease.
Our research and development activities include performing research, development, clinical and regulatory activities and validating improvements to our technology and processes for the purposes of enhancing product performance. Research and development expenses include personnel-related expenses, including share-based compensation, fees for contractual and consulting services, clinical trial costs, travel costs, laboratory supplies, amortization, depreciation, rent, insurance and repairs and maintenance. We have supported the continued growth of our T-SPOT.TB business and expanded the team focused on the development of new products through management of clinical trial programs. In addition, we are expanding our research and development efforts in the U.K. and in the U.S. We expense all research and development costs as incurred.
During each of the three month periods ended March 31, 2017 and 2016, our research and development expenses represented 18% of our total revenue.
Sales and marketing expenses
Our sales and marketing expenses include costs associated with our sales organization, including our direct sales force and sales management, and our marketing, customer service and business development personnel. These expenses consist principally of salaries, commissions, bonuses and employee benefits for these personnel, including share-based compensation, as well as travel costs related to sales, marketing, customer service activities, medical education activities and overhead expenses. We expense all sales and marketing costs as incurred.
During the three-month periods ended March 31, 2017 and 2016, our sales and marketing expenses represented 45% and 50%, respectively, of our total revenue.
Our general and administrative expenses include costs for our executive, accounting, treasury, finance, legal, information technology, or IT, and human resources functions. These expenses consist principally of salaries, bonuses and employee benefits for the personnel included in these functions, including share-based compensation and travel costs, professional services fees, such as consulting, audit, tax and legal fees, costs related to our Board of Directors, general corporate costs, overhead expenses, and bad debt expense. We expense all general and administrative expenses as incurred.
During the three months ended March 31, 2017 and 2016, our general and administrative expenses represented 32% and 27%, respectively, of our total revenue.
During March 2017, as a result of events subsequent to the acquisition, we determined that the timing for FDA approval of the Babesia product acquired from Immunetics would be more likely to occur after the milestone due date. As a result, we recorded a $2.4 million decrease in fair value of contingent purchase price consideration related to our acquisition of Immunetics. The total contingent purchase price consideration of $6.0 million consisted of cash payable on the achievement of certain revenue thresholds and pipeline related milestones over the following three years, including FDA approval of the Babesia product by a certain date. The fair value of these milestone payments had been estimated to be $3.4 million on the date of acquisition based on significant assumptions, including the probabilities of milestone occurrence, the expected timing of milestone payments, and a discount rate of 4.4%.
For the first quarter of 2016, the increase in fair value of contingent purchase price consideration of $55,000 related to the Company's former GoutiFind program and to the Company's on-going SpiroFind program.
Other expense includes interest expense, net, foreign exchange gains/ (losses) and other income and expense items.
Monetary assets and liabilities that are denominated in foreign currencies are remeasured at the period-end closing rate with resulting unrealized exchange fluctuations. Realized exchange fluctuations result from the settlement of transactions in currencies other than the functional currencies of our businesses. The functional currencies of our businesses are U.S. Dollars, Pounds Sterling, Euros, Japanese Yen and Chinese Yuan, depending on the entity.
The following table sets forth, for the periods indicated, the amounts of certain components of our statements of operations and the percentage of total revenue represented by these items, showing period-to-period changes.
% of
$ 8,386 39 % $ 8,138 48 % $ 248 3 %
13,119 61 % 8,972 52 % 4,147 46 %
21,505 100 % 17,110 100 % 4,395 26 %
3,245 15 % 3,293 19 % (48 ) (1 )%
7,252 34 % 4,872 28 % 2,380 49 %
3,805 18 % 3,021 18 % 784 26 %
(2,357 ) (11 )% 55 — % (2,412 ) (4,385 )%
17,964 84 % 16,139 94 % 1,825 11 %
(6,956 ) (32 )% (7,194 ) (42 )% 238 (3 )%
(823 ) (4 )% (17 ) — % (806 ) 4,741 %
(106 ) — % 363 2 % (469 ) (129 )%
(140 ) (1 )% (166 ) (1 )% 26 (16 )%
(8,025 ) (37 )% (7,014 ) (41 )% (1,011 ) 14 %
(47 ) — % (35 ) — % (12 ) 34 %
$ (8,072 ) (38 )% $ (7,049 ) (41 )% $ (1,023 ) 15 %
Revenue increased by 26% to $21.5 million for the three months ended March 31, 2017 compared to $17.1 million for the same period in 2016. This increase in revenue reflected an increase in volumes for our T-SPOT.TB tests in the U.S. and the addition of our tick-borne disease tests, partially offset by lower revenue in Asia due to the timing of shipments.
U.S. revenue grew by 55%, to $13.5 million for the three months ended March 31, 2017, compared to the same period in 2016, driven by T-SPOT.TB test growth of $1.8 million from the addition of new customers and $150,000 from existing customers. In addition, revenue for the three months ended March 31, 2017 included tick-borne disease and other revenue of $3.0 million.
Asia revenue declined by 9% to $6.2 million for the three months ended March 31, 2017, compared to the same period in 2016, due primarily to the timing of shipments to China. On a non-Generally Accepted Accounting Principles, or non-GAAP, constant currency basis, revenue for Asia would have decreased by 8%. Europe and ROW revenue increased 12% to $1.8 million for the three months ended March 31, 2017, compared to the same period in 2016, due to strong TB sales and the additional contribution from the sale of Lyme kits, partially offset by the impact of changes in currency rates. On a non-GAAP constant currency basis, Europe and ROW revenue would have increased by 22% in 2017 compared to 2016.
Changes in revenue include the impact of changes in foreign currency exchange rates. We use the non-GAAP financial measure "constant currency basis" in our filings to show changes in our revenue without giving effect to period-to-period currency fluctuations. Under U.S. GAAP, revenues received in local (non-U.S. Dollar) currencies are translated into U.S. Dollars at the average exchange rate for the period presented. When we use the term "constant currency basis", it means that we have translated local currency revenues for the prior reporting period into U.S. Dollars using the same average foreign currency exchange rates for the conversion of revenues into U.S. Dollars that we used to translate local currency revenues for the comparable reporting period of the current year. We then calculate the change, as a percentage, from the prior period revenues using the current period exchange rates versus the current period revenues. This resulting percentage is a non-GAAP measure referring to a change as a percentage on a "constant currency basis". We consider the use of a period over period revenue comparison on a constant currency basis to be helpful to investors, as it provides a revenue growth measure free of positive or negative volatility due to currency fluctuations.
By revenue type, total revenues were:
$ 8,386 $ 8,138 $ 248 3 %
13,119 8,972 4,147 46 %
$ 21,505 $ 17,110 $ 4,395 26 %
By indication, total revenues were:
$ 18,542 $ 17,110 $ 1,432 8 %
2,963 — 2,963 N/M
By geography, total revenues were:
$ 13,536 $ 8,747 $ 4,789 55 %
1,806 1,606 200 12 %
6,163 6,757 (594 ) (9 )%
Cost of revenue increased by 29% to $10.5 million for the three months ended March 31, 2017 from $8.2 million in the same period in 2016. This increase in cost of revenue was due to a 16% increase in the volume of TB tests performed by our laboratory in the U.S and the addition of cost of revenue from testing for tick-borne diseases. Gross margin was 51% and 52% for the three month periods ended March 31, 2017 and 2016, respectively.
$ 3,245 $ 3,293 $ (48 ) (1 )%
7,252 4,872 2,380 49 %
Research and development expenses increased by 26% to $3.8 million for the three months ended March 31, 2017 from $3.0 million for the same period in 2016. The increase largely resulted from salary and other employee related expenses, which increased $761,000. As a percentage of total revenue, research and development expenses were 18% for each of the three month periods ended March 31, 2017 and 2016.
Sales and marketing expenses increased by 14% to $9.6 million for the three months ended March 31, 2017 from $8.5 million for the same period in 2016. The increase largely resulted from salary and other employee related expenses, which increased $1.0 million. As a percentage of total revenue, sales and marketing expenses declined to 45% for the three months ended March 31, 2017 compared to 50% for the same period in 2016.
General and administrative expenses increased by 50% to $6.9 million for the three months ended March 31, 2017 from $4.6 million for the same period in 2016. The increase in general and administrative expenses included increases of $1.2 million in legal and professional fees, largely related to our ongoing patent litigation, $647,000 in salary and other employee related expenses, and $123,000 for depreciation and amortization. As a percentage of total revenue, general and administrative expenses increased to 32% for the three months ended March 31, 2017 from 27% for the same period in 2016.
For the first quarter of 2016, the change in fair value of contingent purchase price consideration of $55,000 related to the Company's former GoutiFind program and to the Company's on-going SpiroFind program.
Interest expense, net was $823,000 for the three months ended March 31, 2017, compared to $17,000 in the same period in 2016. The increase in interest expense, net in 2017 mainly related to our October 4, 2016 agreement with MidCap Financial, or the MidCap agreement, that provides us with $40.0 million in debt financing, comprised of both a term loan and a revolving line of credit. The MidCap agreement provides us with a term loan of $30.0 million, which matures five years from closing. The term loan accrues interest at a rate of LIBOR plus 7.60% with interest only payments for the first 24 months, with the ability to extend to 48 months subject to certain conditions, before the loan begins to amortize. The MidCap agreement also provides us with a revolving line of credit of up to $10.0 million, which matures five years from closing. The revolving line of credit accrues interest at a rate of LIBOR plus 4.45%. Based on certain conditions, both the term loan and revolving line of credit may be increased by an additional $10.0 million for a total of $60.0 million. To date, we have not borrowed under the revolving line of credit.
We recorded foreign exchange losses of $106,000 for the three months ended March 31, 2017, as a net result of U.S. Dollar denominated bank accounts, accounts receivable, and accounts payable reflected on the books of Oxford Immunotec Limited, which has a functional currency of the U.K. Pound Sterling. For the three months ended March 31, 2016, we recorded foreign exchange gains of $363,000. We are exposed to foreign exchange rate risk because we currently operate in three major regions of the world: the United States, Europe and ROW, and Asia, and our revenue is denominated in multiple currencies. Approximately 63% of our sales for the three months ended March 31, 2017 were in the United States, which are denominated in U.S. Dollars. Sales in China are also denominated in U.S. Dollars. Sales in Europe are denominated primarily in the U.K. Pound Sterling and the Euro. As we grow Europe and ROW sales outside the U.K. and the Euro Zone, we may be subject to risk from additional currencies. Sales in Japan are denominated in Yen.
Our expenses are generally denominated in the currencies in which our operations are located, which are primarily in the United States, the United Kingdom, Japan, Europe and China.
As we continue to grow our business outside the United States, our results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future. To date, we have not entered into any foreign currency hedging contracts, although we may do so in the future.
Other expense was $140,000 for the three months ended March 31, 2017, compared to expense of $166,000 for the three months ended March 31, 2016.
Sources of funds
Since our inception, we have incurred significant net losses and negative cash flows from operations. For the three months ended March 31, 2017, we had a net loss of $8.1 million and used $14.6 million of cash for operating activities. As of March 31, 2017, we had an accumulated deficit of $176.7 million. We incurred a net loss of $7.0 million and used $14.0 million of cash for operating activities for the three months ended March 31, 2016.
As of March 31, 2017, we had cash and cash equivalents of $43.1 million.
As noted above, on October 4, 2016, we entered into a credit agreement with MidCap Financial Funding. The credit agreement consists of a 60 month, $30.0 million term loan and a $10.0 million revolving line of credit, both of which mature on September 30, 2021. The availability of funds under the revolving line of credit is based upon the Company's eligible accounts receivable and eligible inventory. In accordance with the terms of the revolving line of credit, the Company is required to maintain a minimum drawn balance of no less than 30% of availability. Based on certain conditions, both the term loan and revolving line of credit may be increased by an additional $10.0 million for a total of $60.0 million. The Company has not yet borrowed under the revolving line of credit.
Summary of cash flows
The following table summarizes our cash and cash equivalents, accounts receivable and cash flows for the periods indicated:
As of and for the three months
Cash and cash equivalents, excluding restricted cash
$ (14,638 ) $ (13,982 )
Cash flows for the three months ended March 31, 2017 and 2016
Net cash used in operating activities was $14.6 million during the three months ended March 31, 2017, which included a net loss of $8.1 million, non-cash expenses of $121,000, and cash used for changes in operating assets and liabilities of $6.7 million. The non-cash items included share-based compensation expense of $1.3 million, depreciation and amortization of intangible assets expense of $1.0 million, and accretion and amortization of loan fees of $149,000, largely offset by a decrease in the fair value of contingent purchase price consideration of $2.4 million. The cash used for changes in operating assets and liabilities included an increase in accounts receivable of $3.6 million, an increase in prepaid expenses and other assets of $1.4 million, a decrease in accounts payable and accrued liabilities of $908,000, and an increase in inventory, net of $806,000. The increase in accounts receivable, net reflects growing sales and timing of customer payments. The increase in prepaid expenses and other assets reflects the timing of certain payments. The decrease in accounts payable and accrued liabilities was largely due to payments in the first three months of 2017 for royalties on intellectual property and bonuses that were accrued for at December 31, 2016, as well as the timing of payments. Inventory, net increased due to timing.
Net cash used in operating activities was $14.0 million during the three months ended March 31, 2016, which included a net loss of $7.0 million, non-cash items of $1.7 million, and cash used for changes in operating assets and liabilities of $8.7 million. The non-cash items consisted of share-based compensation expense of $1.1 million, depreciation and amortization expense of $581,000, and a $55,000 expense on the change in fair value of contingent purchase price consideration. The cash used for changes in operating assets and liabilities included a decrease in accounts payable and accrued liabilities of $4.4 million, a decrease in deferred income of $1.5 million, an increase in inventory of $1.5 million, and an increase in accounts receivable, net of $1.5 million, partially offset by a decrease in prepaid expenses and other assets of $128,000. The decrease in accounts payable and accrued liabilities was largely due to payments in the first three months of 2016 for royalties on intellectual property and bonuses that were accrued for at December 31, 2015, as well as the timing of payments. The decrease in deferred income related to a change in the process used to determine pricing for certain sales to customers in Japan that has resulted in those sales being recorded upon shipment. Inventory increased due to timing and accounts receivable, net increased as a reflection of growing sales. The decrease in prepaid expenses and other assets reflects the timing of certain payments.
Net cash used in investing activities was $1.3 million during the three months ended March 31, 2017 and consisted of purchases of property and equipment.
Net cash used in investing activities was $731,000 during the three months ended March 31, 2016.
Net cash used in financing activities was $148,000 during the three months ended March 31, 2017.
Net cash used in financing activities was $8,000 during the three months ended March 31, 2016.
Contractual obligations
In May 2017, we entered into a lease amendment for our location in Norwood, Massachusetts to extend the term of the lease through March 31, 2023. In accordance with the lease amendment, we will move to a larger space in an adjacent building in Norwood containing about 39,000 square feet of rentable space. The base rent for the new space over the lease term will range from an initial low of $73,000 per month to a high of $83,000 per month. We will have two options to extend the lease term, each for a five-year period. During the transition, we will also be responsible for the lease payments on the existing space.
As of March 31, 2017, we had 431 employees. None of our employees is represented by a labor union. However, we have one employee in Belgium covered under a collective bargaining agreement. We have not experienced any work stoppages and we believe our employee relations are good.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk from interest rate fluctuations, capital market fluctuations, and foreign currency exchange rate fluctuations has not materially changed from its exposure as of December 31, 2016, as described in Item 7A of our 2016 Form 10-K.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to our management, including our Chief Executive and Chief Financial Officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control Over Financial Reporting
There have been no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
On August 10, 2015, Oxford Immunotec Limited, a wholly-owned subsidiary of Oxford Immunotec Global PLC, filed suit in the United States District Court for the District of Massachusetts against Qiagen N.V., Qiagen Inc., Quest Diagnostics LLC, and Laboratory Corporation of America Holdings alleging claims of patent infringement and seeking monetary and injunctive relief. The complaint alleges that the defendants' manufacture, sale and/or use of the QuantiFERON-TB Gold test infringes patents owned by Oxford Immunotec Limited. The defendants timely responded to the complaint in early October 2015 and challenged the validity of the patents upon which the complaint is based. The defendants argued that our patents are invalid under U.S. law because they claim naturally occurring products or processes. The defendant's motion to dismiss the complaint was denied on September 30, 2016. The defendants have answered the complaint, denying all allegations. The case is scheduled for trial in January 2018. We can provide no assurances as to the likely outcome of the litigation.
There have been no material changes in the risk factors described in "Item 1A. Risk Factors" of the Company's 2016 Form 10-K.
Item 4. Mine Safety Disclosures
See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this Quarterly Report, which Exhibit Index is incorporated herein by this reference.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Peter Wrighton-Smith, Ph.D.
Chief Executive Officer and Director
Richard M. Altieri
Articles of Association of the Registrant (Filed as Exhibit 3.1 to our Current Report on Form 8-K on June 18, 2014 and incorporated herein by reference.)
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The following materials from the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed consolidated balance sheets at March 31, 2017 and December 31, 2016; (ii) Condensed consolidated statements of operations for the three months ended March 31, 2017 and 2016; (iii) Condensed consolidated statements of comprehensive loss for the three months ended March 31, 2017 and 2016; (iv) Condensed consolidated statements of cash flows for the three months ended March 31, 2017 and 2016; and (v) Notes to unaudited condensed consolidated financial statements
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PHILADELPHIA (AP) - The Flyers lost their grip on the No. 1 seed in the Eastern Conference.
The general manager wants a wake-up call.
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Time is running out for the Flyers to show all of that.
Philadelphia hopes it hasn't completely abandoned its winning formula before the first postseason faceoff next week. The Flyers could get a sneak preview Friday in Buffalo against a Sabres team that stands as their likely first-round opponent. The Flyers are second in the East, and have all but lost their shot at winning the conference.
Meanwhile, the late-season swoon allowed Washington to grab the top spot in the East. The Capitals have won four straight games and can drop out of first only if they lose in regulation to Florida on Saturday and if the Flyers win their final two games.
Win two? Well, for starters, the Flyers want just one.
Philadelphia fell hard down the stretch and is on a four-game losing streak. Even worse, the Flyers have lost six straight on their usually intimidating home ice.
"We've been waiting for eight months to get to the playoffs," forward Scott Hartnell said. "Seven months out of those eight, we've been great. This last month, we've not been great. Maybe it's a lull before we get jacked up again."
The Flyers ended last season losers of eight of 12, but turned the corner in the playoffs and reached Game 6 of the Stanley Cup finals before losing to Chicago.
The Flyers can still win the Atlantic Division and finish in second. Philadelphia trails Washington by four points in the standings (107-103), but leads Pittsburgh in the Atlantic by a point. If the Flyers win the division, they'll automatically earn a top-three seed.
Both teams have two games left and Philadelphia has already clinched the first tiebreaker (non-shootout wins). But a No. 1 seed that seemed like an empty-net situation at the start of the month has twisted into a 3-on-5 disadvantage.
"It's hard to sit here," coach Peter Laviolette said, "and make excuses for it."
Laviolette has help on the way, though. All-Star forward Danny Briere (63 points) could play Friday despite his lower-body injury. And defenseman Chris Pronger is day to day with a broken right hand. Pronger, perhaps Philadelphia's most valuable defenseman, expects to return for the postseason.
Pronger was hurt on Feb. 24 against the New York Islanders when his hand was struck with a puck. The Flyers started a four-game losing streak the next game and haven't been the same since he went down.
But GM Paul Holmgren, a former Flyer, doesn't want excuses. Holmgren, who didn't get into details about a team meeting he called, wants the Flyers out of their funk - now.
"It's always good to talk about what needs to be done, but talk is cheap," Pronger said. "We've got to go out and prove it on the ice."
Maybe a trip to Buffalo can start the turnaround. The Flyers have already set a team record this season with 25 road wins. They won only 21 times at the Wells Fargo Center and finish the season there Saturday.
Laviolette, who led the Carolina Hurricanes to a Stanley Cup championship, has implored the Flyers to ratchet up their speed, their passion, more of the intangibles that he says are "what makes us great."
"We need to do it," he said. "We need to be better at that."
Laviolette is sure of one thing for the postseason. Well, at least for Game 1: His goalie. He named rookie Sergei Bobrovsky the postseason starter this week ahead of Brian Boucher. The Flyers also bolstered their depth in net on Wednesday, when they recalled Michael Leighton, last year's postseason star, from the minor leagues.
Bobrovsky has 28 wins, a .917 save percentage and a 2.51 goals-against average. He's done it all except earn a shutout. Oddly enough, the Flyers have yet to shut out a single team this season.
The Flyers scored only six goals on this skid, but still have plenty of firepower. Jeff Carter leads with 36 goals and Briere has 32. Six other players have at least 20.
The biggest spark for a deep postseason run might end up being Holmgren's speech. The reality is, though, it will take more than words for the Flyers to win a championship.
"I think it needed to be done. But, at the same time, it is time to stop talking and start acting it out on the ice," Briere said. "There were lots of little things that needed to be said. That's step one. Step two is to finish it strong. And step three will be to start the playoffs."


This is a placeholder page for Doug Belanger, which means this person is not currently on this site. We do suggest using the tools below to find Doug Belanger.
You are visiting the placeholder page for Doug Belanger. This page is here because someone used our placeholder utility to look for Doug Belanger. We created this page automatically in hopes Doug Belanger would find it. If you are not Doug Belanger, but are an alumni of Marina High School Huntington Beach, CA, register on this site for free now.


The clients had spent a long time in a delightful coastal home we renovated 20 years ago. They called us 3 years ago and said they wanted to "change the station". The architecture celebrates the buildings' history, strong form and generous volumes. Elegant double-PFC portals were placed within the existing structural bays and cloaked with an iteration of our ply "woven pacific ceiling".
Along with most other finishes the ceiling is in subdued natural/industrial hues, allowing the owners' art collection to shine.
With new apartments sprouting up in the vicinity, we have included banks of skylights and splashes of coloured glass to imbue the interior with ever changing light patterns. Upon arriving home, one is secure, relaxed and enchanted within this urban whare.
They no longer hear the waves and smell the sea as they awake. However the family can now tell whether the wind in a southerly or northerly, simply by whether they can detect the aroma Havana or L'affare coffee roasting!
Turn the music up. I like this new station.


text:
Thursday, Aug 6 1998
HEALTHY FAMILIES: Kern County Sees Little Enrollment
Kern County officials held a meeting with state lawmakers and health officials yesterday to assess how well the new Healthy Families program is working. State Sens. Jim Costa (D-Fresno) and Ken Maddy (R-Fresno), Managed Risk Medical Insurance Board Executive Director Sandra Shewry and Kern County Health Department Director B. Jinadu were planning to discuss enrollment and marketing of the state's new health insurance program for children of the working poor. Officials wouldn't release enrollment figures early, and three of the four health plans providing coverage through Healthy Families either didn't "have accurate numbers" or wouldn't answer questions. "If the figures reflect what little statistical data and anecdotal evidence is available now in Kern County," the Bakersfield Californian reports, "they could prove disappointing."
Low Turnout
Rosanna Westmoreland of Kern Family Health Care, the designated "community plan provider," said her plan has enrolled only 53 children. Steve Schilling, executive director of Clinica Sierra Vista, which runs several rural health clinics in the area, said the clinics "aren't seeing many takers even though eight people have been hired to do nothing but help people fill out Healthy Families applications." He said about 140 applications have been completed since the program started a month ago, but he didn't know the percentage of children who would be eligible. He said the "disappointing numbers" are due to the complex 20-plus-page application, "an inadequate marketing campaign" and "the fear that personal information will be passed on to immigration officials." Schilling said, "If a trusted, valued community health care friend like us can't convince patients it's OK to sign up for this program and have nothing happen to them, no one can." The Bakersfield Californian reports that one group estimated 15,000 Kern County children would qualify for the program, while another estimated that number to be as high as 40,000 (Bedell, 8/5). Click Healthy Families to read past coverage of enrollment barriers among the Latino population.

redpajama_set_name: RedPajamaCommonCrawl


text:
package cmd

import (
	"fmt"
	"io"
	"io/ioutil"
	"text/template"
	"time"

	"github.com/renstrom/dedent"
	"github.com/spf13/cobra"

	"k8s.io/apimachinery/pkg/runtime"
	kubeadmapi "k8s.io/kubernetes/cmd/kubeadm/app/apis/kubeadm"
	kubeadmapiext "k8s.io/kubernetes/cmd/kubeadm/app/apis/kubeadm/v1alpha1"
	"k8s.io/kubernetes/cmd/kubeadm/app/apis/kubeadm/validation"
	"k8s.io/kubernetes/cmd/kubeadm/app/cmd/features"
	kubeadmconstants "k8s.io/kubernetes/cmd/kubeadm/app/constants"
	dnsaddonphase "k8s.io/kubernetes/cmd/kubeadm/app/phases/addons/dns"
	proxyaddonphase "k8s.io/kubernetes/cmd/kubeadm/app/phases/addons/proxy"
	apiconfigphase "k8s.io/kubernetes/cmd/kubeadm/app/phases/apiconfig"
	clusterinfophase "k8s.io/kubernetes/cmd/kubeadm/app/phases/bootstraptoken/clusterinfo"
	nodebootstraptokenphase "k8s.io/kubernetes/cmd/kubeadm/app/phases/bootstraptoken/node"
	certsphase "k8s.io/kubernetes/cmd/kubeadm/app/phases/certs"
	"k8s.io/kubernetes/cmd/kubeadm/app/phases/certs/pkiutil"
	controlplanephase "k8s.io/kubernetes/cmd/kubeadm/app/phases/controlplane"
	etcdphase "k8s.io/kubernetes/cmd/kubeadm/app/phases/etcd"
	kubeconfigphase "k8s.io/kubernetes/cmd/kubeadm/app/phases/kubeconfig"
	markmasterphase "k8s.io/kubernetes/cmd/kubeadm/app/phases/markmaster"
	selfhostingphase "k8s.io/kubernetes/cmd/kubeadm/app/phases/selfhosting"
	uploadconfigphase "k8s.io/kubernetes/cmd/kubeadm/app/phases/uploadconfig"
	"k8s.io/kubernetes/cmd/kubeadm/app/preflight"
	kubeadmutil "k8s.io/kubernetes/cmd/kubeadm/app/util"
	"k8s.io/kubernetes/cmd/kubeadm/app/util/apiclient"
	configutil "k8s.io/kubernetes/cmd/kubeadm/app/util/config"
	kubeconfigutil "k8s.io/kubernetes/cmd/kubeadm/app/util/kubeconfig"
	"k8s.io/kubernetes/cmd/kubeadm/app/util/pubkeypin"
	"k8s.io/kubernetes/pkg/api"
	"k8s.io/kubernetes/pkg/util/version"
)

var (
	initDoneTempl = template.Must(template.New("init").Parse(dedent.Dedent(`
		Your Kubernetes master has initialized successfully!

		To start using your cluster, you need to run (as a regular user):

		  mkdir -p $HOME/.kube
		  sudo cp -i {{.KubeConfigPath}} $HOME/.kube/config
		  sudo chown $(id -u):$(id -g) $HOME/.kube/config

		You should now deploy a pod network to the cluster.
		Run "kubectl apply -f [podnetwork].yaml" with one of the options listed at:
		  http://kubernetes.io/docs/admin/addons/

		You can now join any number of machines by running the following on each node
		as root:

		  kubeadm join --token {{.Token}} {{.MasterHostPort}} --discovery-token-ca-cert-hash {{.CAPubKeyPin}}

		`)))
)

// NewCmdInit returns "kubeadm init" command.
func NewCmdInit(out io.Writer) *cobra.Command {
	cfg := &kubeadmapiext.MasterConfiguration{}
	api.Scheme.Default(cfg)

	var cfgPath string
	var skipPreFlight bool
	var skipTokenPrint bool
	cmd := &cobra.Command{
		Use:   "init",
		Short: "Run this in order to set up the Kubernetes master",
		Run: func(cmd *cobra.Command, args []string) {
			api.Scheme.Default(cfg)
			internalcfg := &kubeadmapi.MasterConfiguration{}
			api.Scheme.Convert(cfg, internalcfg, nil)

			i, err := NewInit(cfgPath, internalcfg, skipPreFlight, skipTokenPrint)
			kubeadmutil.CheckErr(err)
			kubeadmutil.CheckErr(i.Validate(cmd))

			// TODO: remove this warning in 1.9
			if !cmd.Flags().Lookup("token-ttl").Changed {
				fmt.Println("[kubeadm] WARNING: starting in 1.8, tokens expire after 24 hours by default (if you require a non-expiring token use --token-ttl 0)")
			}

			kubeadmutil.CheckErr(i.Run(out))
		},
	}

	cmd.PersistentFlags().StringVar(
		&cfg.API.AdvertiseAddress, "apiserver-advertise-address", cfg.API.AdvertiseAddress,
		"The IP address the API Server will advertise it's listening on. 0.0.0.0 means the default network interface's address.",
	)
	cmd.PersistentFlags().Int32Var(
		&cfg.API.BindPort, "apiserver-bind-port", cfg.API.BindPort,
		"Port for the API Server to bind to",
	)
	cmd.PersistentFlags().StringVar(
		&cfg.Networking.ServiceSubnet, "service-cidr", cfg.Networking.ServiceSubnet,
		"Use alternative range of IP address for service VIPs",
	)
	cmd.PersistentFlags().StringVar(
		&cfg.Networking.PodSubnet, "pod-network-cidr", cfg.Networking.PodSubnet,
		"Specify range of IP addresses for the pod network; if set, the control plane will automatically allocate CIDRs for every node",
	)
	cmd.PersistentFlags().StringVar(
		&cfg.Networking.DNSDomain, "service-dns-domain", cfg.Networking.DNSDomain,
		`Use alternative domain for services, e.g. "myorg.internal"`,
	)
	cmd.PersistentFlags().StringVar(
		&cfg.KubernetesVersion, "kubernetes-version", cfg.KubernetesVersion,
		`Choose a specific Kubernetes version for the control plane`,
	)
	cmd.PersistentFlags().StringVar(
		&cfg.CertificatesDir, "cert-dir", cfg.CertificatesDir,
		`The path where to save and store the certificates`,
	)
	cmd.PersistentFlags().StringSliceVar(
		&cfg.APIServerCertSANs, "apiserver-cert-extra-sans", cfg.APIServerCertSANs,
		`Optional extra altnames to use for the API Server serving cert. Can be both IP addresses and dns names.`,
	)
	cmd.PersistentFlags().StringVar(
		&cfg.NodeName, "node-name", cfg.NodeName,
		`Specify the node name`,
	)

	cmd.PersistentFlags().StringVar(&cfgPath, "config", cfgPath, "Path to kubeadm config file (WARNING: Usage of a configuration file is experimental)")

	// Note: All flags that are not bound to the cfg object should be whitelisted in cmd/kubeadm/app/apis/kubeadm/validation/validation.go
	cmd.PersistentFlags().BoolVar(
		&skipPreFlight, "skip-preflight-checks", skipPreFlight,
		"Skip preflight checks normally run before modifying the system",
	)
	// Note: All flags that are not bound to the cfg object should be whitelisted in cmd/kubeadm/app/apis/kubeadm/validation/validation.go
	cmd.PersistentFlags().BoolVar(
		&skipTokenPrint, "skip-token-print", skipTokenPrint,
		"Skip printing of the default bootstrap token generated by 'kubeadm init'",
	)

	cmd.PersistentFlags().StringVar(
		&cfg.Token, "token", cfg.Token,
		"The token to use for establishing bidirectional trust between nodes and masters.")

	cmd.PersistentFlags().DurationVar(
		&cfg.TokenTTL, "token-ttl", cfg.TokenTTL,
		"The duration before the bootstrap token is automatically deleted. 0 means 'never expires'.")

	return cmd
}

func NewInit(cfgPath string, cfg *kubeadmapi.MasterConfiguration, skipPreFlight, skipTokenPrint bool) (*Init, error) {

	fmt.Println("[kubeadm] WARNING: kubeadm is in beta, please do not use it for production clusters.")

	if cfgPath != "" {
		b, err := ioutil.ReadFile(cfgPath)
		if err != nil {
			return nil, fmt.Errorf("unable to read config from %q [%v]", cfgPath, err)
		}
		if err := runtime.DecodeInto(api.Codecs.UniversalDecoder(), b, cfg); err != nil {
			return nil, fmt.Errorf("unable to decode config from %q [%v]", cfgPath, err)
		}
	}

	// Set defaults dynamically that the API group defaulting can't (by fetching information from the internet, looking up network interfaces, etc.)
	err := configutil.SetInitDynamicDefaults(cfg)
	if err != nil {
		return nil, err
	}

	fmt.Printf("[init] Using Kubernetes version: %s\n", cfg.KubernetesVersion)
	fmt.Printf("[init] Using Authorization mode: %v\n", cfg.AuthorizationModes)

	// Warn about the limitations with the current cloudprovider solution.
	if cfg.CloudProvider != "" {
		fmt.Println("[init] WARNING: For cloudprovider integrations to work --cloud-provider must be set for all kubelets in the cluster.")
		fmt.Println("\t(/etc/systemd/system/kubelet.service.d/10-kubeadm.conf should be edited for this purpose)")
	}

	if !skipPreFlight {
		fmt.Println("[preflight] Running pre-flight checks")

		if err := preflight.RunInitMasterChecks(cfg); err != nil {
			return nil, err
		}

		// Try to start the kubelet service in case it's inactive
		preflight.TryStartKubelet()
	} else {
		fmt.Println("[preflight] Skipping pre-flight checks")
	}

	return &Init{cfg: cfg, skipTokenPrint: skipTokenPrint}, nil
}

type Init struct {
	cfg            *kubeadmapi.MasterConfiguration
	skipTokenPrint bool
}

// Validate validates configuration passed to "kubeadm init"
func (i *Init) Validate(cmd *cobra.Command) error {
	if err := validation.ValidateMixedArguments(cmd.Flags()); err != nil {
		return err
	}
	return validation.ValidateMasterConfiguration(i.cfg).ToAggregate()
}

// Run executes master node provisioning, including certificates, needed static pod manifests, etc.
func (i *Init) Run(out io.Writer) error {

	k8sVersion, err := version.ParseSemantic(i.cfg.KubernetesVersion)
	if err != nil {
		return fmt.Errorf("couldn't parse kubernetes version %q: %v", i.cfg.KubernetesVersion, err)
	}

	// PHASE 1: Generate certificates
	if err := certsphase.CreatePKIAssets(i.cfg); err != nil {
		return err
	}

	// PHASE 2: Generate kubeconfig files for the admin and the kubelet
	if err := kubeconfigphase.CreateInitKubeConfigFiles(kubeadmconstants.KubernetesDir, i.cfg); err != nil {
		return err
	}

	// PHASE 3: Bootstrap the control plane
	manifestPath := kubeadmconstants.GetStaticPodDirectory()
	if err := controlplanephase.CreateInitStaticPodManifestFiles(manifestPath, i.cfg); err != nil {
		return err
	}
	// Add etcd static pod spec only if external etcd is not configured
	if len(i.cfg.Etcd.Endpoints) == 0 {
		if err := etcdphase.CreateLocalEtcdStaticPodManifestFile(manifestPath, i.cfg); err != nil {
			return err
		}
	}

	client, err := kubeconfigutil.ClientSetFromFile(kubeadmconstants.GetAdminKubeConfigPath())
	if err != nil {
		return err
	}

	fmt.Printf("[init] Waiting for the kubelet to boot up the control plane as Static Pods from directory %q\n", kubeadmconstants.GetStaticPodDirectory())
	if err := apiclient.WaitForAPI(client, 30*time.Minute); err != nil {
		return err
	}

	// PHASE 4: Mark the master with the right label/taint
	if err := markmasterphase.MarkMaster(client, i.cfg.NodeName); err != nil {
		return err
	}

	// PHASE 5: Set up the node bootstrap tokens
	if !i.skipTokenPrint {
		fmt.Printf("[token] Using token: %s\n", i.cfg.Token)
	}

	// Create the default node bootstrap token
	tokenDescription := "The default bootstrap token generated by 'kubeadm init'."
	if err := nodebootstraptokenphase.UpdateOrCreateToken(client, i.cfg.Token, false, i.cfg.TokenTTL, kubeadmconstants.DefaultTokenUsages, tokenDescription); err != nil {
		return err
	}
	// Create RBAC rules that makes the bootstrap tokens able to post CSRs
	if err := nodebootstraptokenphase.AllowBootstrapTokensToPostCSRs(client); err != nil {
		return err
	}
	// Create RBAC rules that makes the bootstrap tokens able to get their CSRs approved automatically
	if err := nodebootstraptokenphase.AutoApproveNodeBootstrapTokens(client, k8sVersion); err != nil {
		return err
	}

	// Create the cluster-info ConfigMap with the associated RBAC rules
	if err := clusterinfophase.CreateBootstrapConfigMapIfNotExists(client, kubeadmconstants.GetAdminKubeConfigPath()); err != nil {
		return err
	}
	if err := clusterinfophase.CreateClusterInfoRBACRules(client); err != nil {
		return err
	}

	// PHASE 6: Install and deploy all addons, and configure things as necessary

	// Upload currently used configuration to the cluster
	if err := uploadconfigphase.UploadConfiguration(i.cfg, client); err != nil {
		return err
	}

	if err := apiconfigphase.CreateRBACRules(client, k8sVersion); err != nil {
		return err
	}

	if err := dnsaddonphase.EnsureDNSAddon(i.cfg, client); err != nil {
		return err
	}

	if err := proxyaddonphase.EnsureProxyAddon(i.cfg, client); err != nil {
		return err
	}

	// PHASE 7: Make the control plane self-hosted if feature gate is enabled
	if features.Enabled(i.cfg.FeatureFlags, features.SelfHosting) {
		// Temporary control plane is up, now we create our self hosted control
		// plane components and remove the static manifests:
		fmt.Println("[self-hosted] Creating self-hosted control plane...")
		if err := selfhostingphase.CreateSelfHostedControlPlane(i.cfg, client); err != nil {
			return err
		}
	}

	// Load the CA certificate from so we can pin its public key
	caCert, err := pkiutil.TryLoadCertFromDisk(i.cfg.CertificatesDir, kubeadmconstants.CACertAndKeyBaseName)

	// Generate the Master host/port pair used by initDoneTempl
	masterHostPort, err := kubeadmutil.GetMasterHostPort(i.cfg)
	if err != nil {
		return err
	}

	ctx := map[string]string{
		"KubeConfigPath": kubeadmconstants.GetAdminKubeConfigPath(),
		"KubeConfigName": kubeadmconstants.AdminKubeConfigFileName,
		"Token":          i.cfg.Token,
		"CAPubKeyPin":    pubkeypin.Hash(caCert),
		"MasterHostPort": masterHostPort,
	}
	if i.skipTokenPrint {
		ctx["Token"] = "<value withheld>"
	}

	return initDoneTempl.Execute(out, ctx)
}

redpajama_set_name: RedPajamaGithub


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Ryan is a Google Developer Expert for Android and the Android developer at Pixite. He's been developing Android apps since 2009 and loves working on anything fun, usually graphics related. You can usually find him speaking at conferences around North America, or vacationing around the world.