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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________

Commission File Number: 001-38701

SI-BONE, INC.
(Exact Name of Registrant as Specified in its Charter)
 

Delaware
26-2216351
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification Number)
471 El Camino Real, Suite 101, Santa Clara, California
95050
(Address of principal executive offices)(Zip Code)
 Registrant's telephone number, including area code: (408) 207-0700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.0001 per shareSIBNThe Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerAccelerated filerNon-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No x
The number of shares outstanding of the registrant’s Common Stock was 33,489,778 as of October 31, 2021.



TABLE OF CONTENTS
    Page
PART I-FINANCIAL INFORMATION 
 
PART II-OTHER INFORMATION










1


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, prospective products and product candidates, sales force expansion, surgeon adoption, reimbursement determinations, clinical trial results, and U.S. Food and Drug Administration ("FDA") approvals, are forward-looking statements.

These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions, including those described under the sections in this Quarterly Report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements include, but are not limited to, statements about the following:

the impact the COVID-19 pandemic and governmental actions taken to combat the COVID-19 pandemic will have on us, including our operations, financial results, liquidity and capital resources, the existence and duration of state and local orders temporarily prohibiting elective procedures including procedures using our products, the ability and desire of patients and physicians to undergo and perform such procedures, the duration and any potential resurgence of the COVID-19 pandemic, and whether the COVID-19 pandemic will recur in the future;
our ability to maintain a healthy workforce in light of the ongoing COVID-19 pandemic;
our ability to source products and materials included in our surgical systems at prices and on the basis of lead times required to grow and sustain our business;
our expectation that a significant portion of our revenues will be derived from sales of the iFuse Implant System, or iFuse;
our ability to develop additional revenue opportunities, including new indications for use and new devices;
our ability to retain and grow our sales team based on the demand for our products;
our ability to identify, train, and retain surgeons to perform procedures using our products;
our ability to obtain and maintain favorable coverage and reimbursement determinations from third-party payors;
our estimates of our market opportunity;
our expectations regarding the scope of protection from intellectual property rights covering our products;
developments or disputes concerning our intellectual property or other proprietary rights;
timing of and results from clinical and other trials;
marketing clearances and authorization from the FDA and regulators in other jurisdictions;
timing of regulatory filings and feedback;
competition in the markets we serve;
our expectations of the reliability and performance of our products;
our expectations of the benefits to patients, providers, and payors of our products;
our reliance on a limited number of suppliers, including sole source suppliers, which may impact the availability of instruments and materials;
our ability to sustain or increase demand for our products;
our estimates regarding our costs and risks associated with our international operations and expansion;
2


our expectations regarding our ability to retain and recruit key personnel;
our expectations regarding acquisitions and strategic operations;
our ability to fund our working capital requirements;
our compliance with, and the cost of, federal, state, and foreign regulatory requirements;
the factors that may impact our financial results; and
anticipated trends and challenges in our business and the markets in which we operate.

Forward-looking statements are based on management’s current expectations, estimates, forecasts, and projections about our business and the industry in which we operate, and management’s beliefs and assumptions are not guarantees of future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this report may turn out to be inaccurate. Furthermore, if the 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 or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and elsewhere in this report. These statements, like all statements in this report, speak only as of their date. We caution investors that our business and financial performance are subject to substantial risks and uncertainties. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, except as may be required by law.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.


3



PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

SI-BONE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)

September 30, 2021December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$59,863 $53,581 
Short-term investments100,988 142,851 
Accounts receivable, net of allowance for doubtful accounts of $264 and $263, respectively
12,617 13,611 
Inventory10,246 5,633 
Prepaid expenses and other current assets1,934 2,565 
Total current assets185,648 218,241 
Property and equipment, net7,913 4,527 
Other non-current assets405 374 
TOTAL ASSETS $193,966 $223,142 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$4,139 $3,271 
Accrued liabilities and other10,425 10,199 
Total current liabilities14,564 13,470 
Long-term borrowings34,922 39,455 
Other long-term liabilities862 854 
TOTAL LIABILITIES50,348 53,779 
Commitments and contingencies (Note 6)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding
  
Common stock, $0.0001 par value; 100,000,000 shares authorized; 33,450,995 and 32,583,220 shares issued and outstanding, respectively
3 3 
Additional paid-in capital
424,561 408,113 
Accumulated other comprehensive income
426 524 
Accumulated deficit
(281,372)(239,277)
TOTAL STOCKHOLDERS’ EQUITY143,618 169,363 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$193,966 $223,142 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4



SI-BONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
(Unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Revenue
$22,286 $20,373 $64,922 $51,243 
Cost of goods sold
2,478 2,578 7,053 6,627 
Gross profit19,808 17,795 57,869 44,616 
Operating expenses:
Sales and marketing23,525 18,772 67,531 53,808 
Research and development3,288 2,778 9,392 7,033 
General and administrative6,194 4,920 18,685 14,471 
Total operating expenses
33,007 26,470 95,608 75,312 
Loss from operations
(13,199)(8,675)(37,739)(30,696)
Interest and other income (expense), net:
Interest income44 192 151 1,019 
Interest expense(2,658)(1,102)(4,797)(5,016)
Other income (expense), net(59)111 290 (25)
Net loss
$(15,872)$(9,474)$(42,095)$(34,718)
Other comprehensive income (loss):
Changes in foreign currency translation
(23)(33)(103)(23)
Unrealized gain (loss) on marketable securities(11)(147)5 (11)
Comprehensive loss
$(15,906)$(9,654)$(42,193)$(34,752)
Net loss per share, basic and diluted
$(0.48)$(0.33)$(1.28)$(1.23)
Weighted-average number of common shares used to compute basic and diluted net loss per share
33,340,093 28,713,418 33,005,904 28,155,561 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


SI-BONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
(Unaudited)
Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Stockholders’ Equity
SharesAmount
Balance as of December 31, 202032,583,220 $3 $408,113 $524 $(239,277)$169,363 
Issuance of common stock upon exercise of stock options, net of shares withheld93,975 — 601 — — 601 
Issuance of common stock upon vesting of restricted stock units131,339 — — — — — 
Stock-based compensation— — 4,030 — — 4,030 
Vesting of early exercised stock options— — 9 — — 9 
Foreign currency translation— — — (115)— (115)
Net unrealized gain on marketable securities— — — 21 — 21 
Net loss— — — — (12,242)(12,242)
Balance as of March 31, 202132,808,534 3 412,753 430 (251,519)161,667 
Issuance of common stock upon exercise of stock options, net of shares withheld140,917 — 650 — — 650 
Issuance of common stock related to employee stock purchase plan104,861 1,566 1,566 
Issuance of common stock upon vesting of restricted stock units181,958 — — — — — 
Stock-based compensation— — 4,257 — — 4,257 
Vesting of early exercised stock options— — 9 — — 9 
Foreign currency translation— — — 35 — 35 
Net unrealized loss on marketable securities— — — (5)— (5)
Net loss— — — — (13,981)(13,981)
Balance as of June 30, 202133,236,270 3 419,235 460 (265,500)154,198 
Issuance of common stock upon exercise of stock options, net of shares withheld82,109 — 1,076 — — 1,076 
Issuance of common stock upon vesting of restricted stock units132,616 — — — — — 
Stock-based compensation— — 4,241 — — 4,241 
Vesting of early exercised stock options— — 9 — — 9 
Foreign currency translation— — — (23)— (23)
Unrealized gain of marketable securities— — — (11)— (11)
Net loss— — — — (15,872)(15,872)
Balance as of September 30, 202133,450,995 $3 $424,561 $426 $(281,372)$143,618 
6


Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Stockholders’ Equity
SharesAmount
Balance as of December 31, 201925,163,803 3 258,121 464 (195,580)63,008 
Issuance of common stock from public offering, net of underwriting discounts, commissions and offering costs3,135,053 — 62,978 — — 62,978 
Issuance of common stock upon exercise of stock options, net of shares withheld43,334 — 174 — — 174 
Issuance of common stock upon vesting of restricted stock units63,938 — — — — — 
Stock-based compensation— — 2,622 — — 2,622 
Vesting of early exercised stock options— — 27 — — 27 
Foreign currency translation— — — 12 — 12 
Net unrealized gain on marketable securities— — — 221 — 221 
Net loss— — — — (12,772)(12,772)
Balance as of March 31, 202028,406,128 3 323,922 697 (208,352)116,270 
Issuance of common stock upon exercise of stock options, net of shares withheld46,608 — 185 — — 185 
Issuance of common stock related to employee stock purchase plan74,685 — 991 — — 991 
Issuance of common stock upon vesting of restricted stock units85,030 — — — — — 
Stock-based compensation— — 2,955 — — 2,955 
Vesting of early exercised stock options— — 26 — — 26 
Foreign currency translation— — — (2)— (2)
Net unrealized loss on marketable securities— — — (85)— (85)
Net loss— — — — (12,472)(12,472)
Balance as of June 30, 202028,612,451 3 328,079 610 (220,824)107,868 
Issuance of common stock upon exercise of stock options, net of shares withheld137,392 — 628 — — 628 
Issuance of common stock upon vesting of restricted stock units88,734 — — — — — 
Stock-based compensation— — 3,180 — — 3,180 
Vesting of early exercised stock options— — 9 — — 9 
Foreign currency translation— — — (33)— (33)
Net unrealized loss on marketable securities— — — (147)— (147)
Net loss— — — — (9,474)(9,474)
Balance as of September 30, 202028,838,577 $3 $331,896 $430 $(230,298)$102,031 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7



 
SI-BONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
20212020
Cash flows from operating activities
Net loss
$(42,095)$(34,718)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation12,528 8,757 
Depreciation and amortization1,436 786 
Bad debt expense 235 
Accretion (amortization) of discount on marketable securities1,056 (16)
Realized gain on marketable securities (43)
Amortization of debt issuance costs234 204 
Loss on extinguishment of debt1,848 1,534 
Loss on sale and disposal of property and equipment304 248 
Changes in operating assets and liabilities:
Accounts receivable1,060 63 
Inventory(4,545)337 
Prepaid expenses and other assets610 1,489 
Accounts payable425 416 
Accrued liabilities and other320 (2,072)
Net cash used in operating activities(26,819)(22,780)
Cash flows from investing activities
Maturities of marketable securities107,494 63,200 
Sales of marketable securities 12,592 
Purchases of marketable securities(66,678)(69,145)
Purchases of property and equipment(4,614)(1,744)
Net cash provided by investing activities
36,202 4,903 
Cash flows from financing activities
Proceeds from follow-on public offering, net of underwriting discounts, commissions and offering costs 62,978 
Proceeds from debt financing35,000 45,297 
Repayments of debt financing(41,000)(45,297)
Payments of debt issuance costs(111)(750)
Payments of prepayment penalty and lender fees(508)(843)
Proceeds from issuance of common stock under employee stock purchase plan1,566 991 
Proceeds from the exercise of stock options 2,327 987 
Net cash provided by (used in) financing activities(2,726)63,363 
Effect of exchange rate changes on cash and cash equivalents
(375)75 
Net increase in cash and cash equivalents6,282 45,561 
Cash and cash equivalents at
Beginning of period
53,581 10,435 
End of period
$59,863 $55,996 
Supplemental disclosure of non-cash information
Vesting of early exercised stock options
$27 $62 
Unpaid purchases of property and equipment
474 256 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8


SI-BONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


1. The Company and Nature of Business
SI-BONE, Inc. (the “Company”) was incorporated in the state of Delaware on March 18, 2008 and is headquartered in Santa Clara, California. The Company is a medical device company that has pioneered a proprietary minimally invasive surgical implant system to fuse the sacroiliac joint for treatment of the most common types of sacroiliac joint disorders that cause lower back pain. The Company introduced its primary product, the iFuse Implant System, or iFuse, in 2009 in the U.S., in 2010 in certain countries in the European Union, and in 2015 in certain countries in the rest of the world.
In the first quarter of 2020, the Company received $63.0 million of net proceeds from its first follow-on public offering of 4,300,000 shares of the Company's common stock, of which 2,490,053 shares were offered and sold by the Company, and the exercise of underwriter's option to purchase from the Company an additional 645,000 shares of the Company's common stock, at a public offering price of $21.50 per share. The total public offering costs incurred in connection with the follow-on offering were allocated based on the gross proceeds received by the Company and the other selling shareholders on a pro-rated basis. Public offering cost of $0.4 million allocated to selling of shares by the Company was charged against the gross proceeds received from the follow-on offering. Public offering costs of $0.2 million allocated to selling of shares by the selling shareholders was recognized as transaction costs within general and administrative expenses on the consolidated statements of operations in the year ended December 31, 2020.
In October 2020, the Company received $71.6 million of net proceeds from its second follow-on public offering of shares of the Company's common stock, of which 3,000,000 shares were offered and sold by the Company, and the exercise of underwriter's option to purchase from the Company an additional 478,507 shares of the Company's common stock, at a public offering price of $22.00 per share. In addition to the shares sold by the Company in this second follow-on offering, the selling stockholder sold 190,053 shares of the Company's common stock previously held by the selling stockholder at a price to the public of $22.00 per share. The Company did not receive any proceeds from the sale by the selling stockholder.
Risks and Uncertainties
The Company is subject to continuing risk and uncertainties as a result of the COVID-19 pandemic, and is closely monitoring the impact of the pandemic on all aspects of its business, including the impacts on its customers, patients that would benefit from procedures involving the Company's products, employees, suppliers, vendors, business partners and distribution channels. Economies worldwide continue to be negatively impacted by the COVID-19 pandemic, in particular with recurrent outbreaks and mutations of the virus, despite advances in vaccines, and the Company anticipates these disruptions will continue. While the Company has not experienced material disruptions to its supply chain to date, certain of its third-party suppliers have faced delays, product shortages and rising costs resulting from disruptions in the global supply chain, primarily related to the instruments. As a result, the Company is continuing to work closely with its manufacturing partners and suppliers, as well as determining alternative sourcing strategies to enable the Company to source key components and maintain appropriate inventory levels to meet customer demand. As such the Company's future results of operations and liquidity could be adversely impacted by a variety of factors related to the COVID-19 pandemic, including those discussed in the section entitled "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2020. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations remains uncertain.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2020 has been derived from the audited consolidated financial statements at that date but does not include all of the information required by GAAP for complete financial statements. These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments that are necessary for a fair statement of the Company’s consolidated financial information. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period or for any other future year.
The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes thereto for the year ended December 31, 2020 contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 10, 2021.
9


SI-BONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Estimates are based on historical experience, where applicable and other assumptions believed to be reasonable by the management. Actual results could differ from those estimates.
Significant Accounting Policies
The Company’s significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to these accounting policies.
JOBS Act Accounting Election
As an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), the Company has been eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. The Company has elected to take advantage of the extended transition period for adopting new or revised accounting standards that have different effective dates for public and private companies. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
On June 30, 2021, the Company’s public float exceeded $700 million and as such the Company will be deemed to be a large accelerated filer under Rule 12b-2 of the Exchange Act, commencing with the Company’s Annual Report on Form 10-K for the 2021 fiscal year. The Company will retain its current filer status until the end of 2021. As a large accelerated filer, the Company will no longer qualify as an emerging growth company nor be eligible to rely on the benefits afforded to emerging growth companies under the JOBS Act.

Segments
The Company manages and operates as one reportable segment. The Company derives substantially all of its revenue from sales to customers in the U.S. Revenue by geography is based on billing address of the customer. No single country outside the U.S. accounts for more than 10% of the total revenue during the periods presented. Long-lived assets held outside the U.S. are immaterial. The table below summarizes the Company's revenue by geography:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
United States$20,392 $18,924 $59,391 $47,442 
International1,894 1,449 5,531 3,801 
$22,286 $20,373 $64,922 $51,243 
10


SI-BONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Recently Issued Accounting Standards Not Yet Effective
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which requires that lessee's recognize a right-of-use asset and a lease liability for all leases with lease terms greater than twelve months in the balance sheet. A lease liability is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset is an asset that represents the lessee’s right to use, or control use of, a specified asset for the lease term for all leases (with the exception of short-term leases) at the adoption date. In July 2018, the FASB issued ASU 2018-10 and ASU 2018-11, which provides clarification on the narrow aspects of the guidance and provide an additional transition method to adopt the new leases standard. The new transition method allows an entity to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In March 2019, the FASB issued ASU 2019-01, which provides clarification on implementation issues associated with adopting ASU 2016-02. The new leases standard must be adopted using a modified retrospective transition method and allows for the application of the new guidance at the beginning of the earliest comparative period presented or at the adoption date. In November 2019, the FASB issued ASU 2019-10, which revised the mandatory effective dates of the new leases standard. Further, due to the impact of the COVID-19, in June 2020, the FASB issued ASU 2020-05 to further defer the effective date for one year for entities in the “all other” categories. For public companies, the new guidance became effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the new guidance is now effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early adoption is still permitted for any interim or annual financial statements not yet issued. The Company expects to disclose the adoption of this standard for the fiscal year ending December 31, 2021. The Company is currently evaluating the impact of this standard on its consolidated financial statements including the timing of its adoption. The Company anticipates electing several practical expedients that permit the Company not to reassess (1) whether a contract is or contains a lease, (2) the classification of existing leases, and (3) whether previously capitalized initial direct costs would qualify for capitalization under ASC 842. The Company expects that the adoption of this new standard will have a material impact on its balance sheet. The most significant impact would be the recognition of operating lease right-of-use assets and liability. The standard is not expected to have a material impact to the Company's consolidated statements of income and cash flows.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. FASB issued ASU 2019-05 in May 2019, ASU 2019-08 and ASU 2019-11 in November 2019 for codification improvements of Topic 326. The new standard revises the accounting requirements related to the measurement of credit losses and will require organizations to measure all expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts about collectability. Assets must be presented in the financial statements at the net amount expected to be collected. In November 2019, the FASB issued ASU 2019-10, which defers the effective date of ASU 2016-13 for public companies that are eligible to be smaller reporting companies and all other companies, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. In February 2020, the FASB issued ASU 2020-02, which provides guidance regarding methodologies, documentation, and internal controls related to expected credit losses. The Company is currently evaluating the impact of this standard on its consolidated financial statements but does not expect the standard will have a material impact on the Company's consolidated financial statements. The Company expects to disclose the adoption of this standard for the fiscal year ending December 31, 2021.
In May 2021, the FASB issued ASU 2021-04 “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” which clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. An entity should measure the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as follows: i) for a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a “debt” or “debt instrument”), as the difference between the fair value of the modified or exchanged written call option and the fair value of that written call option immediately before it is modified or exchanged; ii) for all other modifications or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option immediately before it is modified or exchanged. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. The Company is currently evaluating the impact of this update on its consolidated financial statements. While the Company does not expect the adoption of ASU 2021-04 to materially impact the Company's consolidated financial statements and related disclosures because it does not currently anticipate modifications to its outstanding equity-classified written call options, the impact on the Company's consolidated financial statements and disclosures will depend on the facts and circumstances of any specific future transactions.
11


SI-BONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

3. Marketable Securities

All of the Company's marketable securities were available-for-sale and were classified based on their maturities. Marketable securities with remaining maturities at the date of purchase of three months or less are classified as cash equivalents. Short-term investments are securities that original maturity or remaining maturity is greater than three months and not more than twelve months. Long-term investments are securities for which the original maturity or remaining maturity is greater than twelve months.

The table below summarizes the marketable securities:
September 30, 2021
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
(in thousands)
Money market funds$54,218 $— $— $54,218 
Cash equivalents54,218 — — 54,218 
U.S. treasury securities52,140 3  52,143 
Corporate bonds15,373  (3)15,370 
Commercial paper33,475   33,475 
Short-term investments100,988 3 (3)100,988 
Total marketable securities$155,206 $3 $(3)$155,206 
December 31, 2020
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
(in thousands)
Money market funds$45,948 $— $— $45,948 
Commercial paper1,400 — — 1,400 
Cash equivalents47,348 — — 47,348 
U.S. treasury securities74,779 4 (7)74,776 
Corporate bonds8,940 4 (6)8,938 
Commercial paper59,137   59,137 
Short-term investments142,856 8 (13)142,851 
Total marketable securities$190,204 $8 $(13)$190,199 
Unrealized gains and losses on available-for-sale securities are recorded in accumulated other comprehensive income (loss) on the condensed consolidated balance sheets. The Company evaluates its investments to assess whether those in unrealized loss positions are other-than-temporarily impaired. The Company considers impairments to be other-than-temporary if it is related to deterioration in credit risk or if it is likely the Company will sell the securities before the recovery of their cost basis. The Company did not identify any of its marketable securities as other-than-temporarily impaired as of September 30, 2021 or December 31, 2020.

12


SI-BONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

4. Fair Value Measurement
Carrying amounts of certain of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities and market interest rates, if applicable. The carrying value of the Company’s long-term debt also approximates fair value based on management’s estimation that a current interest rate would not differ materially from the stated rate. There were no other financial assets or liabilities that required fair value hierarchy measurements and disclosures for the periods presented.
The table below summarizes the fair value of the Company’s marketable securities measured at fair value on a recurring basis based on the three-tier fair value hierarchy:
September 30, 2021
Level 1Level 2Level 3Total
(in thousands)
Marketable securities
Money market funds
$54,218 $ $ $54,218 
U.S. treasury securities52,143   52,143 
Corporate bonds 15,370  15,370 
Commercial paper 33,475  33,475 
Total marketable securities$106,361 $48,845 $ $155,206 
December 31, 2020
Level 1Level 2Level 3Total
(in thousands)
Marketable securities
Money market funds
$45,948 $ $ $45,948 
U.S. treasury securities74,776   74,776 
Corporate bonds 8,938  8,938 
Commercial paper 60,537  60,537 
Total marketable securities$120,724 $69,475 $ $190,199 

13


SI-BONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

5. Balance Sheet Components
Inventory
As of September 30, 2021 and December 31, 2020, inventory consisted entirely of finished goods.
Property and Equipment, net:    
September 30, 2021December 31, 2020
 (in thousands)
Machinery and equipment
$9,650 $6,342 
Construction in progress
2,906 1,692 
Computer and office equipment
878 714 
Leasehold improvements
503 503 
Furniture and fixtures
310 233 
14,247 9,484 
Less: Accumulated depreciation and amortization
(6,334)(4,957)
$7,913 $4,527 
            
Construction in progress consists of cost of individual components of a custom instrument set used for surgical placement of the Company’s products that have not yet been placed into service of $2.8 million and construction costs related to the new lease in Santa Clara of $0.1 million. Depreciation expense was $0.6 million and $0.3 million for the three months ended September 30, 2021 and 2020, respectively, and $1.4 million and $0.8 million for the nine months ended September 30, 2021 and 2020, respectively.
Accrued Liabilities and Other:
September 30, 2021December 31, 2020
 (in thousands)
Accrued compensation and related expenses$8,501 $9,175 
    Accrued professional services 719 511 
Others1,205 513 
$10,425 $10,199 

6. Commitments and Contingencies
Operating Leases
The Company has a non-cancelable operating lease for an office building space, located in Santa Clara, California which expires in May 2025. The Company also has non-cancelable operating leases for its office building spaces in Gallarate, Italy and Knaresborough, United Kingdom, which expire in August 2027 and December 2025, respectively. Effective April 30, 2021, the Company terminated its office lease in Mannheim, Germany, and commenced a new lease that can be terminated at any time with six months written notice to the landlord. Further, the Company also leases vehicles under operating lease arrangements for certain of its personnel in Europe which expire at various times throughout 2021 to 2025. In August 2021, the Company signed a new lease for 19,534 square feet of research and development and warehouse space in Santa Clara, California. The term of the new lease will commence on November 1, 2021 and will terminate on October 31, 2026, with an option to renew for one additional three year term.
Rent expense is recorded over the lease terms on a straight-line basis. Rent expenses charged to operations under operating leases were $0.3 million for the three months ended September 30, 2021 and 2020, and $0.9 million for the nine months ended September 30, 2021 and 2020, respectively.

14


SI-BONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The table below summarizes aggregate future minimum lease payments under all leases as of September 30, 2021:

Year ending December 31,(in thousands)
Remainder of 2021$378 
20221,641 
20231,559 
20241,510 
2025987 
Thereafter540 
$6,615 
Purchase Commitments and Obligations
The Company has certain purchase commitments related to its inventory management and training materials with certain suppliers wherein the Company is required to provide forecasts and purchase certain amounts included in such forecasts. The contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude orders for goods and services entered into in the normal course of business that are not enforceable or legally binding. These outstanding commitments amounted to $1.3 million and $0.3 million as of September 30, 2021 and December 31, 2020, respectively.

Indemnification
The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third-party with respect to the Company’s technology. The term of these indemnification agreements is generally perpetual. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future, but have not yet been made.
The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual.
The Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. No liability associated with such indemnifications has been recorded to date.
7. Borrowings
Term Loan
The following table summarizes the outstanding borrowings from the term loan described below, as of the dates presented:
September 30, 2021December 31, 2020
 (in thousands)
Principal outstanding and final fee$35,700 $41,000 
Less: Unamortized debt issuance costs(107)(661)
          Unaccreted value of final fee(671)(884)
Outstanding debt, net of debt issuance costs and unaccreted value of final fee$34,922 $39,455 
Classified as:
Long-term borrowings$34,922 $39,455 

In October 2017, the Company entered into a term loan with Biopharma Credit Investments IV Sub LP (“Pharmakon”) in for total loan proceeds of $40.0 million (the “Pharmakon Term Loan”). The Pharmakon Term Loan included an interest-only period for 35 months through September 2020 and then equal quarterly principal payments plus interest through December 2022. The
15


SI-BONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Pharmakon Term Loan carried a fixed interest rate of 11.5% and allowed for early prepayment. The prepayment penalty fee was equal to the remaining interest due if prepaid within the first 30 months, a 2% penalty for months 31-48, and a 1% penalty for months 49-60. The Company paid in full and terminated the Pharmakon Term Loan in May 2020.

The outstanding debt as of December 31, 2020 is related to a term loan pursuant to the Loan and Security Agreement dated May 29, 2020, entered into by the Company with Solar Capital Partners (“Solar”). Pursuant to the Loan and Security Agreement, Solar provided an aggregate principal amount of $40.0 million term loan (the “Solar Term Loan”). The total debt issuance costs of $0.8 million associated with the Solar Term Loan were recorded in the condensed consolidated balance sheet as a direct deduction from the carrying amount of the loan, and are amortized as a component of interest expense using straight-line method over the life of the term loan. In accordance with the Loan and Security Agreement with Solar, the Company paid in full and terminated the Pharmakon Term Loan, which was accounted for as debt extinguishment in accordance with the accounting standards. The Company recognized the unamortized debt issuance costs of $0.7 million and the prepayment penalty and lender fees of $0.8 million related to Pharmakon Term Loan as a loss on debt extinguishment. The costs and fees are reflected as interest expense in the consolidated statement of operations for the year ended December 31, 2020. The Solar Term Loan bore interest at a rate per annum equal to 9.40% plus London Interbank Offered Rate (“LIBOR”), payable monthly in arrears. LIBOR means the greater of (i) 0.33% or (ii) one-month LIBOR (or a comparable replacement rate to be determined by the collateral agent if the LIBOR is no longer available), which rate shall reset monthly. The Solar Term Loan included an interest-only period of 36 months through June 2023, and then repaid in equal monthly principal payments plus interest through June 1, 2025. Pursuant to the Loan and Security Agreement with Solar, the Company could voluntarily prepay the Solar Term Loan, in full or in part, but only in increments of $10.0 million, for a prepayment premium in an amount equal to 3.0% of the principal if prepaid in year one, 1.25% of the principal if prepaid in year two, and 0.50% of the principal if prepaid in year three or later. The Solar Term Loan was secured by substantially all of the Company’s assets. The Company was also obligated to pay a final fee equal to $1.0 million or 2.5% of the aggregate principal amount of the Solar Term Loan, which was fully earned by Solar on the effective date of the Loan and Security Agreement with Solar. With respect to the Solar Term Loan, this final fee shall be due and payable on the earliest of (i) the maturity date, (ii) the acceleration of the loan balance or (iii) its full prepayment, refinancing, substitution or replacement. The final fee was included within the long-term borrowings and was accreted to interest expense using straight-line method over the life of the term loan. The Company paid in full and terminated the Solar Term Loan in August 2021.

The outstanding debt as of September 30, 2021 is related to a term loan pursuant to the Loan and Security Agreement dated August 12, 2021 (the “Effective Date”), entered into by the Company with Silicon Valley Bank (“SVB”). Pursuant the agreement, SVB provided an aggregate principal amount of $35.0 million to the Company (the “SVB Term Loan”). The Company used the proceeds of the SVB Term Loan to repay in full and terminate the Solar Term Loan, which was accounted for as debt extinguishment in accordance with the accounting standards. The Company recognized the unamortized debt issuance costs and unaccreted value of final fee of $1.3 million and the prepayment penalty and lender fees of $0.5 million related to Solar Term Loan as a loss on debt extinguishment. The costs and fees are reflected as interest expense in the condensed consolidated statement of operations for the three and nine months ended September 30, 2021. The total debt issuance costs of $0.1 million associated with the SVB Term Loan were recorded in the condensed consolidated balance sheet as a direct deduction from the carrying amount of the loan, and are amortized as a component of interest expense using straight-line method over the life of the term loan. The SVB Term Loan matures (the “Maturity Date”) on either (a) August 1, 2025 or (b) August 1, 2026 dependent on the Company’s achievement of a certain financial performance milestone as of December 31, 2022, as set forth in the Loan Agreement. Interest on the SVB Term Loan is payable monthly at an annual rate set at the greater of (a) 5.75% and (b) prime rate as published in the Wall Street Journal plus 2.5%. Commencing on September 1, 2023, the Company will be required to make monthly principal amortization payments. The Company may elect to prepay the SVB Term Loan prior to the Maturity Date subject to a prepayment fee equal to 1% if the prepayment occurs prior to the second anniversary of the Effective Date and % if the prepayment occurs on or at any time after the second anniversary of the Effective Date. The SVB Term Loan is secured by substantially all the Company's assets other than the Company's intellectual property. The Company is also obligated to pay a final payment equal to $0.7 million or 2% of the aggregate principal amount of the SVB Term Loan, which is considered fully earned by SVB on the effective date of the Loan and Security Agreement with SVB. This final payment shall be due and payable on the earliest of (i) the maturity date, (ii) the full repayment of the loan, (iii) permitted prepayment and mandatory prepayment upon an acceleration as specified in the agreement or (iv) the termination of the agreement. The final payment is included within the long-term borrowings and is accreted to interest expense using straight-line method over the life of the term loan.

The effective interest rate related to the SVB Term Loan and Solar Term Loan (excluding the write-down of unamortized debt issuance costs and prepayment penalty related to the Solar Term Loan) was 8.5% for both the three and nine months ended September 30, 2021. The effective interest rate related to the Solar Term Loan and Pharmakon Term Loan (excluding the write-down of unamortized debt issuance costs and prepayment penalty related to the Pharmakon Term Loan) was 10.8% and 11.6% for the three and nine months ended September 30, 2020, respectively.

16


SI-BONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The table below summarizes the future principal and final fee payments under the SVB Term Loan as of September 30, 2021:
Year ending December 31,(in thousands)
2021 (remaining three months)$ 
2022 
20237,292 
202417,500 
202510,908 
Total principal and final fee payments$35,700 
The Loan Agreement includes affirmative and negative covenants applicable to the Company and certain of its foreign subsidiaries. The affirmative covenants include, among others, covenants requiring the Company to maintain its legal existence and governmental compliance, deliver certain financial reports, and maintain insurance coverage. The negative covenants include, among others, restrictions regarding transferring collateral, pledging the Company's intellectual property to other parties, engaging in mergers or acquisitions, paying dividends or making other distributions, incurring indebtedness, transacting with affiliates, and entering into certain investments, in each case subject to certain exceptions. As of September 30, 2021, the Company was in compliance with all debt covenants.
CARES Act
On March 27, 2020, the U.S. federal government enacted the “Coronavirus Aid, Relief and Economic Security (CARES) Act,” which, among other things, allowed employers to defer the deposit and payment of an employer's share of social security taxes through December 31, 2020. The Company recorded a total liability of $1.0 million related to the deferral of the social security taxes of which $0.5 million is included in each accrued liabilities and other and other long-term liabilities in the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.

8. Stock-Based Incentive Compensation Plans
Stock Options

The table below summarizes the stock option activity for the nine months ended September 30, 2021:
Number of
Shares
Weighted-
Average
Exercise
Price
Outstanding as of December 31, 20202,405,957 $8.54
Exercised
(317,001)7.34
Canceled and forfeited(25,217)15.78
Outstanding as of September 30, 20212,063,739 10.00
As of September 30, 2021, the unrecognized compensation cost related to stock options was $1.7 million, which is expected to be recognized over a period of approximately 1.2 years.

17


SI-BONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

There were no stock options granted during the three months ended September 30, 2020 and nine months ended September 30, 2021. The table below summarizes the weighted average grant date fair value per share and the assumptions used to estimate the grant date fair value using the Black-Scholes option-pricing model of the stock options granted in the nine months ended September 30, 2020:
        
Nine Months Ended September 30,
2020
Weighted average grant date fair value per share
$8.37
Expected term (years)
5.5to7.0
Expected volatility
46.7%to47.2%
Risk-free interest rate