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Document And Entity Information
9 Months Ended
Sep. 30, 2012
Nov. 02, 2012
Entity Registrant Name TRANS1 INC
Entity Central Index Key 0001230355
Current Fiscal Year End Date --12-31
Entity Filer Category Smaller Reporting Company
Trading Symbol tson
Entity Common Stock, Shares Outstanding 27,287,001
Document Type 10-Q
Amendment Flag false
Document Period End Date Sep 30, 2012
Document Fiscal Period Focus Q3
Document Fiscal Year Focus 2012
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Consolidated Statements of Operations and Comprehensive Loss (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Revenue $ 3,198 $ 4,696 $ 10,441 $ 15,163
Cost of revenue 838 1,044 2,747 3,513
Gross profit 2,360 3,652 7,694 11,650
Operating expenses:
Research and development 1,361 1,047 3,937 3,841
Sales and marketing 4,453 4,602 15,124 16,656
General and administrative 2,297 1,298 6,403 4,522
Total operating expenses 8,111 6,947 25,464 25,019
Operating loss (5,751) (3,295) (17,770) (13,369)
Other income (expense), net (114) (32) (146) 7
Net loss (5,865) (3,327) (17,916) (13,362)
Other comprehensive loss:
Foreign currency translation adjustments 1 (12) 1 2
Comprehensive loss $ (5,864) $ (3,339) $ (17,915) $ (13,360)
Net loss per common share - basic and diluted (in dollars per share) $ (0.22) $ (0.16) $ (0.66) $ (0.64)
Weighted average common shares outstanding - basic and diluted (in shares) 27,275 21,288 27,258 21,031
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Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Assets
Cash and cash equivalents $ 27,233 $ 38,724
Short-term investments 0 6,027
Accounts receivable, net 2,076 2,522
Inventory 5,163 4,525
Prepaid expenses and other assets 387 680
Total current assets 34,859 52,478
Property and equipment, net 2,291 1,554
Total assets 37,150 54,032
Liabilities and Stockholders' Equity
Accounts payable 2,626 3,303
Accrued expenses 1,723 1,203
Total current liabilities 4,349 4,506
Noncurrent liabilities 86 26
Commitments and contingencies (Note 9)      
Stockholders' equity:
Common stock, $0.0001 par value; 75,000,000 shares authorized, 27,274,823 and 27,244,059 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively 3 3
Additional paid-in capital 159,533 158,403
Accumulated other comprehensive income 14 13
Accumulated deficit (126,835) (108,919)
Total stockholders' equity 32,715 49,500
Total liabilities and stockholders' equity $ 37,150 $ 54,032
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Consolidated Balance Sheets [Parenthetical] (USD $)
Sep. 30, 2012
Dec. 31, 2011
Common stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Common stock, shares authorized 75,000,000 75,000,000
Common stock, shares issued 27,274,823 27,244,059
Common stock, shares outstanding 27,274,823 27,244,059
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Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Cash flows from operating activities:
Net loss $ (17,916) $ (13,362)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 794 473
Stock-based compensation 1,062 1,254
Allowance for excess and obsolete inventory 109 512
(Reversal of) provision for bad debts (27) 87
Loss on disposal of fixed assets 261 49
Changes in operating assets and liabilities:
Decrease in accounts receivable 473 156
Increase in inventory (747) (867)
Decrease in prepaid expenses 294 140
Decrease in accounts payable (678) (316)
Increase (decrease) in accrued expenses 581 (701)
Net cash used in operating activities (15,794) (12,575)
Cash flows from investing activities:
Purchases of property and equipment (1,793) (436)
Purchases of investments 0 (16,102)
Sales and maturities of investments 6,027 16,096
Net cash provided by (used in) investing activities 4,234 (442)
Cash flows from financing activities:
Net proceeds from issuance of common stock 0 18,274
Proceeds from exercise of stock options 68 187
Net cash provided by financing activities 68 18,461
Effect of exchange rate changes on cash and cash equivalents 1 2
Net increase (decrease) in cash and cash equivalents (11,491) 5,446
Cash and cash equivalents, beginning of period 38,724 24,461
Cash and cash equivalents, end of period $ 27,233 $ 29,907
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Description of Business
9 Months Ended
Sep. 30, 2012
Organization, Consolidation and Presentation Of Financial Statements [Abstract]
Nature of Operations [Text Block]
1. Description of Business

 

TranS1 Inc., a Delaware corporation (the “Company”), was incorporated in May 2000 and is headquartered in Wilmington, North Carolina. The Company is a medical device company focused on designing, developing and marketing products to treat degenerative conditions of the spine affecting the lower lumbar region. The Company operates in one business segment. The Company currently markets the AxiaLIF® family of products for single and two level lumbar fusion, the VEOTM lateral access and interbody fusion system, the Vectre lumbar posterior fixation system and Bi-OsteticTM bone void filler, a biologics product. All of the Company’s AxiaLIF products are delivered using its pre-sacral approach. The Company also markets products that may be used with its surgical approach, including bowel retractors, a bone graft harvesting system and additional discectomy tools. The AxiaLIF 1L product was commercially released in January 2005. The AxiaLIF 2L™ product was commercially released in Europe in the fourth quarter of 2006 and in the United States in the second quarter of 2008. The AxiaLIF 2L product was discontinued in 2010 after the Company launched its AxiaLIF 2L+™ product in July 2010. The Company commercially launched its next generation Vectre facet screw system in April 2010. In the first quarter of 2010, the Company entered into an agreement to distribute Bi-Ostetic bone void filler, a biologics product. The Company commercially launched its AxiaLIF 1L+ product in September 2011. The Company commercially launched its VEO lateral access and interbody fusion system in November 2011 in the United States and in July 2012 in the European Union. The Company sells its products through a direct sales force, independent sales agents and independent distributors.

 

The Company has forty-five issued United States patents, fourteen pending patent applications or provisional patent applications in the United States, eight issued European patents, seven issued Japanese patents, and seven foreign patent application families as counterparts of U.S. cases. The issued and pending patents cover, among other things, (i) the Company’s method for performing trans-sacral procedures in the spine, including diagnostic or therapeutic procedures, and trans-sacral introduction of instrumentation or implants, (ii) apparatus for conducting these procedures including access, disc preparation and implantation including the current TranS1 instruments individually and in kit form, (iii) implants for fusion and motion preservation in the spine, and (iv) a lateral access and interbody fusion system.

 

The Company owns eight trademark registrations in the United States, nine trademark registrations in the European Union and two registered trademarks in Canada. The Company also owns two pending trademark applications in the United States, four pending trademark applications in China and one pending trademark application in the European Union.

 

On September 26, 2011, the Company completed a public offering of 6,200,000 shares of its common stock at an offering price of $3.25 per share. The offering resulted in aggregate proceeds to the Company of approximately $18.2 million, net of underwriting discounts, commissions and offering expenses, and has been included in stockholders' equity as common stock and additional paid-in capital. At September 30, 2012 and December 31, 2011, there were 27,274,823 and 27,244,059 shares of common stock issued and outstanding, respectively, and there were no shares of preferred stock issued and outstanding.

 

The Company is subject to a number of risks similar to other similarly-sized companies in the medical device industry. These risks include, without limitation, acceptance and continued use of the Company’s products by surgeons, the lack of clinical data about the efficacy of these products, uncertainty of reimbursement from third-party payors, cost pressures in the healthcare industry, competitive pressures from substitute products and larger companies, the historical lack of profitability, the dependence on key employees, regulatory approval and market acceptance for new products, compliance with complex and evolving healthcare laws and regulations, uncertainty surrounding the outcome of the matters relating to the subpoena issued to the Company by the Department of Health and Human Services, Office of Inspector General, the reliance on a limited number of suppliers to provide these products, changes in economic conditions, the ability to effectively manage a sales force to meet the Company’s objectives and the ability to conduct successful clinical studies.

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Basis of presentation
9 Months Ended
Sep. 30, 2012
Accounting Policies [Abstract]
Basis of Presentation and Significant Accounting Policies [Text Block]
2. Basis of presentation

 

The Company has prepared the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC. The consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011. The accompanying unaudited interim consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of the Company’s management, necessary for a fair statement of the Company’s consolidated financial position, results of operations and cash flows for the periods presented. These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The principal estimates relate to accounts receivable reserves, inventory reserves, stock-based compensation, accrued expenses and income tax valuations. Actual results could differ from those estimates. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. All intercompany accounts and transactions have been eliminated in consolidation.

 

Impact of Recently Issued Accounting Standards

 

In May 2011, the Financial Accounting Standard Board (“FASB”) issued new authoritative guidance to provide a consistent definition of fair value and ensure that fair value measurements and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. This guidance changes certain fair value measurement principles and enhances the disclosure requirements for fair value measurements. This guidance was effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively. The Company implemented this guidance in the first quarter of 2012 and it did not have a material impact on its financial statements.

 

In June 2011, the FASB issued guidance on the presentation of comprehensive income. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity and requires the presentation of other comprehensive income in a single continuous statement, or in two separate, but consecutive, statements. This guidance was effective for fiscal years and interim periods beginning after December 15, 2011. The Company implemented this guidance in the first quarter of 2012 and it did not have a material effect on its financial statements.

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Income Taxes
9 Months Ended
Sep. 30, 2012
Income Tax Disclosure [Abstract]
Income Tax Disclosure [Text Block]
3. Income Taxes

 

No provisions for federal or state income taxes have been recorded as the Company has incurred net operating losses since inception.

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Net Loss Per Common Share
9 Months Ended
Sep. 30, 2012
Earnings Per Share [Abstract]
Earnings Per Share [Text Block]

 

4. Net Loss Per Common Share

 

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss available to common stockholders per common share is computed by dividing net loss by the weighted average number of common shares and dilutive potential common share equivalents then outstanding. The Company’s potential dilutive common shares, which consist of shares issuable upon the exercise of stock options, have not been included in the computation of diluted net loss per share for all periods as the result would be anti-dilutive.

 

The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share as the result would be anti-dilutive as of the end of each period presented:

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2012     2011     2012     2011  
                                 
Weighted average stock options outstanding     3,409,083       2,790,581       3,224,660       2,546,090

 

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Cash, Cash Equivalents and Investments
9 Months Ended
Sep. 30, 2012
Cash and Cash Equivalents [Abstract]
Cash and Cash Equivalents Disclosure [Text Block]
5. Cash, Cash Equivalents and Investments

 

The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents include money market treasury funds. Short-term investments consist of U.S. agency backed debt instruments.

 

At September 30, 2012, the Company held certain assets that are required to be measured at fair value on a recurring basis. These assets include available for sale securities classified as cash equivalents. Accounting Standards Codification 820-10 requires the valuation of investments using a three-tiered approach, which requires that fair value measurements be classified and disclosed in one of three tiers. These tiers are: Level 1, defined as quoted prices in active markets for identical assets or liabilities; Level 2, defined as valuations based on observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable input data; and Level 3, defined as valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants.

 

Cash and available for sale securities classified as Level 1 assets were:

 

    September 30,     December 31,  
    2012     2011  
    (In thousands)  
Cash and cash equivalents   $ 27,233     $ 38,340  
Short-term investments     0       6,027  
Total cash and available for sale securities   $ 27,233     $ 44,367  

 

The Company had no Level 2 or Level 3 assets or liabilities at September 30, 2012 or December 31, 2011.

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Accounts Receivable, Net
9 Months Ended
Sep. 30, 2012
Receivables [Abstract]
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
6. Accounts Receivable, Net

 

The following table presents the components of accounts receivable:

 

    September 30,     December 31,  
    2012     2011  
    (In thousands)  
Gross accounts receivable   $ 2,325     $ 2,871  
Allowance for uncollectible accounts     (249 )     (349 )
Total accounts receivable, net   $ 2,076     $ 2,522  
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Inventories
9 Months Ended
Sep. 30, 2012
Inventory Disclosure [Abstract]
Inventory Disclosure [Text Block]
7. Inventories

 

The following table presents the components of inventories:

 

    September 30,     December 31,  
    2012     2011  
    (In thousands)  
Finished goods   $ 2,512     $ 1,771  
Work-in-process     2,427       2,515  
Raw materials     224       239  
Total inventories   $ 5,163     $ 4,525
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Accrued Expenses
9 Months Ended
Sep. 30, 2012
Payables and Accruals [Abstract]
Accounts Payable and Accrued Liabilities Disclosure [Text Block]
8. Accrued Expenses

 

The following table presents the components of accrued expenses:

 

    September 30,     December 31,  
    2012     2011  
    (In thousands)  
Bonus   $ 466     $ 351  
Vacation     326       136  
Commission     311       365  
Legal and professional fees     247       175  
Restructuring reserve     88       0  
Travel and entertainment     61       23  
Franchise taxes     48       91  
Other     176       62  
Total accrued expenses   $ 1,723     $ 1,203  
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Contingencies
9 Months Ended
Sep. 30, 2012
Commitments and Contingencies Disclosure [Abstract]
Contingencies Disclosure [Text Block]
9. Contingencies

 

In October 2011, the Company received a subpoena issued by the Department of Health and Human Services, Office of Inspector General, under the authority of the federal healthcare fraud and false claims statutes. The subpoena seeks documents for the period January 1, 2008 through October 6, 2011. The Company is cooperating with the government’s request and is in the process of responding to the subpoena. The Company and its counsel have met with representatives from the government several times during the past four months and continue to work toward a conclusion to this matter. The Company is unable to predict what action, if any, might be taken in the future by the Department of Health and Human Services, Office of Inspector General or other governmental authorities as a result of the matters related to this subpoena or what impact, if any, the outcome of these matters might have on the Company’s consolidated financial position, results of operations, or cash flows. No claims have been made against the Company at this time. The Company’s liability, if any, resulting from this investigation cannot be estimated and as such, the Company has not recorded any liability within the condensed consolidated financial statements in relation to this matter.

 

In January 2012, the Company received notice that a class action lawsuit had been filed in the U.S. District Court Eastern District, North Carolina, on behalf of a class consisting of all persons other than the defendants who purchased the Company’s common stock between February 21, 2008 and October 17, 2011. The Company is in the process of responding to this lawsuit. The Company is unable to predict what impact, if any, the outcome of this matter might have on the Company’s consolidated financial position, results of operations, or cash flows.

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Subsequent Event
9 Months Ended
Sep. 30, 2012
Subsequent Events [Abstract]
Subsequent Events [Text Block]
10. Subsequent Event

 

In October 2012, the Company entered into a distribution agreement with Jiade Sunshine (“Jiade”), pursuant to which Jiade will be the exclusive distributor of AxiaLIF products in the People’s Republic of China, with the exception of Hong Kong, Macau and Taiwan. Under the agreement, Jiade placed an initial order for $1,360,000, which is expected to be shipped in the fourth quarter of 2012, and is required to place additional orders on at least an annual basis for a specified minimum amount of products over the life of the agreement.

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Net Loss Per Common Share (Tables)
9 Months Ended
Sep. 30, 2012
Earnings Per Share [Abstract]
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share as the result would be anti-dilutive as of the end of each period presented:

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2012     2011     2012     2011  
                                 
Weighted average stock options outstanding     3,409,083       2,790,581       3,224,660       2,546,090
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Cash, Cash Equivalents and Investments (Tables)
9 Months Ended
Sep. 30, 2012
Cash and Cash Equivalents [Abstract]
Available-for-sale Securities [Table Text Block]

Cash and available for sale securities classified as Level 1 assets were:

 

    September 30,     December 31,  
    2012     2011  
    (In thousands)  
Cash and cash equivalents   $ 27,233     $ 38,340  
Short-term investments     0       6,027  
Total cash and available for sale securities   $ 27,233     $ 44,367  
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Accounts Receivable, Net (Tables)
9 Months Ended
Sep. 30, 2012
Receivables [Abstract]
Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

The following table presents the components of accounts receivable:

 

    September 30,     December 31,  
    2012     2011  
    (In thousands)  
Gross accounts receivable   $ 2,325     $ 2,871  
Allowance for uncollectible accounts     (249 )     (349 )
Total accounts receivable, net   $ 2,076     $ 2,522

 

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Inventories (Tables)
9 Months Ended
Sep. 30, 2012
Inventory Disclosure [Abstract]
Schedule of Inventory, Current [Table Text Block]

The following table presents the components of inventories:

 

    September 30,     December 31,  
    2012     2011  
    (In thousands)  
Finished goods   $ 2,512     $ 1,771  
Work-in-process     2,427       2,515  
Raw materials     224       239  
Total inventories   $ 5,163     $ 4,525
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Accrued Expenses (Tables)
9 Months Ended
Sep. 30, 2012
Payables and Accruals [Abstract]
Schedule of Accrued Liabilities [Table Text Block]

The following table presents the components of accrued expenses:

 

    September 30,     December 31,  
    2012     2011  
    (In thousands)  
Bonus   $ 466     $ 351  
Vacation     326       136  
Commission     311       365  
Legal and professional fees     247       175  
Restructuring reserve     88       0  
Travel and entertainment     61       23  
Franchise taxes     48       91  
Other     176       62  
Total accrued expenses   $ 1,723     $ 1,203  
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Description of Business (Details Textual) (USD $)
In Thousands, except Share data, unless otherwise specified
6 Months Ended 9 Months Ended
Dec. 31, 2011
Sep. 30, 2012
Sep. 30, 2011
Sep. 26, 2011
Common Stock, Shares, Issued 27,244,059 27,274,823 6,200,000
Common Stock Offer Price $ 3.25
Proceeds From Issuance Of Common Stock $ 18,200 $ 0 $ 18,274
Common Stock, Shares, Outstanding 27,244,059 27,274,823
Preferred Stock, Shares Issued 0 0
Preferred Stock, Shares Outstanding 0 0
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Net Loss Per Common Share (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Weighted average stock options outstanding (in shares) 3,409,083 2,790,581 3,224,660 2,546,090
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Cash, Cash Equivalents and Investments (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Total cash and available for sale securities $ 27,233 $ 44,367
Cash and Cash Equivalents [Member]
Total cash and available for sale securities 27,233 38,340
Short-Term Investments [Member]
Total cash and available for sale securities $ 0 $ 6,027
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Accounts Receivable, Net (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Gross accounts receivable $ 2,325 $ 2,871
Allowance for uncollectible accounts (249) (349)
Total accounts receivable, net $ 2,076 $ 2,522
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Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Finished goods $ 2,512 $ 1,771
Work-in-process 2,427 2,515
Raw materials 224 239
Total inventories $ 5,163 $ 4,525
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Accrued Expenses (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2012
Dec. 31, 2011
Bonus $ 466 $ 351
Vacation 326 136
Commission 311 365
Legal and professional fees 247 175
Restructuring reserve 88 0
Travel and entertainment 61 23
Franchise taxes 48 91
Other 176 62
Total accrued expenses $ 1,723 $ 1,203
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Subsequent Event (Details Textual) (USD $)
1 Months Ended
Oct. 31, 2012
Initial Order Expected To Be Shipped $ 1,360,000
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