JUNIPER PHARMACEUTICALS INC - FORM 10-Q/A

JUNIPER PHARMACEUTICALS INC - FORM 10-Q/A - November 14, 2016

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EX-32.2 - EX-32.2 - JUNIPER PHARMACEUTICALS INC	d241025dex322.htm
EX-32.1 - EX-32.1 - JUNIPER PHARMACEUTICALS INC	d241025dex321.htm
EX-31.2 - EX-31.2 - JUNIPER PHARMACEUTICALS INC	d241025dex312.htm
EX-31.1 - EX-31.1 - JUNIPER PHARMACEUTICALS INC	d241025dex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

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

For the quarterly period ended June 30, 2016

☐	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 1-10352

JUNIPER PHARMACEUTICALS, INC.

(Exact name of Registrant as specified in its charter)


Delaware		59-2758596
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

33 Arch Street Boston, Massachusetts		02110
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (617) 639-1500

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). Yes ☒ No ☐

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

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

The number of shares outstanding of the registrant’s common stock as of August 2, 2016: 10,843,752

EXPLANATORY NOTE

Unless the context indicates otherwise, references in this Quarterly Report to “Juniper Pharmaceuticals,” “Juniper,” “the Company,” “we,” “our,” and “us” mean Juniper Pharmaceuticals, Inc. and its subsidiaries.

Description of Restatement

We are filing this Amendment to our Quarterly Report on Form 10-Q (the “Amended Report”), which was originally filed on Form 10-Q on August 4, 2016 (the “Original Report” or “Quarterly Report on Form 10-Q”), to reflect a restatement of our consolidated financial statements.

As described in Note 1 to our consolidated financial statements and as described in additional detail in the Explanatory Note to our Annual Report on Form 10-K/A for the year ended December 31, 2015 filed on November 14, 2016 misstatements were identified in connection with our previous product revenue recognition as well as to the recognition of research and development expenses under a clinical research agreement. The Company determined that the Company’s audited consolidated financial statements for the fiscal years ended December 31, 2013 through December 31, 2015, including the unaudited consolidated financial information for each quarterly period within the fiscal years ended December 31, 2014 and 2015, as reported in the Company’s Annual Report on Form 10-K filed on March 10, 2016 and amended on April 22, 2016, and its unaudited condensed consolidated financial statements for the quarters ended March 31, 2016 and June 30, 2016, and the related quarters in 2015, as reported in the Company’s Quarterly Reports on Form 10-Q filed on May 4, 2016 and August 4, 2016, respectively, should no longer be relied upon due to the errors identified therein, and that a restatement of these financial statements was required.

As of December 31, 2015, management determined that the Company did not maintain effective internal control over financial reporting due to the existence of material weaknesses that resulted in errors identified. As of June 30, 2016, due to the existence of these material weaknesses, management has concluded that the Company’s disclosure controls and procedures were not effective. See Item 4 of this Form 10-Q/A and Item 9A of the 2015 Form 10-K/A for further information.

Items Amended in this Filing

For reasons discussed above, we are filing this Amended Report in order to amend the following items in of our Original Report to the extent necessary to reflect the adjustments discussed above and make corresponding revisions to our financial data cited elsewhere in this Amended Report:

•

Part I, Item 1. Financial Statements (unaudited)

•

Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

•

Part I, Item 4. Controls and Procedures

•

Part II, Item 1A. Risk Factors

In accordance with applicable SEC rules, this Amended Report includes new certifications required by Rule 13a-14 under the Securities Exchange Act of 1934 (“Exchange Act”) from our Chief Executive Officer and our Chief Financial Officer dated as of the date of filing this Amended Report.

Except as noted above, no other information in our Original Report is amended hereby and is repeated herein solely for the reader’s convenience.

In order to preserve the nature and character of the disclosures set forth in the Original Report, except as expressly noted above, this Amended Report speaks as of the date of the filing of the Original Report, and we have not updated the disclosures in this Amended Report to speak as of a later date. All information contained in this Amended Report is subject to updating and supplementing as provided in our reports filed with the SEC subsequent to the date of the Original Report. Accordingly, this Amended Report should be read in conjunction with our filings made with the SEC subsequent to the filing of our Original Report, including any amendment to these filings.

Juniper Pharmaceuticals, Inc.

Table of Contents


		Page

	Part I—Financial Information

Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015		1
	Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 2016 and 2015		2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six month periods ended June 30, 2016 and 2015		3
	Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2016 and 2015		4

	Notes to Condensed Consolidated Financial Statements (unaudited)		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		40
Item 4.	Controls and Procedures		40

	Part II—Other Information

Item 1.	Legal Proceedings		41
Item 1A.	Risk Factors		41
Item 6.	Exhibits		43
Signatures			44

Juniper Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)


	June 30, 2016			December 31, 2015
	(As Restated)			(As Restated)
Assets
Current assets:
Cash and cash equivalents	$	12,975		$	13,901
Accounts receivable, net		6,154			7,538
Inventories		3,937			3,623
Prepaid expenses and other current assets		2,033			872

Total current assets		25,099			25,934
Property and equipment, net		12,184			12,850
Intangible assets, net		1,236			1,598
Goodwill		9,055			10,010
Other assets		168			185

Total assets	$	47,742		$	50,577

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,831		$	2,004
Accrued expenses and other		3,476			3,430
Deferred revenue		6,014			4,167
Notes payable		219			238

Total current liabilities		13,540			9,839
Deferred revenue, net of current portion		214			710
Notes payable, net of current portion		2,503			2,897
Other noncurrent liabilities		77			69

Total liabilities		16,334			13,515

Commitments and contingencies (See Note 5)
Contingently redeemable series C preferred stock, 0.55 shares issued and outstanding (liquidation preference of $550)		550			550

Stockholders’ equity:
Preferred stock, $0.01 par value; 1,000 shares authorized Series B convertible preferred stock, 0.13 shares issued and outstanding (liquidation preference of $13)		—			—
Common stock $0.01 par value; 150,000 shares authorized; 12,216 issued and 10,803 outstanding at June 30, 2016 and 12,215 issued and 10,802 outstanding at December 31, 2015, respectively		122			122
Additional paid-in capital		289,926			289,464
Treasury stock, at cost (1,413 shares)		(8,601	)		(8,601	)
Accumulated deficit		(247,222	)		(243,311	)
Accumulated other comprehensive loss		(3,367	)		(1,162	)

Total stockholders’ equity		30,858			36,512

Total liabilities and stockholders’ equity	$	47,742		$	50,577

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

Juniper Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(As Restated)			(As Restated)			(As Restated)			(As Restated)
Revenues
Product revenues	$	7,334		$	6,055		$	13,659		$	11,640
Service revenues		3,374			2,714			6,627			5,174
Royalties		902			864			1,801			1,855

Total revenues		11,610			9,633			22,087			18,669
Cost of product revenues		4,182			3,521			8,209			6,633
Cost of service revenues		2,285			2,049			4,608			3,815

Total cost of revenues		6,467			5,570			12,817			10,448
Gross profit		5,143			4,063			9,270			8,221
Operating expenses
Sales and marketing		379			282			651			603
Research and development		3,797			2,132			5,930			3,516
General and administrative		3,244			2,562			6,704			5,136

Total operating expenses		7,420			4,976			13,285			9,255
Loss from operations		(2,277	)		(913	)		(4,015	)		(1,034	)

Interest expense, net		(24	)		(27	)		(50	)		(54	)
Other income		81			37			206			208

Total non-operating income		57			10			156			154
Loss before income taxes		(2,220	)		(903	)		(3,859	)		(880	)
Provision for income taxes		48			3			52			8

Net loss	$	(2,268	)	$	(906	)	$	(3,911	)	$	(888	)

Basic net loss per common share	$	(0.21	)	$	(0.08	)	$	(0.36	)	$	(0.08	)

Diluted net loss per common share	$	(0.21	)	$	(0.08	)	$	(0.36	)	$	(0.08	)

Basic weighted average common shares outstanding		10,789			10,758			10,789			10,754

Diluted weighted average common shares outstanding		10,789			10,758			10,789			10,754

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

Juniper Pharmaceuticals, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(As Restated)			(As Restated)			(As Restated)			(As Restated)
Net loss	$	(2,268	)	$	(906	)	$	(3,911	)	$	(888	)
Other comprehensive (loss) income components:
Foreign currency translation		(1,541	)		1,229			(2,205	)		242

Total other comprehensive (loss) income		(1,541	)		1,229			(2,205	)		242

Comprehensive (loss) income	$	(3,809	)	$	323		$	(6,116	)	$	(646	)

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

Juniper Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2016			2015
	(As Restated)			(As Restated)
Operating activities:
Net loss	$	(3,911	)	$	(888	)
Reconciliation of net income to net cash provided by (used in) operating activities:
Depreciation and amortization		966			1,030
Stock-based compensation expense		475			904
Changes in operating assets and liabilities:
Accounts receivable		903			(1,133	)
Inventories		(314	)		(579	)
Prepaid expenses and other current assets		(391	)		(981	)
Other non-current assets		18			5
Accounts payable		1,873			(37	)
Accrued expenses and other		(616	)		2,076
Deferred revenue		1,519			(435	)

Net cash provided by (used in) operating activities		522			(38	)

Investing activities:
Purchases of property and equipment		(1,202	)		(525	)

Net cash used in investing activities		(1,202	)		(525	)
Financing activities:
Proceeds from exercise of common stock options		—			83
Principal payments on notes payable		(122	)		(118	)
Dividends paid		(14	)		(14	)

Net cash used in financing activities		(136	)		(49	)
Effect of exchange rate changes on cash and cash equivalents		(110	)		(20	)

Net decrease in cash and cash equivalents		(926	)		(632	)
Cash and cash equivalents, beginning of period		13,901			16,762

Cash and cash equivalents, end of period	$	12,975		$	16,130

Supplemental cash flow information
Cash paid for interest	$	44		$	51

Cash paid for income taxes	$	—		$	2

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

Juniper Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(1) Restatement of the Consolidated Financial Statements

Background

On October 18, 2016, during the course of responding to a comment letter from the staff of the U.S. Securities and Exchange Commission, the Company determined that the Company’s audited consolidated financial statements for the fiscal years ended December 31, 2013 through December 31, 2015, including the unaudited consolidated financial information for each quarterly period within the fiscal years ended December 31, 2014 and 2015, as reported in the Company’s Annual Report on Form 10-K filed on March 10, 2016 and amended on April 22, 2016, and its unaudited condensed consolidated financial statements for the quarters ended March 31, 2016 and June 30, 2016, and the related quarters in 2015, as reported in the Company’s Quarterly Reports on Form 10-Q filed on May 4, 2016 and August 4, 2016, respectively, should no longer be relied upon due to errors identified therein, and that a restatement of these financial statements is required.

The revenue related errors relate to the determination that a portion of the invoice price of product sold under the Company’s supply agreement with Ares Trading S.A. (an affiliate of Merck KGaA, Darmstadt, Germany (“Merck KGaA”)) is considered contingent, and therefore not fixed or determinable at the time of shipment. The Company’s previous practice was to record revenue at the time of shipment based on the invoice price, with an adjustment to increase or decrease revenue upon completion of the quarterly reconciliation process. Accordingly, correction of the revenue errors will result in a timing difference for the contingent portion of revenue from the Company’s original methodology. Under the corrected methodology, revenue will be recognized in the period product is shipped to Merck KGaA for the fixed portion only (direct manufacturing cost plus 20%) with the contingent portion of the invoice price initially recorded as deferred revenue and subsequently recognized upon completion of a quarterly reconciliation process that occurs after receiving sell-through information from Merck KGaA on a country-by-country basis.

Additionally, the Company has a contract related to a COL-1077 clinical trial which has been in place since May 2015. During the course of compiling its results for the quarter ended September 30, 2016, the Company identified certain research and development expenses which had been incurred during the year ended December 31, 2015, and research and development expenses incurred during the three months ended March 31, 2016 and June 30, 2016 which had not been properly recorded in the periods to which the expenses related. The restatement reflects the recognition of additional research and development expense in the affected periods, with corresponding adjustments to prepaid expenses and other current assets, and accrued expenses related to those amounts. The additional research and development expenses incurred during the year ended December 31, 2015 were incurred during the three month period ended December 31, 2015, and therefore did not have an impact on the consolidated statements of operations or consolidated statement of comprehensive income (loss) for the three and six month periods ended June 30, 2015 or the consolidated statement of cash flows for the six months ended June 30, 2015. The balances of prepaid expenses and other current assets and accrued expenses in the consolidated balance sheet as of December 31, 2015 have been restated to reflect these corrections.

The effects of the restatement on the Company’s consolidated balance sheet as of June 30, 2016 are as follows (in thousands):


	June 30, 2016
	As Previously Reported			Restatement Adjustments			As Restated
Consolidated Balance Sheet:
Prepaid expenses and other current assets	$	3,290		$	(1,257	)	$	2,033
Total current assets		26,356			(1,257	)		25,099
Total assets		48,999			(1,257	)		47,742
Accrued expenses and other		4,031			(555	)		3,476
Deferred revenue		1,284			4,730			6,014
Total current liabilities		9,365			4,175			13,540
Total liabilities		12,159			4,175			16,334
Accumulated deficit		(241,790	)		(5,432	)		(247,222	)
Total stockholders’ equity		36,290			(5,432	)		30,858
Total liabilities and stockholders’ equity		48,999			(1,257	)		47,742

The effects of the restatement on the Company’s consolidated balance sheet as of December 31, 2015 are as follows (in thousands):


	December 31, 2015
	As Previously Reported			Restatement Adjustments			As Restated
Consolidated Balance Sheet:
Prepaid expenses and other current assets	$	1,674		$	(802	)	$	872
Total current assets		26,736			(802	)		25,934
Total assets		51,379			(802	)		50,577
Accrued expenses and other		4,158			(728	)		3,430
Deferred revenue		1,336			2,831			4,167
Total current liabilities		7,736			2,103			9,839
Total liabilities		11,412			2,103			13,515
Accumulated deficit		(240,406	)		(2,905	)		(243,311	)
Total stockholders’ equity		39,417			(2,905	)		36,512
Total liabilities and stockholders’ equity		51,379			(802	)		50,577

The tables below show the effects of the restatement on the Company’s consolidated statements of operations and consolidated statements of comprehensive (loss) income for the three months ended June 30, 2016 and 2015 (in thousands except for per share data). In each case, the tax effect of the adjustments was considered insignificant.


	Three Months Ended June 30, 2016
	As Previously Reported			Restatement Adjustments			As Restated
Consolidated Statement of Operations:
Product revenues	$	7,609		$	(275	)	$	7,334
Total revenues		11,885			(275	)		11,610
Gross profit		5,418			(275	)		5,143
Research and development		3,550			247			3,797
Total operating expenses		7,173			247			7,420
Loss from operations		(1,755	)		(522	)		(2,277	)
Loss before taxes		(1,698	)		(522	)		(2,220	)
Net loss		(1,746	)		(522	)		(2,268	)
Basis net loss per share	$	(0.16	)	$	(0.05	)	$	(0.21	)
Diluted net loss per share	$	(0.16	)	$	(0.05	)	$	(0.21	)
Consolidated Statement of Comprehensive Loss:
Net loss	$	(1,746	)	$	(522	)	$	(2,268	)
Comprehensive loss		(3,287	)		(522	)		(3,809	)


	Three Months Ended June 30, 2015
	As Previously Reported			Restatement Adjustments			As Restated
Consolidated Statement of Operations:
Product revenues	$	6,635		$	(580	)	$	6,055
Total revenues		10,213			(580	)		9,633
Gross profit		4,643			(580	)		4,063
Loss from operations		(333	)		(580	)		(913	)
Loss before taxes		(323	)		(580	)		(903	)
Net loss		(326	)		(580	)		(906	)
Basis net loss per share	$	(0.03	)	$	(0.05	)	$	(0.08	)
Diluted net loss per share	$	(0.03	)	$	(0.05	)	$	(0.08	)
Consolidated Statement of Comprehensive (Loss) Income:
Net loss	$	(326	)	$	(580	)	$	(906	)
Comprehensive income		903			(580	)		323

The tables below show the effects of the restatement on the Company’s consolidated statements of operations, consolidated statements of comprehensive (loss) income and consolidated statements of cash flows for the six months ended June 30, 2016 and 2015 (in thousands, except per share data). In each case, the tax effect of the adjustments was considered insignificant.


	Six Months Ended June 30, 2016
	As Previously Reported			Restatement Adjustments			As Restated
Consolidated Statement of Operations:
Product revenues	$	15,558		$	(1,899	)	$	13,659
Total revenues		23,986			(1,899	)		22,087
Gross profit		11,169			(1,899	)		9,270
Research and development		5,302			628			5,930
Total operating expenses		12,657			628			13,285
Loss from operations		(1,488	)		(2,527	)		(4,015	)
Loss before taxes		(1,332	)		(2,527	)		(3,859	)
Net loss		(1,384	)		(2,527	)		(3,911	)
Basis net loss per share	$	(0.13	)	$	(0.23	)	$	(0.36	)
Diluted net loss per share	$	(0.13	)	$	(0.23	)	$	(0.36	)
Consolidated Statement of Comprehensive Loss:
Net income	$	(1,384	)	$	(2,527	)	$	(3,911	)
Comprehensive loss		(3,589	)		(2,527	)		(6,116	)
Consolidated Statement of Cash Flows:
Net loss	$	(1,384	)	$	(2,527	)	$	(3,911	)
Prepaid expenses and other current assets		(1,648	)		1,257			(391	)
Accrued expenses and other		13			(629	)		(616	)
Deferred revenue		(380	)		1,899			1,519


	Six Months Ended June 30, 2015
	As Previously Reported			Adjustment			As Restated
Consolidated Statement of Operations:
Product revenues	$	11,510		$	130		$	11,640
Total revenues		18,539			130			18,669
Gross profit		8,091			130			8,221
Loss from operations		(1,164	)		130			(1,034	)
Loss before taxes		(1,010	)		130			(880	)
Net loss		(1,018	)		130			(888	)
Basis net loss per share	$	(0.10	)	$	0.02		$	(0.08	)
Diluted net loss per share	$	(0.10	)	$	0.02		$	(0.08	)
Consolidated Statement of Comprehensive Loss:
Net loss	$	(1,018	)	$	130		$	(888	)
Comprehensive loss		(776	)		130			(646	)
Consolidated Statement of Cash Flows:
Net loss	$	(1,018	)	$	130		$	(888	)
Deferred revenue		(305	)		(130	)		(435	)

(2) Interim Condensed Consolidated Financial Statements

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and related notes that appear in the Annual Report on Form 10-K/A of Juniper Pharmaceuticals, Inc. (“Juniper” or the “Company”) for the year ended December 31, 2015 filed with the SEC on November 14, 2016 (the “2015 Annual Report”). In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of June 30, 2016, and its results of operations for the three months and six months ended June 30, 2016, and 2015, and cash flows for the six months ended June 30, 2016, and 2015. The condensed consolidated balance sheet at December 31, 2015, was derived from audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements. Results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results for the year ending December 31, 2016 or any period thereafter.

Management 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, liabilities, revenues and expenses and related disclosures at the date of the financial statements during the reporting period. Significant estimates are used for, but are not limited to, revenue recognition, allowance for doubtful accounts, inventory reserve, impairment analysis of goodwill and intangibles including their useful lives, research and development accruals, deferred tax assets, liabilities and valuation allowances, and fair value of stock options. On an ongoing basis, management evaluates its estimates. Actual results could differ from those estimates.

Summary of Significant Accounting Policies

Revenue Recognition and Sales Returns Reserves (As Restated)

Revenues include product revenues, which primarily consist of sales of CRINONE to Merck KGaA, royalty revenues, which primarily consist of royalty revenues from Allergan on sales of CRINONE, service revenues, which primarily consist of analytical and consulting services, pharmaceutical development and clinical trial manufacturing services and other revenues.

Product Revenue

Revenues from the sale of products are to be recognized when all of the following criteria are met: persuasive evidence of a sales arrangement exists; delivery has occurred or services have been rendered; the price is fixed or determinable; and collectibility is reasonably assured. Selling prices to Merck KGaA for CRINONE (progesterone gel) are determined on an annual and country-by-country basis and are the greater of (i) a percentage of Merck KGaA’s estimated net selling price, or (ii) Juniper’s direct manufacturing cost plus 20% and are invoiced to Merck KGaA upon shipment. Juniper records revenue at the minimum selling price, which is Juniper’s direct manufacturing cost plus 20% at the time of shipment to Merck KGaA as that amount is considered fixed or determinable. The Company records deferred revenue related to

amounts invoiced above the minimum selling price. Upon receiving sell through information from Merck KGaA on a quarterly and country-by-country basis, the Company records an adjustment to increase revenue to reflect the difference between Merck KGaA’s net selling price and the minimum price recorded at the time of shipment. Any difference between the amounts invoiced at Merck KGaA’s estimated net selling price and Merck KGaA’s actual net selling price are billed or credited to Merck KGaA in the quarter the product is sold through by Merck KGaA. Accordingly, product revenue in each period includes both an amount for product shipped to Merck KGaA in the current period recognized at the minimum purchase price as well as an amount for product shipped by Merck KGaA to its customers in the current period equal to the difference between Merck KGaA’s actual net selling price and the minimum purchase price. Merck KGaA is also entitled to a volume discount based on annual purchases. The Company records reserves against revenue on a quarterly basis to reflect the volume discount expected to be earned by Merck KGaA during the year.

In April 2013, Juniper’s license and supply agreement with Merck KGaA for the sale of CRINONE outside the United States was renewed for an additional five year term, extending the expiration date to May 19, 2020.

Service Revenue

The professional service contracts that Juniper enters into and operates under specifies whether the engagement will be billed on a time-and-materials or a fixed-price basis. These engagements generally last three to six months, although some of Juniper’s engagements can be much longer in duration.

Juniper recognizes substantially all of the Company’s professional services revenues under written contracts when the fee is fixed or determinable, as the services are provided, and only in those situations where collection from the client is reasonably assured. In certain cases Juniper bills clients prior to work being performed, which requires Juniper to defer revenue in accordance with U.S. GAAP. In these cases, these amounts are fully reserved until all criteria for recognizing revenue are met.

Revenues from time-and-materials service contracts are recognized as the services are performed based upon hours worked and contractually agreed-upon hourly rates, as well as indirect fees based upon hours worked.

Service revenues from a majority of Juniper’s fixed-price engagements are recognized on a proportional performance method based on the ratio of costs incurred, substantially all of which are labor-related, to the total estimated project costs. In general, project costs are classified in costs of services and are based on the direct salary of the employees on the engagement plus all direct expenses incurred to complete the engagement, including any amounts billed to Juniper by its vendors. The proportional performance method is used for fixed-price contracts because reasonably dependable estimates of the revenues and costs applicable to various stages of a contract can be made, based on historical experience and the terms set forth in the contract, and are indicative of the level of benefit provided to Juniper’s clients. In the event of a termination, fixed-price contracts generally provide for payment for services rendered up to the termination date.

Service revenues also include reimbursements, which include reimbursement for travel and other out-of-pocket expenses, outside consultants, and other reimbursable expenses.

Royalty revenues, based on sales by licensees, are recorded as revenues when those sales are made by the licensees.

The Company maintains accounts receivable allowances for estimated losses resulting from disputed amounts or the inability of Juniper’s customers to make required payments. Juniper identifies specific collection issues and establishes an accounts receivable allowance based on its historical collection experience, review of client accounts, current trends, and credit policy. If the financial condition of Juniper’s customers were to deteriorate or disputes were to arise regarding the services provided, resulting in an impairment of their ability or intent to make payment, additional allowances may be required. A failure to estimate accurately the accounts receivable allowances and ensure that payments are received on a timely basis could have a material adverse effect on Juniper’s business, financial condition, and results of operations.

Juniper collects value added tax from its customers for revenues generated out of the United Kingdom for which the customer is not tax exempt and remits such taxes to the appropriate governmental authorities. Juniper presents its value added tax on a net basis; therefore, these taxes are excluded from revenues.

Deferred Revenue

The Company’s deferred revenue balance consists of the following at June 30, 2016 and December 31, 2015 (in thousands):


	June 30, 2016		December 31, 2015
	(As Restated)		(As Restated)
Product revenues	$	4,730	$	2,831
Service revenues		480		566
Regional Growth Fund		1,018		1,480

Total	$	6,228	$	4,877

Amounts invoiced but not yet earned on product revenues are recorded as deferred revenue until the Company receives sell through information from Merck KGaA indicating the product has been sold through or otherwise disposed of. Amounts invoiced but not yet earned on service revenue are deferred until such time as performance is rendered or the obligation to perform the service is completed for service revenues. Amounts deferred for product revenue are not settled until sell through information is received from Merck KGaA.

As part of the acquisition of Juniper Pharma Services, Juniper assumed a $2.5 million obligation under a grant arrangement with the Regional Growth Fund on behalf of the Secretary of State for Business, Innovation, and Skills in the United Kingdom. Juniper Pharma Services used this grant to fund the building of its second facility, which includes analytical labs, office space, and a manufacturing facility. As a part of the arrangement, Juniper Pharma Services is required to create and maintain certain full-time equivalent personnel levels through October 2017. As of June 30, 2016, the Company is in compliance with the covenants of the arrangement. The income from the Regional Growth Fund will be recognized in the other income line of the consolidated statement of operations on a decelerated basis through September 30, 2017.

(3) Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market. Components of inventory cost include materials, labor and manufacturing overhead. Inventories consist of the following (in thousands):


	June 30, 2016		December 31, 2015
Raw materials	$	802	$	1,410
Work in process		2,231		1,840
Finished goods		904		373

Total	$	3,937	$	3,623

(4) Goodwill and Intangible Assets

Changes to goodwill during the six months ended June 30, 2016 were as follows (in thousands):


	Total
Balance—December 31, 2015	$	10,010
Effects of foreign currency translation		(955	)

Balance—June 30, 2016	$	9,055

Intangible assets consist of the following at June 30, 2016 and December 31, 2015 (in thousands):


	Trademark			Developed Technology			Customer Relationships			Total
Gross carrying amount—June 30, 2016	$	300		$	1,370		$	1,240		$	2,910
Foreign currency translation adjustment		(45	)		(206	)		(187	)		(438	)
Accumulated amortization		(237	)		(579	)		(420	)		(1,236	)

Balance—June 30, 2016	$	18		$	585		$	633		$	1,236


	Trademark			Developed Technology			Customer Relationships			Total
Gross carrying amount—December 31, 2015	$	300		$	1,370		$	1,240		$	2,910
Foreign currency translation adjustment		(19	)		(83	)		(76	)		(178	)
Accumulated amortization		(215	)		(538	)		(381	)		(1,134	)

Balance—December 31, 2015	$	66		$	749		$	783		$	1,598

Amortization expense related to developed technology is classified as a component of cost of service revenues in the accompanying consolidated statements of operations. Amortization expense related to trademark and customer relationships is classified as a component of general and administrative expenses in the accompanying consolidated statements of operations.

Amortization expense for the three months ended June 30, 2016 was $0.1 million. Amortization expense for the three months ended June 30, 2015 was $0.2 million. Amortization expense for the six months ended June 30, 2016 was $0.2 million. Amortization expense for the six months ended June 30, 2015 was $0.3 million. As of June 30, 2016, amortization expense on existing intangible assets for the next five years is as follows (in thousands):


Year ending December 31,	Total
Remainder of 2016	$	185
2017		313
2018		287
2019		260
2020		191

Total	$	1,236

(5) Debt and other Contractual Obligations

In September 2013, Juniper assumed debt of $3.9 million in connection with its acquisition of Juniper Pharma Services (“JPS”). JPS had entered into a Business Loan Agreement (“Loan Agreement”) covering three loan facilities with Lloyds TSB Bank (“Lloyds”) as administrative agent. JPS had drawn down $3.9 million and as of June 30, 2016 owed $2.7 million. The three loan facilities are each repayable by monthly installments. Repayment began on one facility in February 2013 and the remaining two commenced in October 2013. All facilities are due for repayment over 15 years from the date of drawdown. Two of the facilities bear interest at the Bank of England’s base rate plus 1.95% and 2.55%, respectively. The interest rate at June 30, 2016 for these two facilities was 2.45% and 3.05%, respectively. The third facility is a fixed rate agreement bearing interest at 3.52% per annum. The weighted average interest rate for the three loan facilities for the three months ended June 30, 2016 was 3.00%. The Loan Agreement is secured by the mortgaged property and an unlimited lien on other assets of JPS. The Loan Agreement contains financial covenants that limit the amount of indebtedness JPS may incur, requires JPS to maintain certain levels of net worth, and restricts JPS’s ability to materially alter the character of its business. As of June 30, 2016, the Company is in compliance with all of the covenants under the Loan Agreement.

In September 2013, as part of the acquisition of JPS, Juniper assumed a $2.5 million obligation under a grant arrangement with the Regional Growth Fund on behalf of the Secretary of State for Business, Innovation, and Skills in the United Kingdom. JPS used this grant to fund the building of its second facility, which includes analytical labs, office space, and a manufacturing facility. As part of the arrangement, JPS is required to create and maintain certain full-time equivalent personnel levels through October 2017. As of June 30, 2016, the Company is in compliance with the covenants of the arrangement.

The Regional Growth Fund obligation is recognized in the other income line item in the consolidated statement of operations on a decelerated basis over the obligation period through October 2017. As of June 30, 2016, the obligation’s carrying amount is $1.0 million and it is recorded as deferred revenue on the consolidated balance sheets. Other income associated with the Regional Growth Fund obligation for the three months ended June 30, 2016 and 2015 was $0.2 million and $0.1 million, respectively. Other income associated with the Regional Growth Fund obligation for the six months ended June 30, 2016 and 2015 was $0.3 million and $0.2 million, respectively. The amount of other income on the obligation that will be recognized provided the Company remains in compliance with the covenants will be the following (in thousands):


Year	Total
Remainder of 2016	$	375
2017		643

Total	$	1,018

(6) Intravaginal Ring Technology License

In March 2015, the Company obtained an exclusive worldwide license (“License Agreement”) to the intellectual property rights for a novel segmented intravaginal ring (“IVR”) technology. Due to its novel polymer and segmentation composition, the Company believes the IVR has the potential to deliver one or more drugs, including hormones and larger molecules such as peptides, at different dosages and release rates within a single segmented ring. Drugs such as progesterone and leuprolide¹ have already been tested using the technology and demonstrated sustained release for up to three weeks. This technology was developed by Dr. Robert Langer from the Massachusetts Institute of Technology (“MIT”) and Dr. William Crowley from Massachusetts General Hospital (“MGH”) and Harvard Medical School. Drs. Langer and Crowley have each agreed to serve a three-year term as strategic advisors to the Company in exchange for an upfront one-time payment plus quarterly fees and equity compensation.

Unless earlier terminated by the parties, the License Agreement will remain in effect until the later of (i) the date on which all issued patents and filed patent applications within the licensed patent rights have expired or been abandoned and (ii) one year after the last sale for which a royalty is due under the License Agreement or 10 years after such expiration or abandonment date referred to in (i), whichever is earlier. Juniper has the right to terminate the License Agreement by giving 90 day advance written notice to MGH. MGH has the right to terminate the License Agreement based on our failure to make payments due under the License Agreement, subject to a 15 day cure period, or our failure to maintain the insurance required by the License Agreement. MGH may also terminate the License Agreement based on Juniper’s non-financial default under the License Agreement, subject to a 60 day cure period.

Pursuant to the terms of the License Agreement, Juniper has agreed to reimburse MGH for all costs associated with the preparation, filing, prosecution and maintenance of the licensed patent rights, and has agreed to pay MGH a $50,000 annual license fee on each of the first five year anniversaries of the effective date of the License Agreement, and a $100,000 annual license fee beginning on the sixth anniversary of the effective date of the License Agreement and on each subsequent anniversary thereafter. The annual license fee is creditable against any royalties or sublicense income payable in each calendar year.

Under the terms of the License Agreement, Juniper has agreed to use commercially reasonable efforts to develop and commercialize at least one product and/or process related to the IVR technology, which efforts will include the making of certain minimum annual expenditures in each of the first five years following the effective date of the License Agreement. Juniper has also agreed to pay MGH certain milestone payments totaling up to $1,200,000 tied to the Company’s achievement of certain development and commercialization milestones, and certain annual royalty payments based on net sales of any such patented products or processes developed by Juniper.

¹	Kimball AB et al. A novel approach to administration of peptides in women: Systemic absorption of a GnRH agonist via transvaginal ring delivery system. J Control Release. 2016 Apr 26. pii: S0168-3659(16)30249-8. doi: 10.1016/j.jconrel.2016.04.035.

(7) Segments and Geographic Information

The Company and its subsidiaries currently operate in two segments: product and service. The product segment includes supply chain management for Crinone, the Company’s sole commercialized product. The product segment also includes the royalty stream the Company receives from Allergan for Crinone sales in the United States, and the development of new product candidates. The service segment includes pharmaceutical development, clinical trial manufacturing, and advanced analytical and consulting services for the Company’s customers as well as characterizing and developing pharmaceutical product candidates for the Company’s internal programs and managing the preclinical and clinical manufacturing of COL-1077 and the Company’s IVR technology. In September 2013, the Company acquired JPS, a U.K.-based provider of pharmaceutical development, clinical trial manufacturing, and advanced analytical and consulting services to the pharmaceutical industry. The Company has integrated its supply chain management for its sole commercialized product, Crinone, into those operations and has sought to capture synergies by transferring all operational activities related to its historic business to JPS.

The Company’s largest customer, Merck KGaA, Darmstadt, Germany (“Merck KGaA”) obtains Crinone from the Company through its Switzerland-based subsidiary; it then sells Crinone throughout the world, excluding the United States. The Company’s primary domestic customer, Allergan, Plc (“Allergan”), is responsible for the commercialization and sale of Crinone in the United States. JPS provides services to customers in many jurisdictions; including the European Union, the United States, Australia and Canada. The following tables show selected information by geographic area (in thousands):

Revenues:


	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(As Restated)		(As Restated)		(As Restated)		(As Restated)
United States	$	2,421	$	1,877	$	4,215	$	3,624
Switzerland		7,350		6,111		13,691		11,759
Other countries		1,839		1,645		4,181		3,286

Total	$	11,610	$	9,633	$	22,087	$	18,669

Total assets:


	June 30, 2016		December 31, 2015
	(As Restated)		(As Restated)
United States	$	14,125	$	15,454
United Kingdom		30,274		33,335
Other countries		3,343		1,788

Total	$	47,742	$	50,577

Long-lived assets:


	June 30, 2016		December 31, 2015
United Kingdom	$	12,569	$	13,817
Other countries		1,019		816

Total	$	13,588	$	14,633

No other individual country represented greater than 10% of total revenues, total assets, or total long-lived assets for any period presented.

For the three months ended June 30, 2016 and 2015, Merck KGaA and Allergan accounted for 89% and 11%, and 88% and 12% of the product segment revenue, respectively. For the six months ended June 30, 2016 and 2015, Merck KGaA and Allergan accounted for 88% and 12%, and 86% and 14% of the product segment revenue, respectively. No other customers accounted for 10% or more of total revenues for the three or six months ended June 30, 2016 and 2015.

At June 30, 2016 Merck KGaA and Allergan made up 96% and 4% of the product segment accounts receivable, respectively. At December 31, 2015 Merck KGaA and Allergan accounted for 58% and 42% of the product segment accounts receivable, respectively. At June 30, 2016 no customers accounted for greater than 10% of the service segment accounts receivable. At December 31, 2015 one customer accounted for 18% of total service segment accounts receivable.

The following summarizes other information by segment for the three months ended June 30, 2016 (in thousands):


	Product		Service		Total
	(As Restated)				(As Restated)
Revenues
Product revenues	$	7,334	$	—	$	7,334
Service revenues		—		3,374		3,374
Royalties		902		—		902

Total revenues		8,236		3,374		11,610
Cost of product revenues		4,182		—		4,182
Cost of service revenues		—		2,285		2,285

Total cost of revenues		4,182		2,285		6,467

Gross profit	$	4,054	$	1,089	$	5,143

Total operating expenses						7,420
Total non-operating income						57

Loss before income taxes					$	(2,220	)

The following summarizes other information by segment for the three months ended June 30, 2015 (in thousands):


	Product		Service		Total
	(As Restated)				(As Restated)
Revenues
Product revenues	$	6,055	$	—	$	6,055
Service revenues		—		2,714		2,714
Royalties		864		—		864

Total revenues		6,919		2,714		9,633
Cost of product revenues		3,521		—		3,521
Cost of service revenues		—		2,049		2,049

Total cost of revenues		3,521		2,049		5,570

Gross profit	$	3,398	$	665	$	4,063

Total operating expenses						4,976
Total non-operating income						10

Loss before income taxes					$	(903	)

The following summarizes other information by segment for the six months ended June 30, 2016 (in thousands):


	Product		Service		Total
	(As Restated)				(As Restated)
Revenues
Product revenues	$	13,659	$	—	$	13,659
Service revenues		—		6,627		6,627
Royalties		1,801		—		1,801

Total revenues		15,460		6,627		22,087
Cost of product revenues		8,209		—		8,209
Cost of service revenues		—		4,608		4,608

Total cost of revenues		8,209		4,608		12,817

Gross profit	$	7,251	$	2,019	$	9,270

Total operating expenses						13,285
Total non-operating income						156

Loss before income taxes					$	(3,859	)

The following summarizes other information by segment for the six months ended June 30, 2015 (in thousands):


	Product		Service		Total
	(As Restated)				(As Restated)
Revenues
Product revenues	$	11,640	$	—	$	11,640
Service revenues		—		5,174		5,174
Royalties		1,855		—		1,855

Total revenues		13,495		5,174		18,669
Cost of product revenues		6,633		—		6,633
Cost of service revenues		—		3,815		3,815

Total cost of revenues		6,633		3,815		10,448

Gross profit	$	6,862	$	1,359	$	8,221

Total operating expenses						9,255
Total non-operating income						154

Loss before income taxes					$	(880	)

(8) Property and Equipment

Property and equipment consists of the following (in thousands):


	Estimated Useful Life (Years)		June 30, 2016			December 31, 2015
Machinery and equipment		3-10	$	7,318		$	7,175
Furniture and fixtures		3-5		1,186			1,030
Computer equipment and software		3-5		530			625
Buildings		Up to 39		7,935			8,771
Land		Indefinite		509			562
Construction in-process				511			9

				17,989			18,172
Less: Accumulated depreciation				(5,805	)		(5,322	)

Total			$	12,184		$	12,850

Depreciation expense was $0.5 million and $0.4 million for the three month periods ended June 30, 2016 and 2015, respectively. Depreciation expense was $1.0 million and $0.8 million for the six month periods ended June 30, 2016 and 2015, respectively.

(9) Net Loss Per Common Share

The calculation of basic and diluted loss per common share and common share equivalents is as follows (in thousands except for per share data):


	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(As Restated)			(As Restated)			(As Restated)			(As Restated)
Basic loss per common share
Net loss	$	(2,268	)	$	(906	)	$	(3,911	)	$	(888	)
Less: Preferred stock dividends		(7	)		(7	)		(14	)		(14	)

Net loss applicable to common stock	$	(2,275	)	$	(913	)	$	(3,925	)	$	(902	)

Basic weighted average number of common shares outstanding		10,789			10,758			10,789			10,754

Basic net loss per common share	$	(0.21	)	$	(0.08	)	$	(0.36	)	$	(0.08	)

Diluted loss per common share
Net loss applicable to common stock	$	(2,275	)	$	(913	)	$	(3,925	)	$	(902	)
Add: Preferred stock dividends		7			7			14			14

Net loss applicable to dilutive common stock	$	(2,268	)	$	(906	)	$	(3,911	)	$	(888	)

Basic weighted average number of common shares outstanding		10,789			10,758			10,789			10,754
Effect of dilutive securities		—			—			—			—
Diluted weighted average number of common shares outstanding		10,789			10,758			10,789			10,754

Diluted net loss per common share	$	(0.21	)	$	(0.08	)	$	(0.36	)	$	(0.08	)

Basic loss per common share is computed by dividing the net loss, less preferred dividends, by the weighted-average number of shares of common stock outstanding during a period. The diluted loss per common share calculation gives effect to dilutive options, convertible preferred stock, and other potential dilutive common stock including restricted shares of common stock outstanding during the period. Diluted loss per share is based on the treasury stock method and includes the effect from potential issuance of common stock, such as shares issuable pursuant to the exercise of stock options, assuming the exercise of all in-the-money stock options. Common share equivalents have been excluded where their inclusion would be anti-dilutive.

Shares to be issued upon the exercise of the outstanding options and warrants, convertible preferred stock, and selected restricted shares of common stock excluded from the income per share calculation amounted to 1.5 million and 1.5 million in each of the three and six month periods ended June 30, 2016 and 2015, respectively, because the awards were anti-dilutive.

(10) Accumulated Other Comprehensive Loss

Changes to accumulated other comprehensive loss during the six months ended June 30, 2016 were as follows (in thousands):


	Translation Adjustment
Balance—December 31, 2015	$	(1,162	)
Current period other comprehensive loss		(2,205	)

Balance—June 30, 2016	$	(3,367	)

(11) Stock-Based Compensation

Stock-based compensation expense was $0.4 million for both the three months ended June 30, 2016 and 2015. Stock-based compensation expense for the six months ended June 30, 2016 and 2015 was $0.5 million and $0.9 million, respectively.

Total stock-based compensation expense was recorded to cost of revenues and operating expenses based upon the functional responsibilities of the individuals holding the respective options as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016			2015
Cost of revenues	$	32	$	22	$	58		$	41
Sales and marketing		17		10		31			18
Research and development		109		233		(37	)		608
General and administrative		199		107		423			237

Total	$	357	$	372	$	475		$	904

Cash received for option exercises was $0.1 million for the six months ended June 30, 2015. There were no option exercises in the six months ended June 30, 2016.

Juniper granted 397,500 and 232,000 stock options to employees during the six months ended June 30, 2016 and 2015, respectively.

Juniper granted 1,270 and 461 restricted shares to non-employee directors during the six months ended June 30, 2016 and 2015, respectively.

Juniper granted 240,000 stock options to non-employees during the six months ended June 30, 2015. No stock options were granted to non-employees during the six months ended June 30, 2016.

The Company records stock-based compensation expense for stock options granted to non-employees based on the fair value of the stock options, which is re-measured over the graded vesting term resulting in periodic adjustments to stock-based compensation expense. During the three months ended June 30, 2016 and 2015 the Company recorded stock-based compensation expense of $0.1 million and $0.2 million for non-employee options, respectively. During the six months ended June 30, 2016 the Company recorded a reduction of stock-based compensation expense of $0.1 million for non-employees options, as a result of impacts of changes in the fair value of the options during the period. During the six months ended June 30, 2015 the Company recorded stock-based compensation expense of $0.6 million for non-employee options. The stock-based compensation expense recorded for non-employees is reflected in the research and development line of the statement of operations. The remaining options will be re-measured over a 9 month period.

The Company uses the Black-Scholes option pricing model to determine the estimated grant date fair values for stock-based awards.

The weighted-average grant date fair values of options granted to employees during the six months ended June, 2016 and 2015 were $4.81 and $3.62, respectively, using the following assumptions:


	Six Months Ended June 30,
	2016	2015
Risk free interest rate	1.14%	0.87% - 1.06%
Expected term	4.75 years	4.56 – 4.75 years
Dividend yield	—	—
Expected volatility	79.23% - 79.29%	76.76% - 78.04%

The weighted-average grant date fair values of the options granted to non-employees during the six months ended June 30, 2016 and 2015 were $0 and $4.44, respectively, using the following assumptions:


	Six Months Ended June 30,
	2016		2015
Risk free interest rate		—		1.47	%
Expected term		—		7 years
Dividend yield		—		—
Expected volatility		—		82.88	%

Option-pricing models require the input of various subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. Juniper’s estimated expected stock price volatility is based on its own historical volatility. Juniper’s expected term of options granted during the six months ended June 30, 2016 and 2015 was derived using the simplified method for employees and the contractual term of the option for non-employees. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

As of June 30, 2016, the total unrecognized compensation cost related to outstanding stock options and restricted stock awards expected to vest was $3.5 million, which the Company expects to recognize over a weighted-average period of 2.84 years.

(12) Fair Value of Financial Instruments

U.S. GAAP establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

Level 1: Quoted prices in active markets for identical assets and liabilities.

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, 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.

The fair value of cash and cash equivalents are classified as Level 1 at June 30, 2016 and December 31, 2015. The fair value of the common stock warrant liability was zero, and the warrant expired in April 2015.

The fair values of accounts receivable and accounts payable approximate their respective carrying amounts. The Company’s long-term debt is carried at amortized face value, which approximates fair value based on current market pricing of similar debt instruments and is categorized as a Level 2 measurement.

(13) Income Taxes

During the three months ended June 30, 2016 and 2015, Juniper recorded income tax expense of $48,000 and $3,000, respectively, representing an effective tax rate of (2.2)% and (0.3)%, respectively. During the six months ended June 30, 2016 and 2015, Juniper recorded income tax expense of $52,000 and $8,000, respectively, representing an effective tax rate of (1.3)% and (0.9)%, respectively. The income tax provision for the three and six months ended June 30, 2016, is primarily attributable to alternative minimum taxes and state minimum taxes owed. The income tax provision for the three and six months ended June 30, 2015, is primarily attributable to state minimum taxes owed.

Juniper files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. Juniper is no longer subject to U.S. federal income tax examinations by tax authorities for years prior to 2012. Additionally, with few exceptions, Juniper is no longer subject to U.S. state tax examinations for years prior to 2012.

(14) Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. The Company is currently evaluating the method and impact that the adoption will have on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the method and impact that the adoption will have on its consolidated financial statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Recognition and Measurement of “Financial Assets and Financial Liabilities,” which provides new guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. The standard becomes effective for Juniper beginning in the first quarter of 2018 and early adoption is permitted. The Company is currently evaluating the method and impact that the adoption will have on its consolidated financial statements and related disclosures.

In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. The Company is currently evaluating the method and impact that the adoption will have on its consolidated financial statements and related disclosures.

In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory.” This ASU simplifies the measurement of inventory by requiring certain inventory to be measured at the lower of cost or net realizable value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2016 and for interim periods therein. The Company is currently evaluating the method and impact that the adoption will have on the Company’s consolidated financial statements and related disclosures.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern” (“ASU 2014-15”). The provisions of ASU 2014-15 require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company does not believe this ASU will have an impact on its financial statements except for disclosure requirements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which provides guidance for revenue recognition. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets and supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition,” and most industry-specific guidance. This ASU also supersedes some cost guidance included in Subtopic 605-35, “Revenue Recognition-Construction-Type and Production-Type Contracts.” The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB approved a one year delay for the effective date of the revenue standard. The guidance is effective for the Company beginning January 1, 2018 and, at that time the Company may adopt the new standard under the full retrospective approach or the modified retrospective approach. Early adoption is not permitted. The Company is currently evaluating the method and impact that the adoption of ASU 2014-09 will have on its consolidated financial statements and related disclosures.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

This Quarterly Report on Form 10-Q contains information that may constitute forward-looking statements. Generally, forward-looking statements can be identified by words such as “may,” “will,” “plan,” “believe,” “expect,” “intend,” “anticipate,” “potential,” “should,” “estimate,” “predict,” “project,” “would,” and similar expressions, which are generally not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future—including statements relating to our future operating or financial performance or events, our strategy, goals, plans and projections regarding our financial position, our liquidity and capital resources, and our product development—are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. Our Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain known and unknown risks, uncertainties and factors that may cause actual results to differ materially from our Company’s historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in our Annual Report on Form 10-K/A for the year ended December 31, 2015, those described in this Quarterly Report on Form 10-Q/A, and those described from time to time in our future reports filed with the Securities and Exchange Commission (the “SEC”).

You should read this Quarterly Report and the documents that we have filed as exhibits to this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. While we may elect to update forward-looking statements at some point in the future, we do not undertake any obligation to update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

Restatement of the Consolidated Financial Statements

Background

On October 18, 2016, during the course of responding to a comment letter from the staff of the U.S. Securities and Exchange Commission, we determined that our audited consolidated financial statements for the fiscal years ended December 31, 2013 through December 31, 2015, including the unaudited consolidated financial information for each quarterly period within the fiscal years ended December 31, 2014 and 2015, as reported in our Annual Report on Form 10-K filed on March 10, 2016 and amended on April 22, 2016, and our unaudited condensed consolidated financial statements for the quarters ended March 31, 2016 and June 30, 2016, and the related quarters in 2015, as reported in our Quarterly Reports on Form 10-Q filed on May 4, 2016 and August 4, 2016, respectively, should no longer be relied upon due to an error identified therein, and that a restatement of these financial statements is required.

The revenue related errors relate to the determination that a portion of the invoice price of product sold under our supply agreement with Ares Trading S.A. (an affiliate of Merck KGaA, Darmstadt, Germany (“Merck KGaA”)) is considered contingent, and therefore not fixed or determinable at the time of shipment. Our previous practice was to record revenue at the time of shipment based on the invoice price, with an adjustment to increase or decrease revenue upon completion of the quarterly reconciliation process. Accordingly, correction of the revenue errors will result in a timing difference for the contingent portion of revenue from our original methodology. We currently expect that, under the corrected methodology, revenue will be recognized in the period product is shipped to Merck KGaA for the fixed portion only (direct manufacturing cost plus 20%) with the contingent portion of the invoice price initially recorded as deferred revenue and subsequently recognized upon completion of a quarterly reconciliation process that occurs after receiving sell-through information from Merck KGaA on a country-by-country basis.

Additionally, we have a contract related to a COL-1077 clinical trial which has been in place since May 2015. During the course of compiling our results for the quarter ended September 30, 2016, we identified certain research and development expenses which had been incurred during the year ended December 31, 2015, and research and development expenses incurred during the three months ended March 31, 2016 and June 30, 2016 which had not been properly recorded in the periods to which the expenses related. The restatement reflects the recognition of additional research and development expense in the affected periods, with corresponding adjustments to prepaid expenses and other current assets, and accrued expenses related to those amounts. The additional research and development expenses incurred during the year ended December 31, 2015 were incurred during the three month period ended December 31, 2015, and therefore did not have an impact on the consolidated statements of operations or consolidated statement of comprehensive income (loss) for the three and six month periods ended June 30, 2015 or the consolidated statement of cash flows for the six months ended June 30, 2015. The balances of prepaid expenses and other current assets and accrued expenses in the consolidated balance sheet as of December 31, 2015 have been restated to reflect these corrections.

The effects of the restatement on our consolidated balance sheet as of June 30, 2016 are as follows (in thousands):


	June 30, 2016
	As Previously Reported			Restatement Adjustments			As Restated
Consolidated Balance Sheet:
Prepaid expenses and other current assets	$	3,290		$	(1,257	)	$	2,033
Total current assets		26,356			(1,257	)		25,099
Total assets		48,999			(1,257	)		47,742
Accrued expenses and other		4,031			(555	)		3,476
Deferred revenue		1,284			4,730			6,014
Total current liabilities		9,365			4,175			13,540
Total liabilities		12,159			4,175			16,334
Accumulated deficit		(241,790	)		(5,432	)		(247,222	)
Total stockholders’ equity		36,290			(5,432	)		30,858
Total liabilities and stockholders’ equity		48,999			(1,257	)		47,742

The effects of the restatement on our consolidated balance sheet as of December 31, 2015 are as follows (in thousands):


	December 31, 2015
	As Previously Reported			Restatement Adjustments			As Restated
Consolidated Balance Sheet:
Prepaid expenses and other current assets	$	1,674		$	(802	)	$	872
Total current assets		26,736			(802	)		25,934
Total assets		51,379			(802	)		50,577
Accrued expenses and other		4,158			(728	)		3,430
Deferred revenue		1,336			2,831			4,167
Total current liabilities		7,736			2,103			9,839
Total liabilities		11,412			2,103			13,515
Accumulated deficit		(240,406	)		(2,905	)		(243,311	)
Total stockholders’ equity		39,417			(2,905	)		36,512
Total liabilities and stockholders’ equity		51,379			(802	)		50,577

The tables below show the effects of the restatement on our consolidated statements of operations, consolidated statements of comprehensive (loss) income and statements of comprehensive (loss) income for the three months ended June 30, 2016 and 2015 (in thousands, except for per share data). In each case, the tax effect of the adjustments was considered insignificant.


	Three Months Ended June 30, 2016
	As Previously Reported			Restatement Adjustments			As Restated
Consolidated Statement of Operations:
Product revenues	$	7,609		$	(275	)	$	7,334
Total revenues		11,885			(275	)		11,610
Gross profit		5,418			(275	)		5,143
Research and development		3,550			247			3,797
Total operating expenses		7,173			247			7,420
Loss from operations		(1,755	)		(522	)		(2,277	)
Loss before taxes		(1,698	)		(522	)		(2,220	)
Net loss		(1,746	)		(522	)		(2,268	)
Basis net loss per share	$	(0.16	)	$	(0.05	)	$	(0.21	)
Diluted net loss per share	$	(0.16	)	$	(0.05	)	$	(0.21	)
Consolidated Statement of Comprehensive Loss:
Net loss	$	(1,746	)	$	(522	)	$	(2,268	)
Comprehensive loss		(3,287	)		(522	)		(3,809	)


	Three Months Ended June 30, 2015
	As Previously Reported			Restatement Adjustments			As Restated
Consolidated Statement of Operations:
Product revenues	$	6,635		$	(580	)	$	6,055
Total revenues		10,213			(580	)		9,633
Gross profit		4,643			(580	)		4,063
Loss from operations		(333	)		(580	)		(913	)
Loss before taxes		(323	)		(580	)		(903	)
Net loss		(326	)		(580	)		(906	)
Basis net loss per share	$	(0.03	)	$	(0.05	)	$	(0.08	)
Diluted net loss per share	$	(0.03	)	$	(0.05	)	$	(0.08	)
Consolidated Statement of Comprehensive (Loss) Income:
Net loss	$	(326	)	$	(580	)	$	(906	)
Comprehensive income		903			(580	)		323

The tables below show the effect of the restatement on our consolidated statements of operations, consolidated statements of comprehensive (loss) income and consolidated statements of cash flows for the six months ended June 30, 2016 and 2015 (in thousands except for per share data). In each case, the tax effect of the adjustment was considered insignificant.


	Six Months Ended June 30, 2016
	As Previously Reported			Restatement Adjustments			As Restated
Consolidated Statement of Operations:
Product revenues	$	15,558		$	(1,899	)	$	13,659
Total revenues		23,986			(1,899	)		22,087
Gross profit		11,169			(1,899	)		9,270
Research and development		5,302			628			5,930
Total operating expenses		12,657			628			13,285
Loss from operations		(1,488	)		(2,527	)		(4,015	)
Loss before taxes		(1,332	)		(2,527	)		(3,859	)
Provision for income taxes		52			—			52
Net loss		(1,384	)		(2,527	)		(3,911	)
Basis net loss per share	$	(0.13	)	$	(0.23	)	$	(0.36	)
Diluted net loss per share	$	(0.13	)	$	(0.23	)	$	(0.36	)
Consolidated Statement of Comprehensive Loss:
Net income	$	(1,384	)	$	(2,527	)	$	(3,911	)
Comprehensive loss		(3,589	)		(2,527	)		(6,116	)
Consolidated Statement of Cash Flows:
Net loss	$	(1,384	)	$	(2,527	)	$	(3,911	)
Prepaid expenses and other current assets		(1,648	)		1,257			(391	)
Accrued expenses and other		13			(629	)		(616	)
Deferred revenue		(380	)		1,899			1,519


	Six Months Ended June 30, 2015
	As Previously Reported			Restatement Adjustments			As Restated
Consolidated Statement of Operations:
Product revenues	$	11,510		$	130		$	11,640
Total revenues		18,539			130			18,669
Gross profit		8,091			130			8,221
Loss from operations		(1,164	)		130			(1,034	)
Loss before taxes		(1,010	)		130			(880	)
Net loss		(1,018	)		130			(888	)
Basis net loss per share	$	(0.10	)	$	0.02		$	(0.08	)
Diluted net loss per share	$	(0.10	)	$	0.02		$	(0.08	)
Consolidated Statement of Comprehensive Loss:
Net loss	$	(1,018	)	$	130		$	(888	)
Comprehensive loss		(776	)		130			(646	)
Consolidated Statement of Cash Flows:
Net loss	$	(1,018	)	$	130		$	(888	)
Deferred revenue		(305	)		(130	)		(435	)

Company Overview

We are a women’s health therapeutics company focused on developing therapeutics that address unmet medical needs in women’s health. Our pipeline of product and product development programs utilizes proprietary bioadhesive delivery system (“BDS”) gel and multi-segment intravaginal ring (“IVR”) drug delivery technologies. Our BDS gel is a polymer designed to adhere to the vaginal epithelium to provide sustained and controlled delivery of active drug product for acute treatments. The IVR technology allows for the delivery of one or more drugs in a single segmented ring to potentially address both acute and chronic conditions.

Our objective is to be a leader in the discovery, development, and commercialization of therapeutics designed to treat unmet medical needs in women’s health. Key elements of our strategy include:

•

Advancing our lead product candidate, COL-1077, an investigational 10% lidocaine bioadhesive vaginal gel, through clinical development and regulatory approval;

•

Advancing preclinical product candidates targeting overactive bladder, hormone replacement therapy, and preterm birth into clinical development;

•

Supplying Crinone to our commercial partner, Merck KGaA, Darmstadt, Germany (“Merck KGaA”), for sale in over 90 countries around the world;

•

Growing revenue from our formulation, analytical and product development capabilities at our pharmaceutical service business, Juniper Pharma Services (“JPS”), and deploying that same capability for the advancement of our in-house product candidates; and

•

Identifying and pursuing business development collaborations, including co-development opportunities that leverage our proprietary drug delivery technologies and the pharmaceutical development capabilities of JPS for life-cycle management of existing commercial pharmaceutical products.

We are applying the cash flow generated from our core business operations, Crinone and JPS, to partially fund the advancement of our proprietary product pipeline. We believe this strategy positions us well for effective and capital-efficient growth.

Product Development:

We are developing a pipeline of proprietary products to treat unmet medical needs in women’s health. The following table includes the programs that we currently believe are significant to our business:


Product Candidate	Indication/Field	Status
CLINICAL
COL-1077	Pain from minimally invasive gynecological procedures	Phase 2b

PRECLINICAL
JNP-0101 - Oxybutynin IVR	Overactive bladder in women	Preclinical
JNP-0201 - Progesterone + Estradiol IVR	Hormone replacement therapy	Preclinical
JNP-0301 - Progesterone IVR	Prevention of preterm birth	Preclinical

The expenditures that will be necessary to execute our business plan are subject to numerous uncertainties. Completion of clinical trials may take several years or more, and the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product candidate. It is not unusual for the clinical development of these types of product candidates to each take three years or more, and for total development costs to exceed $25 million for each product candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the following timelines:


Clinical Phase		Estimated Completion Period
Phase 1		1 - 2 Years
Phase 2		1 - 3 Years
Phase 3		1 - 3 Years

The duration and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the clinical trial protocol, including, among others, the following:

•

the number of patients that ultimately participate in the trial;

•

the duration of patient follow-up that seems appropriate in view of results;

•

the number of clinical sites included in the trials;

•

the length of time required to enroll suitable patient subjects; and

•

the efficacy and safety profile of the product candidate.

We generally will test potential product candidates in preclinical studies for safety, toxicology and immunogenicity in addition to utilizing already published data for the underlying active pharmaceutical ingredient. We may then conduct multiple clinical trials for each product candidate. As we obtain results from trials, we may elect to discontinue or delay clinical trials for certain product candidates in order to focus our resources on more promising product candidates.

An element of our business strategy is to pursue the research and development of a broad portfolio of product candidates. This is intended to allow us to diversify the risks associated with our research and development expenditures. To the extent we are unable to maintain a broad range of product candidates, our dependence on the success of one or a few product candidates increases.

Regulatory approval is required before we can market our product candidates as therapeutic products. In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval, the regulatory agency must conclude that our clinical data is safe and effective. Results from preclinical testing and early clinical trials (through Phase 2) may often not be predictive of results obtained in later clinical trials. In various pharmaceutical companies like ours, a number of new drugs have shown promising results in early clinical trials, but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals.

Our business strategy includes the option of entering into collaborative arrangements with third parties to complete the development and commercialization of our product candidates. In the event that third parties take over the clinical trial process for one of our product candidates, the estimated completion date would largely be under control of that third party rather than us. We cannot forecast with any degree of certainty which proprietary products, if any, will be subject to future collaborative arrangements, in whole or in part, and how such arrangements would affect our development plan or capital requirements.

As a result of the uncertainties discussed above, among others, it is difficult to accurately estimate the duration and completion costs of our research and development projects or when, if ever, and to what extent we will receive cash inflows from the commercialization and sale of a product. Our inability to complete our research and development projects in a timely manner or our failure to enter into collaborative agreements, when appropriate, could significantly increase our capital requirements and could adversely impact our liquidity. These uncertainties could force us to seek additional, external sources of financing from time to time in order to continue with our business strategy. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would jeopardize the future success of our business.

Clinical Development Program for COL-1077

We are currently advancing COL-1077, an investigational 10% lidocaine BDS vaginal gel intended as a local anesthetic for pain from minimally invasive gynecological procedures. In March 2015, we filed an Investigational New Drug (“IND”) application with the U.S. Food and Drug Administration (“FDA”) for COL-1077. In June 2015, we began enrolling patients in a multicenter, randomized, double-blinded, placebo-controlled Phase 2b clinical trial to evaluate the safety and efficacy of COL-1077 in women undergoing transvaginal pipelle-directed endometrial biopsy with tenaculum placement, a procedure to remove a tissue sample from the inner lining of the uterus.

This study builds on a prior proof-of-concept study that evaluated the effect of 5% lidocaine BDS gel versus placebo BDS gel in a vasopressin-induced cramping model. In the earlier study, there were statistically significant decreases in objectively measured uterine pressure, objectively measured uterine contraction frequency, patient reported pain, and the perceived number of uterine contractions.

The primary endpoint of the current Phase 2b study is a reduction in pain intensity at the time of endometrial biopsy, with secondary endpoints assessing the reduction in peri- and post-procedural pain over a 24-hour time period. Additional endpoints will evaluate safety and need for rescue analgesic, as well as some exploratory patient-related outcome assessments such as ability to return to normal activities after the procedure is performed.

We utilized the expertise of JPS for the development and clinical trial manufacturing of this product. We are using external contract research organizations for clinical study management.

We completed enrollment in our Phase 2b clinical trial in July 2016 and continue to expect to announce top-line study results in the third quarter of 2016. Assuming positive results, we plan to advance COL-1077 into Phase 3 in 2017.

Preclinical Programs

JNP-0101 - Oxybutynin IVR for the treatment of OAB

We are developing an IVR product candidate designed to deliver oxybutynin for the treatment of overactive bladder (“OAB”) in women. Oxybutynin is currently approved for the treatment of OAB, and oral oxybutynin is first line therapy for most women, however, oral oxybutynin therapy is frequently discontinued due to undesirable side effects including dry mouth, blurred vision, and constipation. We expect that the delivery of oxybutynin using our IVR technology will provide an improved side effect profile as the drug will be delivered to local tissues in higher concentrations, and bypass first pass hepatic metabolism issues (where a drug is metabolized in the liver resulting in reduced drug availability and/or metabolites that can cause side effects). We expect to complete IND-enabling studies and file an IND with the FDA in 2017, and initiate the Phase 2 program thereafter.

JNP-0201 - Progesterone and Estradiol IVR for HRT

Our segmented IVR product candidate for hormone replacement therapy (HRT) in menopausal women will contain separate natural progesterone and natural estradiol segments. JNP-0201 has been designed to deliver these hormones locally to vaginal tissue. We believe our delivery approach will provide an improved side effect profile when compared to the currently approved combination HRT therapies; these include orally administered formulations utilizing synthetic hormones, which have been associated in published clinical trials with higher risk of side effects including cardiovascular events. In addition, we believe that delivery using our IVR technology will improve patient compliance and convenience versus other routes of administration, including oral therapies and patches. This product candidate is currently in preclinical development. We expect to file an IND with the FDA for JNP-0201 in 2017.

JNP-0301 - Progesterone IVR for the prevention of PTB

JNP-0301 is a natural progesterone IVR product candidate for the prevention of preterm birth in women with a short cervical length. Short cervical length at mid-pregnancy is a critical predictor of preterm birth (“PTB”) in women, and medical guidelines issued by the American College of Obstetricians and Gynecologists and the Society of Maternal Fetal Medicine, among others, support use of vaginal progesterone in women with a short cervical length at mid-pregnancy to reduce the risk of PTB. There is no FDA approved product to prevent PTB in women at risk due to short cervix. We believe JNP-0301 can enable the consistent local delivery of progesterone while facilitating patient compliance. This product candidate is currently in preclinical development, and we expect to continue our work on determining the clinical and regulatory pathway for a vaginal progesterone therapy for this indication.

Crinone:

Crinone is a BDS vaginal progesterone gel designed to be used for progesterone supplementation or replacement as part of assisted reproductive technology (“ART”) for infertile women with progesterone deficiency. Crinone is approved for marketing in the United States, Europe, and certain other markets. We licensed Crinone to our commercial partner, Merck KGaA, for markets outside the United States, and we sold the U.S. intellectual property rights to Crinone to Allergan Plc (“Allergan”) in 2010.

Crinone continues to be introduced in new countries by Merck KGaA. Under the terms of our current license and supply agreement with Merck KGaA, we manufacture and sell Crinone to Merck KGaA on a country-by-country basis at the greater of (i) cost plus 20% or (ii) a percentage of Merck KGaA’s net selling price based on a tiered structure. As sales unit volumes increase, our percentage share of incremental sales decreases. Additionally, we are jointly cooperating with Merck KGaA to evaluate and implement manufacturing cost reductions, with both parties sharing any benefits realized from these initiatives. The license and supply agreement with Merck KGaA was renewed in April 2013, extending the expiration date to May 2020. If, at the end of the supply term, the parties cannot agree upon mutually acceptable terms for renewal of the supply arrangement, Merck KGaA will have the option of converting the agreement into a license agreement and will be free to manufacture, or have manufactured, Crinone pursuant to the terms set forth in the current license and supply agreement.

Product revenues include sales of Crinone to Merck KGaA and royalty revenues from Allergan based on its U.S. sales of Crinone.

Pharmaceutical Service Business:

JPS, our pharmaceutical service business, offers a range of sophisticated technical services to the pharmaceutical and biotechnology industry. Our customers range from start-up biotechnology firms to global pharmaceutical companies.

Within our services offering, we provide our customers expertise on the characterization, development, and manufacturing of pharmaceutical compounds for clinical trials. We believe we have particular expertise in problem solving for challenging compounds that are considered “difficult to progress.” Our service model allows us to take customers’ product candidates from early development through clinical trials manufacturing. These same capabilities are also deployed for our in-house proprietary product development activities, including managing the preclinical and clinical manufacturing stages for COL-1077 and our IVR programs. We also support our customers with advanced analytical and consulting services for intellectual property defense.

Through JPS, we also manage the global supply chain and contract manufacturing of Crinone, for our partner Merck KGaA.

Business Development Collaborations:

Our IVR and BDS technologies can be applied to life-cycle management strategies for existing commercial products that may benefit from intravaginal delivery of drugs. In particular, existing commercial products that are injectable, experience poor compliance, or have systemic toxicity limitations may benefit from our delivery technologies.

We are actively exploring business development collaborations that will leverage our novel drug delivery technologies and in-house expertise at JPS. We expect to be an active participant in these collaborations, including participating as a co-development partner, depending on the product and market opportunity.

Sources of Revenue

We generate revenues primarily from the sale of our products and services and from our royalty stream. During the three months ended June 30, 2016, we derived approximately 63% of our revenues from the sale of our products, 29% from the sale of our services, and 8% from our royalty stream. During the three months ended June 30, 2015, we derived approximately 63% of our revenues from the sale of our products, 28% from the sale of our services, and 9% from our royalty stream. During the six months ended June 30, 2016, we derived approximately 62% of our revenues from the sale of our products, 30% from the sale of our services, and 8% from our royalty stream. During the six months ended June 30, 2015, we derived approximately 62% of our revenues from the sale of our products, 28% from the sale of our services, and 10% from our royalty stream.

We expect that revenues will continue to be derived from product sales to Merck KGaA, a royalty stream from Allergan, and from our service business. Quarterly sales results can vary widely and affect comparisons with prior periods because (i) products shipped to Merck KGaA occur only in full batches, and may not correlate to Merck KGaA’s in-market sales and (ii) service revenues are driven by contracting and maintaining an active backlog of customer projects, which may vary widely from quarter to quarter.

Generally, we recognize revenue from the sale of our products upon shipment to Merck KGaA when all of the following criteria are net: persuasive evidence of an arrangement exists; delivery has occurred; the price is fixed or determinable; and collectability is reasonably assured. Revenues from services are recognized as the work is performed, and revenues from royalties are recognized as sales are made by Allergan.

Results of Operations – Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015 (As Restated)

The following tables contain selected consolidated statements of operations information, which serves as the basis of the discussion surrounding the results of our operations for the three months ended June 30, 2016 and 2015:


	Three Months Ended June 30,
	2016						2015
	Amount			As a % of Total Revenue			Amount			As a % of Total Revenue			$ Change			% Change
	(As Restated)			(As Restated)			(As Restated)			(As Restated)			(As Restated)			(As Restated)
Product revenues	$	7,334			63	%	$	6,055			63	%	$	1,279			21	%
Service revenues		3,374			29			2,714			28			660			24
Royalties		902			8			864			9			38			4

Total revenues		11,610			100			9,633			100			1,977			21
Cost of product revenues		4,182			36			3,521			37			661			19
Cost of service revenues		2,285			20			2,049			21			236			12

Total cost of revenues		6,467			56			5,570			58			897			16

Gross profit		5,143			44			4,063			42			1,080			27
Operating expenses:
Sales and Marketing		379			3			282			3			97			34
Research and development		3,797			33			2,132			22			1,665			78
General and administrative		3,244			28			2,562			27			682			27

Total operating expenses		7,420			64			4,976			52			2,444			49

Loss from operations		(2,277	)		(20	)		(913	)		(9	)		(1,364	)		149
Interest expense, net		(24	)		—			(27	)		—			3			(11	)
Other income, net		81			1			37			—			44			119

Loss before income taxes		(2,220	)		(19	)		(903	)		(9	)		(1,317	)		146
Provision for income taxes		48			—			3			—			45			1,500

Net loss	$	(2,268	)		(20	)%	$	(906	)		(9	)%	$	(1,362	)		150	%

Revenues


	Three Months Ended June 30,
	2016		2015		$ Change		% Change
	(As Restated)		(As Restated)		(As Restated)		(As Restated)
Product revenues	$	7,334	$	6,055	$	1,279		21	%
Service revenues		3,374		2,714		660		24
Royalties		902		864		38		4

Total revenues	$	11,610	$	9,633	$	1,977		21	%

Revenues in the three months ended June 30, 2016 increased by $2.0 million, or 21%, compared to the three months ended June 30, 2015. The increase was primarily attributable to the following factors by segment:

Product (As Restated)

•

Revenues from the sale of Crinone, increased by approximately $1.3 million, or 21%, from the 2015 period primarily due to both in-market and new market growth by Merck KGaA. Revenue included $5.6 million related to product shipped to Merck KGaA and $1.7 million related to product sold through by Merck KGaA to its customers in the three months ended June 30, 2016. Revenue included $4.7 million related to product shipped to Merck KGaA and $1.4 million related to product sold through by Merck KGaA to its customers in the three months ended June 30, 2015.

•

Royalty revenues increased $38,000, or 4% from the three months ended June 30, 2016 as compared to the three months ended June 30, 2015.

Service

•

Service revenues increased approximately $0.7 million, or 24%, from the 2015 period primarily due to increases in customer volume across our service offerings and a sales focus on larger customer contracts.

Cost of revenues


	Three Months Ended June 30,						$ Change		% Change
	2016			2015			$ Change		% Change
	(As Restated)			(As Restated)			(As Restated)		(As Restated)
Cost of product revenues	$	4,182		$	3,521		$	661		19	%
Cost of service revenues		2,285			2,049			236		12

Total cost of revenues	$	6,467		$	5,570		$	897		16	%

Total cost of revenue (as a percentage of total revenues)		56	%		58	%
Product gross margin		49	%		49	%
Services gross margin		32	%		25	%

Total cost of revenues was $6.5 million and $5.6 million for the three month periods ended June 30, 2016 and 2015, respectively. The increase in total cost of revenues in 2016 was largely driven by the increased volume of Crinone product sold to Merck KGaA. There was a 34% increase in Crinone units shipped in the 2016 period as compared to the 2015 period.

Cost of service revenues are largely fixed and consist mainly of facility costs, external consultant fees, depreciation and materials used in connection with generating our service revenues. Personnel costs are scaled to support customer volume.

Product gross margin, including royalty income, remained flat in 2016 as compared to 2015 due to the increased volume of product shipped to Merck KGaA offset by a lower cost per unit compared to the prior year. Service gross margin increased in 2016 as compared to 2015 due to mix of revenue type within the service segment and increased capacity utilization.

Sales and marketing expenses


	Three Months Ended June 30,						$ Change		% Change
	2016			2015			$ Change		% Change
	(As Restated)			(As Restated)			(As Restated)		(As Restated)
Sales and marketing	$	379		$	282		$	97		34	%
Sales and marketing (as a percentage of total revenues)		3	%		3	%

Sales and marketing expenses incurred during the three months ended June 30, 2016 and 2015 were attributable to our service business and consisted of personnel costs for our sales force as well as marketing costs for certain tradeshows and conference fees. The increase in sales and marketing expense in the 2016 period as compared to the 2015 period primarily relates to investment in the U.S. market in 2016.

Research and development


	Three Months Ended June 30,						$ Change		% Change
	2016			2015			$ Change		% Change
	(As Restated)			(As Restated)			(As Restated)		(As Restated)
Research and development	$	3,797		$	2,132		$	1,665		78	%
Research and development (as a percentage of total revenues)		33	%		22	%

Research and development costs incurred during the three months ended June 30, 2016 and 2015 were largely associated with the development of COL-1077. The 2016 expense primarily includes clinical trial costs, personnel-related expenses, and professional service consultants. In March 2015, Drs. Robert Langer and William Crowley joined as strategic advisors to our Company and we recorded $0.2 million of stock-based compensation expense for the three months ended June 30, 2015 in connection with their agreements. For the three months ended June 30, 2016, as a result of changes in underlying fair value of options we recorded $0.1 million of stock-based compensation expense. As we continue to advance COL-1077 and pipeline product candidates, we expect corresponding increases in research and development costs.

General and administrative expenses


	Three Months Ended June 30,						$ Change		% Change
	2016			2015			$ Change		% Change
	(As Restated)			(As Restated)			(As Restated)		(As Restated)
General and administrative	$	3,244		$	2,562		$	682		27	%
General and administrative (as a percentage of total revenues)		28	%		27	%

General and administrative expenses increased by $0.7 million to $3.2 million for the three months ended June 30, 2016, compared with $2.6 million for the three months ended June 30, 2015. This increase was attributable principally to costs associated with the creation of an internal business development function that was not in place in 2015, in addition to personnel costs, professional service costs, facility costs, and other costs associated with Company growth..

Non-operating income and expense


	Three Months Ended June 30,						$ Change		% Change
(in thousands, except for percentages)	2016			2015			$ Change		% Change
Interest expense, net	$	(24	)	$	(27	)	$	3		(11	)%
Other income, net	$	81		$	37		$	44		119	%

Interest expense, net, primarily relates to interest payments denominated in British pounds, associated with loan facilities assumed in the acquisition of JPS.

Other income, primarily relates to the income associated with the Regional Growth Fund offset by net foreign currency transaction losses related to the weakening of the Euro and British pound against the U.S dollar.

Provision for income taxes


	Three Months Ended June 30,						$ Change		% Change
(in thousands, except for percentages)	2016			2015			$ Change		% Change
	(As Restated)			(As Restated)			(As Restated)		(As Restated)
Provision for income taxes	$	48		$	3		$	45		1,500	%
Provision for income taxes (as a percentage of income (loss) before income taxes)		(2.2	)%		(0.3	)%

The 2016 tax expense represents alternative minimum taxes and state minimum taxes owed. The 2015 tax expense represents state minimum taxes owed. Currently, we have a full valuation allowance offsetting our net domestic deferred tax asset.

Results of Operations – Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015 (As Restated)


	Six Months Ended June 30,
	2016						2015
	Amount			As a % of Total Revenue			Amount			As a % of Total Revenue			$ Change			% Change
	(As Restated)			(As Restated)			(As Restated)			(As Restated)			(As Restated)			(As Restated)
Product revenues	$	13,659			62	%	$	11,640			62	%	$	2,019			17	%
Service revenues		6,627			30			5,174			28			1,453			28
Royalties		1,801			8			1,855			10			(54	)		(3	)

Total revenues		22,087			100			18,669			100			3,418			18
Cost of product revenues		8,209			37			6,633			36			1,576			24
Cost of service revenues		4,608			21			3,815			20			793			21

Total cost of revenues		12,817			58			10,448			56			2,369			23

Gross profit		9,270			42			8,221			44			1,049			13
Operating expenses:
Sales and Marketing		651			3			603			3			48			8
Research and development		5,930			27			3,516			19			2,414			69
General and administrative		6,704			30			5,136			28			1,568			31

Total operating expenses		13,285			60			9,255			50			4,030			44

Loss from operations		(4,015	)		(18	)		(1,034	)		(6	)		(2,981	)		288
Interest expense, net		(50	)		—			(54	)		—			4			(7	)
Other income, net		206			1			208			1			(2	)		(1	)

Loss before income taxes		(3,859	)		(17	)		(880	)		(5	)		(2,979	)		339
Provision for income taxes		52			—			8			—			44			550

Net loss	$	(3,911	)		(18	)%	$	(888	)		(5	)%	$	(3,023	)		340	%

Revenues


	Six Months Ended June 30,				$ Change			% Change
	2016		2015		$ Change			% Change
	(As Restated)		(As Restated)		(As Restated)			(As Restated)
Product revenues	$	13,659	$	11,640	$	2,019			17	%
Service revenues		6,627		5,174		1,453			28
Royalties		1,801		1,855		(54	)		(3	)

Total revenues	$	22,087	$	18,669	$	3,418			18	%

Revenues in the six months ended June 30, 2016 increased by $3.4 million, or 18%, compared to the six months ended June 30, 2015. The increase was primarily attributable to the following factors by segment:

Product (As Restated)

•

Revenues from the sale of Crinone, increased by approximately $2.0 million, or 17%, from the 2015 period primarily due to both in-market and new market growth by Merck KGaA. Revenue included $10.3 million related to product shipped to Merck KGaA and $3.4 million related to product sold through by Merck KGaA to its customers in the six months ended June 30, 2016. Revenue included $8.8 million related to product shipped to Merck KGaA and $2.8 million related to product sold through by Merck KGaA to its customers in the six months ended June 30, 2015.

•

Royalty revenues decreased $0.1 million, or 3%, for the six months ended June 30, 2016 as compared to the six months ended June 30, 2015.

Service

•

Service revenues increased approximately $1.5 million, or 28%, from the 2015 period primarily due to increases in customer volume across our service offerings.

Cost of revenues


	Six Months Ended June 30,						$ Change		% Change
	2016			2015			$ Change		% Change
	(As Restated)			(As Restated)			(As Restated)		(As Restated)
Cost of product revenues	$	8,209		$	6,633		$	1,576		24	%
Cost of service revenues		4,608			3,815			793		21

Total cost of revenues	$	12,817		$	10,448		$	2,369		23	%

Total cost of revenue (as a percentage of total revenues)		58	%		56	%
Product gross margin		47	%		51	%
Services gross margin		30	%		26	%

Total cost of revenues was $12.8 million and $10.4 million for the six month periods ended June 30, 2016 and 2015, respectively. The increase in total cost of revenues in 2016 was largely driven by the increased volume of Crinone product sold to Merck KGaA. There was a 31% increase in Crinone units shipped in the 2016 period as compared to the 2015 period.

Product gross margin, including royalty income, decreased in 2016 as compared to 2015 due to the increased volume of product shipped to Merck KGaA compared to the prior year. Service gross margin increased in 2016 as compared to 2015 due to mix of revenue type within the service segment and increased capacity utilization.

Sales and marketing expenses


	Six Months Ended June 30,						$ Change		% Change
	2016			2015			$ Change		% Change
	(As Restated)			(As Restated)			(As Restated)		(As Restated)
Sales and marketing	$	651		$	603		$	48		8	%
Sales and marketing (as a percentage of total revenues)		3	%		3	%

Sales and marketing expenses incurred during the six months ended June 30, 2016 and 2015 were attributable to our service business and consisted of personnel costs for our sales force as well as marketing costs for certain tradeshows and conference fees. The increase in sales and marketing expense in the 2016 period as compared to the 2015 period primarily relates to investment in the U.S. market in 2016 offset by a non-recurring corporate recruitment expense in 2015.

Research and development


	Six Months Ended June 30,						$ Change		% Change
	2016			2015			$ Change		% Change
	(As Restated)			(As Restated)			(As Restated)		(As Restated)
Research and development	$	5,930		$	3,516		$	2,414		69	%
Research and development (as a percentage of total revenues)		27	%		19	%

Research and development costs incurred during the six months ended June 30, 2016 and 2015 were largely associated with the development of COL-1077. The 2016 expense primarily includes clinical trial costs, personnel-related expenses and professional service consultants. In March 2015, Drs. Robert Langer and William Crowley joined as strategic advisors to our Company and we recorded $0.6 million of stock-based compensation expense for the six months ended June 30, 2015 in connection with their agreements. For the six months ended June 30, 2016, as a result of changes in underlying fair value of options we recorded a $0.1 million reduction in stock-based compensation expense. As we continue to advance COL-1077 and pipeline product candidates, we expect corresponding increases in research and development costs.

General and administrative expenses


	Six Months Ended June 30,						$ Change		% Change
	2016			2015			$ Change		% Change
	(As Restated)			(As Restated)			(As Restated)		(As Restated)
General and administrative	$	6,704		$	5,136		$	1,568		31	%
General and administrative (as a percentage of total revenues)		30	%		28	%

General and administrative expenses increased by $1.6 million to $6.7 million for the six months ended June 30, 2016, compared with $5.1 million for the six months ended June 30, 2015. This increase was attributable principally to costs associated with the creation of an internal business development function that was not in place in 2015, in addition to non-recurring legal, personnel costs, professional service costs, facility costs, and other costs associated with Company growth.

Non-operating income and expense


	Six Months Ended June 30,						$ Change			% Change
(in thousands, except for percentages)	2016			2015			$ Change			% Change
Interest expense, net	$	(50	)	$	(54	)	$	4			(7	)%
Other income, net	$	206		$	208		$	(2	)		(1	)%

Interest expense, net, primarily relates to interest payments denominated in British pounds, associated with loan facilities assumed in the acquisition of JPS.

Other income, net primarily relates to the income associated with the Regional Growth Fund offset by net foreign currency transaction losses related to the weakening of the Euro and British pound against the U.S dollar.

Provision for income taxes


	Six Months Ended June 30,						$ Change		% Change
(in thousands, except for percentages)	2016			2015			$ Change		% Change
	(As Restated)			(As Restated)			(As Restated)		(As Restated)
Provision for income taxes	$	52		$	8		$	44		550	%
Provision for income taxes (as a percentage of income (loss) before income taxes)		(1.3	)%		(0.9	)%

Liquidity and Capital Resources

We require cash to pay our operating expenses, including research and development activities, fund working capital needs, make capital expenditures and fund acquisitions.

At June 30, 2016, our cash and cash equivalents were $13.0 million. Our cash and cash equivalents are highly liquid investments with original maturities of 90 days or less at date of purchase and consist of cash in operating accounts.

In September 2013, we assumed debt of $3.9 million in connection with our acquisition of JPS. JPS had entered into a Business Loan Agreement (“Loan Agreement”) covering three loan facilities with Lloyds TSB Bank (“Lloyds”) as administrative agent. JPS had drawn down $3.9 million under the Loan Agreement and as of June 30, 2016 owed a principal balance of $2.7 million. The three loan facilities are each repayable in monthly installments. Repayment began on one facility in February 2013, and the remaining two commenced in October 2013. All facilities are due for repayment over 15 years from the date of drawdown. Two of the facilities bear interest at the Bank of England’s base rate plus 1.95% and 2.55%, respectively. The interest rate at June 30, 2016 for these two facilities was 2.45% and 3.05%, respectively. The third facility is a fixed rate agreement bearing interest at 3.52% per annum. The weighted average interest rate for the three loan facilities for the six months ending June 30, 2016 was 3.00%. The Loan Agreement is secured by the mortgaged property and other assets of JPS. The Loan Agreement contains financial covenants that limit the amount of indebtedness we may incur, requires us to maintain certain levels of net worth, and restricts our ability to materially alter the character of JPS’s business. As of June 30, 2016, the Company remained in compliance with all of the covenants under the Loan Agreement.

In September 2013, as part of the acquisition of JPS, we assumed a $2.5 million obligation under a grant arrangement with the Regional Growth Fund on behalf of the Secretary of State for Business, Innovation, and Skills in the United Kingdom. JPS used this grant to fund the building of their second facility, which includes analytical labs, office space, and a clinical manufacturing facility. As a part of the arrangement, JPS is required to create and maintain certain full-time equivalent personnel levels through October 2017. As of June 30, 2016, we remained in compliance with the covenants of the arrangement.

The income from the Regional Growth Fund will be recognized on a decelerated basis over the next two years. As of June 30, 2016, the obligation is valued at $1.0 million and is recorded as deferred revenue on the consolidated balance sheets. The amount of other income on the obligation that will be recognized provided we remain in compliance with the covenants will be the following:

(in thousands):


Year	Total
Remainder of 2016	$	375
2017		643

Total	$	1,018

Our future capital requirements depend on a number of factors, including the rate of market acceptance of our current and future products and services and the resources we devote to developing and supporting the same. Our capital expenditures for the three months ended June 30, 2016 were $0.5 million compared to $0.3 million for the three months ended June 30, 2015. Our capital expenditures for the six months ended June 30, 2016 were $1.2 million compared to $0.5 million for the six months ended June 30, 2015. Our capital expenditures primarily relate to investments in capital equipment made at our Nottingham, U.K. site, our contract manufacturer sites and for research and development. We expect our capital expenditures to increase for the remainder of the year ending December 31, 2016, as compared to the year ended December 31, 2015, primarily due to additional research and development expenditures.

Research and development expenses include costs for product and clinical development, which were a combination of internal and third-party costs, and regulatory fees. In 2015, our research and development activities continued for COL-1077. In 2016, we expect our research and development expenses to increase as we advance research and development efforts related to COL-1077, JNP-0101, JNP-0201 and JNP-0301.

As of June 30, 2016, we had 514,141 exercisable options outstanding which, if exercised, would result in approximately $3.8 million of additional capital and would cause the number of shares outstanding to increase. The intrinsic value of exercisable options was $0.3 million for the six months ended June 30, 2016. The intrinsic value of exercisable options was $0.8 million for the six months ended June 30, 2015.

We believe that our current cash and cash equivalents, as well as cash generated from operations, will be sufficient to meet our anticipated cash needs for working capital, including advancing our product candidates, and capital expenditures for the foreseeable future.

Cash Flows (As Restated)

Net cash provided by operating activities for the six months ended June 30, 2016 was $0.5 million, which resulted primarily from approximately $1.4 million in depreciation and amortization and stock-based compensation expense and net changes in working capital items which increased cash by approximately $3.0 million offset by a $3.9 million net loss. Net cash used in investing activities was $1.2 million for the six months ended June 30, 2016, which resulted primarily from the purchase of property plant and equipment. Net cash used in financing activities was approximately $0.1 million for the six months ended June 30, 2016, primarily relating to the principal payments on the note (Loan Agreement).

Net cash used by operating activities for the six months ended June 30, 2015 was $38,000 and resulted primarily from a $0.9 million net loss and net changes in working capital items which decreased cash by $1.1 million offset by approximately $1.9 million in depreciation and amortization and stock-based compensation expense. Net cash used in investing activities was $0.5 million for the six months ended June 30, 2015, which resulted primarily from the purchase of property plant and equipment. Net cash used in financing activities was approximately $49,000 for the six months ended June 30, 2015, primarily relating to the principal payments on the note (Loan Agreement) offset by proceeds from the exercise of common stock options.

Off-Balance Sheet Arrangements

As of June 30, 2016, we did not have any off-balance sheet arrangements as defined in Regulation S-K, Item 303(a)(4)(ii).

Contractual Obligations

On October 15, 2015, we entered into a lease agreement for our corporate office in Boston. The initial term of the lease agreement is approximately 39 months, which includes a three-month free rent period, after which monthly rental payments totaling $430,050 for the first twelve months, $437,100 for the next twelve months and $444,150 for the final twelve months. There have been no other material changes to our contractual obligations and commitments outside the ordinary course of business from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations set forth above are based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates and judgments, including those described in our Annual Report on Form 10-K for the year ended December 31, 2015. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities, and the reported amounts of revenues and expenses, that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no material changes to our critical accounting policies as of June 30, 2016 except as it relates to our policy for revenue recognition.

Revenue Recognition and Sales Returns Reserves (As Restated)

Product Revenue

Revenues from the sale of products are recognized when all of the following criteria are met: persuasive evidence of a sales arrangement exists; delivery has occurred or services have been rendered; the price is fixed or determinable; and collectibility is reasonably assured. Selling prices to Merck KGaA for CRINONE (progesterone gel) are determined on an annual and country-by-country basis and are the greater of (i) a percentage of Merck KGaA’s estimated net selling price, or (ii) Our direct manufacturing cost plus 20% and are invoiced to Merck KGaA upon shipment. We record revenue at the minimum selling price, which is our direct manufacturing cost plus 20% at the time of shipment to Merck KGaA as that amount is considered fixed or determinable. We record deferred revenue related to amounts invoiced above the minimum selling price. Upon receiving sell through information from Merck KGaA on a quarterly and country-by-country basis, we record an adjustment to increase revenue to reflect the difference between Merck KGaA’s net selling price and the minimum price recorded at the time of shipment. Any difference between the amounts invoiced at Merck KGaA’s estimated net selling price and Merck KGaA’s actual net selling price are billed or credited to Merck KGaA in the quarter the product is sold through by Merck KGaA. Accordingly, product revenue in each period includes both an amount for product shipped to Merck KGaA in the current period recognized at the minimum purchase price as well as an amount for product shipped by Merck KGaA to its customers in the current period equal to the difference between Merck KGaA’s actual net selling price and the minimum purchase price. Merck KGaA is also entitled to a volume discount based on annual purchases. We record reserves against revenue on a quarterly basis to reflect the volume discount expected to be earned by Merck KGaA during the year.

In April 2013, our license and supply agreement with Merck KGaA for the sale of CRINONE outside the United States was renewed for an additional five year term, extending the expiration date to May 19, 2020.

Service Revenue

The professional service contracts that we enter into and operate under specifies whether the engagement will be billed on a time-and-materials or a fixed-price basis. These engagements generally last three to six months, although some of our engagements can be much longer in duration.

We recognize substantially all of our professional services revenues under written contracts when the fee is fixed or determinable, as the services are provided, and only in those situations where collection from the client is reasonably assured. In certain cases we bill clients prior to work being performed, which requires us to defer revenue in accordance with U.S. GAAP. In these cases, these amounts are fully reserved until all criteria for recognizing revenue are met.

Service revenues from a majority of our fixed-price engagements are recognized on a proportional performance method based on the ratio of costs incurred, substantially all of which are labor-related, to the total estimated project costs. In general, project costs are classified in costs of services and are based on the direct salary of the employees on the engagement plus all direct expenses incurred to complete the engagement, including any amounts billed to us by our vendors. The proportional performance method is used for fixed-price contracts because reasonably dependable estimates of the revenues and costs applicable to various stages of a contract can be made, based on historical experience and the terms set forth in the contract, and are indicative of the level of benefit provided to our clients. In the event of a termination, fixed-price contracts generally provide for payment for services rendered up to the termination date.

Service revenues also include reimbursements, which include reimbursement for travel and other out-of-pocket expenses, outside consultants, and other reimbursable expenses.

Royalty revenues, based on sales by licensees, are recorded as revenues when those sales are made by the licensees.

We maintain accounts receivable allowances for estimated losses resulting from disputed amounts or the inability of our customers to make required payments. We identify specific collection issues and establish an accounts receivable allowance based on our historical collection experience, review of client accounts, current trends, and credit policy. If the financial condition of our customers were to deteriorate or disputes were to arise regarding the services provided, resulting in an impairment of their ability or intent to make payment, additional allowances may be required. A failure to estimate accurately the accounts receivable allowances and ensure that payments are received on a timely basis could have a material adverse effect on our business, financial condition, and results of operations.

We collect value added tax from our customers for revenues generated out of the United Kingdom for which the customer is not tax exempt and remits such taxes to the appropriate governmental authorities. We present our value added tax on a net basis; therefore, these taxes are excluded from revenues.

Deferred Revenue

Our deferred revenue balance consists of the following at June 30, 2016 and December 31, 2015 (in thousands):


	June 30, 2016		December 31, 2015
	(As Restated)		(As Restated)
Product revenues	$	4,730	$	2,831
Service revenues		480		566
Regional Growth Fund		1,018		1,480

Total	$	6,228	$	4,877

Amounts invoiced but not yet earned on product revenues are recorded as deferred revenue until we receive sell through information from Merck KGaA indicating the product has been sold through or otherwise disposed of. Amounts invoiced but not yet earned on service revenue are deferred until such time as performance is rendered or the obligation to perform the service is completed for service revenues. Amounts deferred for product revenue are not settled until sell through information is received from Merck KGaA.

As part of the acquisition of Juniper Pharma Services, we assumed a $2.5 million obligation under a grant arrangement with the Regional Growth Fund on behalf of the Secretary of State for Business, Innovation, and Skills in the United Kingdom. Juniper Pharma Services used this grant to fund the building of its second facility, which includes analytical labs, office space, and a manufacturing facility. As a part of the arrangement, Juniper Pharma Services is required to create and maintain certain full-time equivalent personnel levels through October 2017. As of June 30, 2016, we are in compliance with the covenants of the arrangement. The income from the Regional Growth Fund will be recognized in the other income line of the consolidated statement of operations on a decelerated basis through September 30, 2017.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Rate Risk

We do not believe that we have material exposure to market rate risk. We may, however, seek additional financing to fund future obligations and no assurance can be given that the terms of future sources of financing will not expose us to material market rate risk.

There has been no material change to our market rate risk exposure since December 31, 2015.

Foreign Currency Exchange

A significant portion of our operations are conducted through operations in countries other than the United States. Revenues from our international operations that were recorded in U.S. dollars represented approximately 68% of our total international revenues for the three months ended June 30, 2016. The remaining 32% were sales in British pounds. Our raw materials for cost of product revenues are primarily purchased in Euros. Since we conduct our business in U.S. dollars, our main exposure, if any, results from changes in the exchange rate between the British pound and the U.S. dollar and the Euro and the U.S. dollar. Our policy is to reduce exposure to exchange rate fluctuations by designating most of our assets and liabilities, as well as most of our revenues and expenditures, in U.S. dollars, or having them linked to the U.S. dollar. We have not historically engaged in hedging activities relating to our non-U.S. dollar operations.

There has been no material change to our foreign currency exchange risk exposure since December 31, 2015.

Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of June 30, 2016. The evaluation of our disclosure controls and procedures by our Chief Executive Officer and Chief Financial Officer included a review of the restatement described in the filing of this Form 10-Q/A, and the Form 10-Q/A for the quarter ended March 31, 2016, where the Company restated its consolidated balance sheet, consolidated statement of operations, consolidated statements of comprehensive income (loss), and consolidated statements of cash flows. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2016 at the reasonable assurance level, to enable us to record, process, summarize and report information required to be disclosed by us in reports that we file or submit within the time periods specified in the SEC rules or forms due to the material weaknesses described below.

Material Weaknesses in Internal Control over Financial Reporting (Revised)

A material weakness is defined as a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim consolidated financial statements will not be prevented or detected on a timely basis. In connection with the restatement of our consolidated financial statements and revised management’s assessment of our internal controls over financial reporting at December 31, 2015, and evaluation of our disclosure controls and procedures as of March 31, 2016 and June 30, 2016, we identified material weaknesses in our internal control over financial reporting associated with technical accounting of significant contractual agreements as well as our monitoring of expenses incurred under our clinical research agreements.

Specifically, the Company did not design and maintain effective internal control over the assessment of the accounting for significant arrangements, including timely assessment of revenue recognition, and the Company did not design and maintain effective internal control over the accounting for the completeness, accuracy and presentation and disclosure over research and development expenses and related prepaid and accrual accounts. These material weaknesses resulted in the restatement described in Note 1 of our prior period financial statements including the years ended December 31, 2013, 2014 and 2015 and the interim periods therein and the quarter ended June 30, 2016, which is included in this Quarterly Report on Form 10-Q/A and the quarter ended March 31, 2016, which is included in the Quarterly Reports on Form 10-Q/A filed on November 14, 2016. Additionally, these material weaknesses could result in a misstatement in the financial statements that would result in a material misstatement in the annual or interim consolidated financial statements that would not be prevented or detected.

Changes in Internal Control over Financial Reporting

Except for the material weaknesses noted above and the remediation activities described under the caption Management’s Remediation Initiatives, there have been no changes in our internal control over financial reporting during the three months ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Remediation Initiatives (Revised)

Our management is committed to the planning and implementation of remediation to address all material weaknesses as well as other identified areas of risk. These remediation efforts, summarized below, which are implemented, in the process of being implemented or are planned for implementation, are intended to address the identified material weaknesses and to enhance our overall financial control environment.

With the oversight of senior management and our Audit Committee, we plan to take steps intended to address the underlying causes of the material weaknesses in the immediate future, primarily through the following:

•

Process improvements: We have commenced the redesign of specific processes and controls associated with review of contractual agreements, including a quarterly identification and review of significant agreements with the senior management team to ensure that the relevant accounting implications are identified and considered. Additionally, we are in the process of re-designing our controls over research and development expenses, including the related balance sheet accounts.

We have not yet been able to remediate these material weaknesses. These actions are subject to ongoing review by our senior management, as well as oversight by the audit committee of our board of directors. Although we plan to complete this remediation process as quickly as possible, we cannot, at this time, estimate when such remediation may occur, and our initiatives may not prove successful in remediating the material weaknesses. Management may determine to enhance other existing controls and/or implement additional controls as the implementation progresses. It will take time to determine whether the additional controls we are implementing will be sufficient to accomplish their intended purpose; accordingly, the material weaknesses may continue for a period of time. While the audit committee of our board of directors and senior management are closely monitoring this implementation, until the remediation efforts discussed in this section, including any additional remediation efforts that our senior management identifies as necessary, are complete, tested and determined effective, we will not be able to conclude that the material weaknesses have been remediated. In addition, we may need to incur incremental costs associated with this remediation, primarily due to the hiring and training of finance and accounting personnel, and the implementation and validation of improved accounting and financial reporting procedures.

We are committed to improving our internal control and processes and intend to continue to review and improve our financial reporting controls and procedures. As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.

Part II—Other Information

Item 1. Legal Proceedings

Claims and lawsuits are filed against our Company from time to time. Although the results of pending claims are always uncertain, we believe that we have adequate reserves or adequate insurance coverage in respect of these claims, but no assurance can be given as to the sufficiency of such reserves or insurance coverage in the event of any unfavorable outcome resulting from these actions.

Item 1a. Risk Factors

An investment in shares of our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2015 in addition to other information included in this Quarterly Report on Form 10-Q, including our financial statements and related notes hereto, before deciding to invest in our common stock. The occurrence of any of these risks could have a material adverse effect on our business, financial condition, results of operations and future growth prospects. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.

Our management has identified material weaknesses in the Company’s internal control over financial reporting which could, if not remediated, result in additional material misstatements in our consolidated financial statements. We may be unable to develop, implement and maintain appropriate controls in future periods. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, and current and potential stockholders may lose confidence in our financial reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, and the Sarbanes-Oxley Act of 2002 and SEC rules require that our management report annually on the effectiveness of the Company’s internal control over financial reporting and our disclosure controls and procedures. Among other things, our management must conduct an assessment of the Company’s internal control over financial reporting to allow management to report on, and our independent registered public accounting firm to audit, the effectiveness of the Company’s internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. As disclosed in Part II, Item 9A, “Controls and Procedures” of our Annual Report on Form 10-K/A for the year ended December 31, 2015 and any amendments thereto on Form 10-K/A, our management, with the participation of our current President and Chief Executive Officer and our Chief Financial Officer, has determined that we have material weaknesses in the Company’s internal control over financial reporting as of December 31, 2015 related to technical accounting review of significant contractual agreements and our monitoring of expenses incurred under our clinical research agreements. The material weaknesses resulted in the restatement of our previously filed annual audited and interim unaudited consolidated financial statements. Additionally, this control deficiency could result in a misstatement in the financial statements that would result in a material misstatement in the annual or interim consolidated financial statements that would not be prevented or detected.

We have identified material weaknesses in our internal control over financial reporting before. For the year ended December 31, 2014, our management identified a material weakness in our internal control over financial reporting, relating to our evaluation of revenue recognition for services transactions and contractual arrangements. We developed a remediation plan designed to address the material weakness in our internal control over financial reporting. Our plan included additional staffing, enhancing policies and procedures relating to revenue recognition and other areas reflected in the material weakness, and implementing a series of incremental software solutions.

A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. We are actively engaged in developing and implementing a remediation plan designed to address such material weaknesses. However, additional material weaknesses in the Company’s internal control over financial reporting may be identified in the future. Any failure to implement or maintain required new or improved controls, or any difficulties we encounter in their implementation, could result in additional material weaknesses, or could result in material misstatements in our consolidated financial statements. These misstatements could result in a further restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations, reduce our ability to obtain financing or cause investors to lose confidence in our reported financial information, leading to a decline in our stock price.

Although we are working to remedy the ineffectiveness of the Company’s internal control over financial reporting, there can be no assurance as to when the remediation plan will be fully developed, when it will be fully implemented or the aggregate cost of implementation. Until our remediation plan is fully implemented, our management will continue to devote significant time and attention to these efforts. If we do not complete our remediation in a timely fashion, or at all, or if our remediation plan is inadequate, there will continue to be an increased risk that we will be unable to timely file future periodic reports with the SEC and that our future consolidated financial statements could contain errors that will be undetected. Further and continued determinations that there are material weaknesses in the effectiveness of the Company’s internal control over financial reporting could also reduce our ability to obtain financing or could increase the cost of any financing we obtain and require additional expenditures of both money and our management’s time to comply with applicable requirements. For more information relating to the Company’s internal control over financial reporting (and disclosure controls and procedures) and the remediation plan undertaken by us, see Part II, Item 9A, “Controls and Procedures included in the Annual Report on Form 10-K/A filed on November 14, 2016.”

We cannot assure you that additional material weaknesses in our internal control over financial reporting will not be identified in the future. Any failure to implement and document new and more precise monitoring controls or to implement organizational changes including skillset enhancements through resource changes or education to improve detection and communication of financial misstatements across all levels of the organization could result in additional material weaknesses, result in material misstatement in our financial statements and cause us to fail to meet our reporting obligations, which in turn could cause the trading price of our common stock to decline.

Item 6. Exhibits

(a) Exhibits


10.1		Employment agreement, dated July 19, 2016 (and effective August 1, 016), by and between Juniper Pharmaceuticals, Inc. and Alicia Secor (incorporated by reference to Exhibit 10.1 to the Form 8-K (File No. 001-10352) filed on July 20, 2016).

10.2		Form of Inducement Option Award Agreement (incorporated by reference to Exhibit 10.2 to the Form 8-K (File No. 001-10352) filed on July 20, 2016).

10.3		Transition and Consulting Agreement dated July 19, 2016, by and between Juniper Pharmaceuticals, Inc. and Frank C. Condella, Jr. (incorporated by reference to Exhibit 10.3 to the Form 8-K (File No. 001-10352), filed on July 20, 2016).

31.1*		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of the Company.

31.2*		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of the Company.

32.1**		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*		The following materials from the Juniper Pharmaceuticals, Inc. Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015, (ii) Condensed Consolidated Balance Sheets at June 30, 2016 and December 31, 2015, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2016 and 2015, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015, and (v) Notes to Condensed Consolidated Financial Statements.

*	Filed herewith.

**	Furnished herewith.

Signatures

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.

Juniper Pharmaceuticals, Inc.

/s/ George O. Elston

George O. Elston

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

DATE: November 14, 2016

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