UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

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

For the quarterly period ended March 31, ~~2020~~2021

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

Commission FileNumber 001-37906

ORGANOGENESIS HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware

98-1329150

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

85 Dan Road

Canton, MA 02021

(Address of principal executive offices) (Zip Code)

(781)575-0775

(Registrant’s telephone number, including area code)

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

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Class A Common Stock, $0.0001 par value

ORGO

Nasdaq Capital Market

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

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

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

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

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

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

As of May 1, ~~2020,~~2021, the registrant had a total of ~~106,107,921~~128,218,266 shares of its Class A common stock, $0.0001 par value per share, outstanding.

Organogenesis Holdings Inc.

Quarterly Report on Form10-Q

For the Quarterly Period Ended March 31, ~~2020~~2021

Table of Contents


		Page
PART I. FINANCIAL INFORMATION			4
Item 1.	Unaudited Consolidated Financial Statements		4
	Consolidated Balance Sheets		4
	Consolidated Statements of Operations		5
	Consolidated Statements of ~~Redeemable Common Stock and~~ Stockholders’ Equity		6
	Consolidated Statements of Cash Flows		7
	Notes to Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2025
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		2934
Item 4.	Controls and Procedures		2934

PART II. OTHER INFORMATION			3036
Item 1.	Legal Proceedings		3036
Item 1A	Risk Factors		3036
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		3236
Item 3.	Defaults Upon Senior Securities		3236
Item 4.	Mine Safety Disclosures		3236
Item 5.	Other Information		3236
Item 6.	Exhibits		3337

SIGNATURES			3438

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report onForm 10-Q contains forward-looking statements. These statements may relate to, but are not limited to, expectations of our future results of operations, business strategies and operations, financing plans, potential growth opportunities, potential market opportunities and the effects of competition, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. These risks and other factors include, but are not limited to, those listed under “Risk Factors.” In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “might,” “would,” “continue” or the negative of these terms or other comparable terminology. These forward-looking statements are based on our management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management’s beliefs and assumptions. These forward-looking statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Form10-Q may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and discussed elsewhere in this Form10-Q ~~including those related to~~and in “Part I, Item 1A—Risk Factors” in our Annual Report on Form 10-K for the ~~coronavirus(COVID-19)~~ ~~pandemic.~~year ended December 31, 2020. These forward-looking statements speak only as of the date of this Form10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of thisForm 10-Q.

As used herein, except as otherwise indicated by context, references to “we,” “us,” “our,” “the Company,” “Organogenesis” and “ORGO” will refer to Organogenesis Holdings Inc. and its subsidiaries.

PART I—FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements.

ORGANOGENESIS HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(amounts in thousands, except share and per share data)


	March 31,			December 31,			March 31,			December 31,
	2020			2019			2021			2020
Assets
Current assets:
Cash	$	46,898		$	60,174		$	77,458		$	84,394
Restricted cash		176			196			500			412
Accounts receivable, net		32,724			39,359			72,003			56,804
Inventory		26,436			22,918			29,721			27,799
Prepaid expenses and other current assets		5,164			2,953			5,557			4,935

Total current assets		111,398			125,600			185,239			174,344
Property and equipment, net		50,071			47,184			62,431			60,068
Notes receivable from related parties		576			556
Intangible assets, net		19,981			20,797			29,379			30,622
Goodwill		25,539			25,539			28,772			28,772
Deferred tax asset		15			127
Operating lease right-of-use assets, net								12,706			—
Deferred tax asset, net								18			18
Other assets		760			884			636			670

Total assets	$	208,340		$	220,687		$	319,181		$	294,494

Liabilities and Stockholders’ Equity
Current liabilities:
Deferred acquisition consideration	$	1,958		$	5,000		$	—		$	483
Current portion of term loan		1,667			—			16,875			16,666
Current portion of capital lease obligations		3,189			3,057
Current portion of finance lease obligations								3,870			3,619
Current portion of operating lease obligations								4,004			—
Current portion of deferred rent and lease incentive obligation								—			95
Accounts payable		26,208			28,387			23,877			23,381
Accrued expenses and other current liabilities		21,803			23,450			25,383			23,973

Total current liabilities		54,825			59,894			74,009			68,217
Line of credit		33,484			33,484			10,000			10,000
Term loan, net of current portion		57,910			49,634			42,876			43,044
Deferred rent		1,105			1,012
Capital lease obligations, net of current portion		13,755			14,431
Deferred acquisition consideration, net of current portion								1,436			1,436
Earnout liability								3,689			3,985
Deferred rent and lease incentive obligation, net of current portion								—			2,315
Finance lease obligations, net of current portion								10,516			11,442
Operating lease obligations, net of current portion								11,031			—
Other liabilities		6,966			6,649			8,332			7,971

Total liabilities		168,045			165,104			161,889			148,410

Commitments and contingencies (Note 13)
Commitments and contingencies (Note 18)
Stockholders’ equity:
Common stock, $0.0001 par value; 400,000,000 shares authorized; 106,088,563 and 105,599,434 shares issued; 105,360,015 and 104,870,886 shares outstanding at March 31, 2020 and December 31, 2019, respectively.		11			10
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued								—			—
Common stock, $0.0001 par value; 400,000,000 shares authorized; 128,830,803 and 128,460,381 shares issued; 128,102,255 and 127,731,833 shares outstanding at March 31, 2021 and December 31, 2020, respectively.								13			13
Additionalpaid-in capital		227,604			226,580			298,095			296,830
Accumulated deficit		(187,320	)		(171,007	)		(140,816	)		(150,759	)

Total stockholders’ equity		40,295			55,583			157,292			146,084

Total liabilities and stockholders’ equity	$	208,340		$	220,687		$	319,181		$	294,494

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

ORGANOGENESIS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(amounts in thousands, except share and per share data)


	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
Net revenue	$	61,732		$	57,123		$	102,552		$	61,732
Cost of goods sold		18,793			16,980			25,495			18,793

Gross profit		42,939			40,143			77,057			42,939
Operating expenses:
Selling, general and administrative		52,613			48,893			58,232			52,613
Research and development		5,410			3,371			6,209			5,410

Total operating expenses		58,023			52,264			64,441			58,023

Loss from operations		(15,084	)		(12,121	)
Income (loss) from operations								12,616			(15,084	)

Other expense, net:
Interest expense, net		(2,510	)		(1,778	)		(2,470	)		(2,510	)
Loss on the extinguishment of debt		—			(1,862	)
Gain on settlement of deferred acquisition consideration		1,295			—			—			1,295
Other income, net		21			132
Other income (expense), net								(3	)		21

Total other expense, net		(1,194	)		(3,508	)		(2,473	)		(1,194	)

Net loss before income taxes		(16,278	)		(15,629	)
Net income (loss) before income taxes								10,143			(16,278	)
Income tax expense		(35	)		(37	)		(200	)		(35	)

Net loss	$	(16,313	)	$	(15,666	)
Net income (loss)							$	9,943		$	(16,313	)

Net loss per share —basic and diluted	$	(0.16	)	$	(0.17	)
Net income (loss), per share:
Basic							$	0.08		$	(0.16	)

Weighted-average common shares outstanding—basic and diluted		104,486,924			90,604,107
Diluted							$	0.07		$	(0.16	)

Weighted-average common shares outstanding
Basic								127,870,065			104,486,924

Diluted								133,451,950			104,486,924

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

ORGANOGENESIS HOLDINGS INC.

CONSOLIDATED STATEMENTS ~~OF REDEEMABLE COMMON STOCK AND~~ STOCKHOLDERS’ EQUITY

(unaudited)

(amounts in thousands, except share data)

   Three Months Ended March 31, 2020
   Redeemable          Additional
Paid-in
Capital    Total Organogenesis
Holdings Inc.
Stockholders’ Equity
   Common Stock    Common Stock    Accumulated
Deficit
     Shares      Amount    Shares    Amount
Balance as of December 31, 2019
   —      $ —      104,870,886    $ 10    $ 226,580    $ (171,007 ) $ 55,583
Exercise of stock options
   —      —      489,129    1    815    —   816
Stock-based compensation expense
   —      —      —      —      209    —   209
Net loss
   —      —      —      —      —      (16,313 ) (16,313 )












Balance as of March 31, 2020
   —      $ —      105,360,015    $ 11    $ 227,604    $ (187,320 ) $ 40,295


	Three Months Ended March 31, 2021
					Additional
	Common Stock				Paid-in			Accumulated			Total
	Shares		Amount		Capital			Deficit			Stockholders’ Equity
Balance as of December 31, 2020 (as reported)		127,731,833	$	13	$	299,129		$	(153,058	)	$	146,084
Adjustment due to Private Warrant reclassification		—		—		(2,299	)		2,299			—
Balance as of December 31, 2020 (as adjusted)		127,731,833		13		296,830			(150,759	)		146,084
Exercise of stock options		285,344		—		984			—			984
Vesting of RSUs, net of shares surrendered to pay taxes		85,078		—		(417	)		—			(417	)
Stock-based compensation expense		—		—		698			—			698
Net income		—		—		—			9,943			9,943

Balance as of March 31, 2021		128,102,255	$	13	$	298,095		$	(140,816	)	$	157,292

   Three Months Ended March 31, 2019
   Redeemable          Additional
Paid-in
Capital    Accumulated
Deficit Total Organogenesis
Holdings Inc.
Stockholders’ Equity
   Common Stock    Common Stock
   Shares Amount    Shares    Amount
Balance as of December 31, 2018
   728,548 $ —      91,261,413    $ 9    $ 177,272    $ (130,240 ) $ 47,041
Adoption of ASC 606
   —   —      —      —      —      332 332
Exercise of common stock warrants
   —   —      54,626    —      628    —   628
Stock-based compensation expense
   —   —      —      —      224    —   224
Redemption of redeemable common stock placed into treasury
   (728,548 ) —      —      —      —      —   —
Net loss
   —   —      —      —      —      (15,666 ) (15,666 )










Balance as of March 31, 2019
   —   $ —      91,316,039    $ 9    $ 178,124    $ (145,574 ) $ 32,559


	Three Months Ended March 31, 2020
					Additional
	Common Stock				Paid-in			Accumulated			Total
	Shares		Amount		Capital			Deficit			Stockholders’ Equity
Balance as of December 31, 2019 (as reported)		104,870,886	$	10	$	226,580		$	(171,007	)	$	55,583
Adjustment due to Private Warrant reclassification		—		—		(2,299	)		2,299			—
Balance as of December 31, 2019 (as adjusted)		104,870,886		10		224,281			(168,708	)		55,583
Exercise of stock options		489,129		1		815			—			816
Stock-based compensation expense		—		—		209			—			209
Net loss		—		—		—			(16,313	)		(16,313	)

Balance as of March 31, 2020 (as adjusted)		105,360,015	$	11	$	225,305		$	(185,021	)	$	40,295

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

ORGANOGENESIS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(amounts in thousands)


	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
Cash flows from operating activities:
Net loss	$	(16,313	)	$	(15,666	)
Adjustments to reconcile net loss to net cash used in operating activities:
Net income (loss)							$	9,943		$	(16,313	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		902			902			1,010			902
Amortization of intangible assets		817			1,498			1,243			817
Amortization of operating lease right-of-use assets								1,129			—
Non-cash interest expense		46			115			72			46
Deferred interest expense		470			36			525			470
Deferred rent expense		92			49
Deferred rent expense and lease incentive obligation								—			92
Gain on settlement of deferred acquisition consideration		(1,295	)		—			—			(1,295	)
Provision (benefit) recorded for sales returns and doubtful accounts		217			(76	)
Recovery of certain notes receivable from related parties								(179	)		—
Provision recorded for sales returns and doubtful accounts								1,103			217
Loss on disposal of property and equipment		201			—			239			201
Adjustment for excess and obsolete inventories		769			257			2,290			769
Stock-based compensation		209			224			698			209
Loss on extinguishment of debt		—			1,862
Change in fair value of Earnout liability								(296	)		—
Changes in operating assets and liabilities:
Accounts receivable		6,325			2,474			(16,301	)		6,325
Inventory		(4,287	)		(5,076	)		(4,212	)		(4,287	)
Prepaid expenses and other current assets		(2,099	)		(963	)		(622	)		(2,099	)
Operating leases								(1,210	)		—
Accounts payable		(1,910	)		4,882			1,842			(1,910	)
Accrued expenses and other current liabilities		(1,274	)		176			1,411			(1,274	)
Other liabilities		(153	)		(252	)		(164	)		(153	)

Net cash used in operating activities		(17,283	)		(9,558	)		(1,479	)		(17,283	)
Cash flows from investing activities:
Purchases of property and equipment		(4,243	)		(317	)		(4,957	)		(4,243	)
Proceeds from the repayment of notes receivable from related parties								179			—

Net cash used in investing activities		(4,243	)		(317	)		(4,778	)		(4,243	)
Cash flows from financing activities:
Line of credit borrowings		—			4,500
Proceeds from term loan		10,000			40,000			—			10,000
Repayment of notes payable		—			(17,585	)
Payments of withholding taxes in connection with RSUs vesting								(417	)		—
Proceeds from the exercise of stock options		816			—			984			816
Redemption of redeemable common stock placed into treasury		—			(6,762	)
Principal repayments of capital lease obligations		(544	)		(209	)
Principal repayments of finance lease obligations								(675	)		(544	)
Payment of deferred acquisition consideration		(2,042	)		—			(483	)		(2,042	)
Payment of debt issuance costs		—			(811	)

Net cash provided by financing activities		8,230			19,133
Net cash (used in) provided by financing activities								(591	)		8,230
Change in cash and restricted cash		(13,296	)		9,258			(6,848	)		(13,296	)
Cash and restricted cash, beginning of period		60,370			21,405			84,806			60,370

Cash and restricted cash, end of period	$	47,074		$	30,663		$	77,958		$	47,074

Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,244		$	1,962		$	1,937		$	2,244
Cash paid for income taxes	$	—		$	58		$	—		$	—
Supplemental disclosure ofnon-cash investing and financing activities:
Debt issuance costs included in accounts payable	$	—		$	113
Purchases of property and equipment included in accounts payable and accrued expenses	$	2,942		$	415		$	306		$	2,942
Exercise of common stock warrants included in prepaid expenses and other current assets	$	—		$	628
Right-of-use assets obtained through operating lease obligations							$	310		$	—

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

ORGANOGENESIS HOLDINGS INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

~~Three Months Ended March 31, 2020~~

(amounts in thousands, except share and per share data)

1. Nature of the Business and Basis of Presentation

Organogenesis Holdings Inc. (formerly Avista Healthcare Public Acquisition Corp.) (“ORGO” or the “Company”) is a leading regenerative medicine company focused on the development, manufacture, and commercialization of solutions for the Advanced Wound Care and Surgical & Sports Medicine markets. ~~Many~~Several of the existing and pipeline products in the Company’s portfolio have Premarket Application (“PMA”) approval, Business License Applicant (“BLA”) approval or Premarket Notification 510(k) clearance from the United States Food and Drug Administration (“FDA”). The Company’s customers include hospitals, wound care centers, government facilities, ambulatory service centers (“ASCs”) and physician offices. The Company has one operating and reportable segment.

COVID-19 pandemic

The emergence of the coronavirus(COVID-19) around the world, and particularly in the United States, ~~presents significant~~continues to present risks to the Company. While theCOVID-19 pandemic has not materially adversely affected the Company’s financial results and business operations inthrough the first quarter ended March 31, ~~2020,~~2021, the Company is unable to predict the impact thatCOVID-19 will have on its financial position and operating results because of the numerous uncertainties created by the unprecedented nature of the pandemic. The public health actions being undertaken to reduce the spread of the virus may create significant disruptions to the Company with respect to: (i) the demand for its products, (ii) the ability of its sales representatives to reach healthcare customers, (iii) its ability to maintain staffing levels to support its operations, (iv) its ability to continue to manufacture certain of its products, (v) the reliability of its supply chain and (vi) its ability to achieve the financial covenants required to borrow under the 2019 Credit Agreement (see Note “9. Long-Term Debt Obligations”). The extent to which the~~COVID-19~~ pandemic may impact the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, travel restrictions and social distancing in the U.S. and other countries, business closures or business disruptions and the effectiveness of actions taken in the U.S. and other countries to contain and treat the disease.

The Company is closely monitoring the evolving impact of the pandemic on all aspects of its business. The Company has implemented a number of measures designed to protect the health and safety of its employees, support its customers and promote business continuity. The Company ~~is also actively reviewing~~has reviewed and ~~implementing~~implemented cost-saving measures ~~including discontinuing allnon-essential~~ ~~services~~ and ~~programs~~will continue to review and ~~instituting controls on travel, events, marketing and clinical studies~~implement additional cost-saving measures, as necessary, to ~~adapt the financial business plan for~~address the evolvingCOVID-19 challenges.

Merger with Avista Healthcare Public Acquisition Corp

On December 10, 2018, Avista Healthcare Public Acquisition Corp., our predecessor company (“AHPAC”), consummated the previously announced merger (the “Avista Merger”) pursuant to an Agreement and Plan of Merger, dated as of August 17, 2018 (as amended, the “Avista Merger Agreement”), by and among AHPAC, Avista Healthcare Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of AHPAC (“Avista Merger Sub”) and Organogenesis Inc., a Delaware corporation (“Organogenesis Inc.”). As a result of the Avista Merger and the other transactions contemplated by the Avista Merger Agreement, Avista Merger Sub merged with and into Organogenesis Inc., with Organogenesis Inc. surviving the Avista Merger and becoming a wholly-owned subsidiary of AHPAC. AHPAC changed its name to Organogenesis Holdings Inc. (ORGO).

The Avista Merger was accounted for as a reverse merger in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Under this method of accounting, AHPAC was treated as the “acquired” company for accounting purposes. This determination was primarily based on Organogenesis Inc.’s equity holders having a majority of the voting power of the combined company, Organogenesis Inc. comprising the ongoing operations of the combined entity, Organogenesis Inc. comprising a majority of the governing body of the combined company, and Organogenesis Inc.’s senior management comprising the senior management of the combined company. Accordingly, for accounting purposes, the Avista Merger was treated as the equivalent of Organogenesis Inc. issuing stock for the net assets of AHPAC, accompanied by a recapitalization. The net assets of AHPAC were recorded at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Avista Merger are those of Organogenesis Inc.

Liquidity and Financial Conditions

In accordance with ASC205-40, Going Concern (“ASC205-40”), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. ~~The Company has incurred a recurring loss from operations since~~Since its inception, ~~and~~the Company has funded its operations primarily with cash flow from product sales, ~~and~~ proceeds from loans from affiliates and entities controlled by its affiliates, sales of its Class A common stock and third-party debt. As of March 31, ~~2020,~~2021, the Company had an accumulated deficit of ~~$187,320~~$140,816 and working capital of ~~$56,573. During~~$111,230. The Company also had up to $30,000 available (subject to Borrowing Base) for future revolving borrowings under our Revolving Facility (see Note “13. Long-Term Debt Obligations”). For the three months ended March 31, ~~2020,~~2021, the Company has ~~incurred~~generated net ~~losses~~income of ~~$16,313~~$9,943 and used ~~$17,283~~$1,479 of cash infrom operations. ~~The Company expects to continue to generate operating losses for the foreseeable future as the Company expends resources to grow the organization to support the planned expansion of the business.~~ The Company expects that its cash of ~~$46,898~~$77,458 and other components of working capital of $33,772 as of March 31, ~~2020,~~2021, plus net cash flows from product sales and availability under the 2019 Credit Agreement, ~~(see Note “9. Long-Term Debt Obligations”),~~ will be sufficient to fund its operating expenses, capital expenditure requirements and debt service payments for at least 12 months beyond the filing date of this quarterly report. ~~The Company is closely monitoring ongoing developments in connection with theCOVID-19~~ pandemic, which may negatively impact its commercial prospects, projected cash position and access to capital in 2020. The Company will continue to assess its cash position and, if circumstances warrant, make appropriate adjustments to its operating plan.

The Company expects to continue investing in product development, sales and marketing, and customer support for its products. The Company may seek to raise additional funding through public and/or private equity financings, debt financings, ~~borrowings from the Revolving Facility under the 2019 Credit Agreement~~ or other strategic transactions. There can be no assurance that the Company will be able to obtain additional debt or equity financing on terms acceptable to the Company, on a timely basis ~~or at all, particularly in light of the adverse impacts of theCOVID-19~~ pandemic on the capital markets. The Company’s ability to borrow under the Revolving Facility is subject to compliance with certain financial covenants that include maintaining Minimum Trailing Twelve Month Consolidated Revenue and~~Non-PuraPly~~ ~~Revenue. If the Company is not able to comply with these covenants, due to the impacts ofCOVID-19~~ or otherwise, it will be unable to borrow under the facility without obtaining an amendment from its lenders. There can be no assurance that the Company’s lenders would agree to any such amendment on acceptable terms, or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations, and financial condition.

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared by management in accordance with ~~accounting principles generally accepted in the United States of America~~GAAP and in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. While we believe that the disclosures presented are adequate in order to make the information not misleading, these unaudited quarterly financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, ~~2019~~2020 (the “Annual Report”).

The unaudited consolidated financial statements include the accounts and results of operations of Organogenesis Holdings Inc. and its wholly-owned or controlled subsidiaries of Organogenesis Inc., including Organogenesis GmbH (a Switzerland corporation) and Prime Merger Sub, LLC. All intercompany balances and transactions have been eliminated in consolidation. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s financial position, results of operations and cash flows at the dates and for the periods indicated. The results for the three months ended March 31, ~~2020~~2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2020,~~2021, any other interim periods, or any future years or periods.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure as of the date of the consolidated financial statements and the reported results of operations during the reporting ~~period.~~periods. Actual results could differ from those estimates.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note “2. Significant Accounting Policies” to the Consolidated Financial Statements included in the Annual Report. There have been no material changes to the significant accounting policies previously disclosed in the Annual ~~Report.~~Report, other than as it related to the recently adopted accounting pronouncement disclosed below.

~~Reclassification of Prior Period Balances~~Revision to Previously Issued Financial Statements

~~Reclassification has~~On April 12, 2021, the Staff of the SEC issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). In the SEC Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s financial statements as opposed to equity.

As of December 31, 2018, the Company had 4.1 million private warrants outstanding, which were issued to Avista Capital Partners IV, L.P. and Avista Capital Partners IV (Offshore), L.P. in connection with the Avista Merger on December 10, 2018 (the “Private Warrants”), and 31.0 million public warrants outstanding that were issued in connection with the initial public offering of Avista Healthcare Public Acquisition Corp. on October 10, 2016 (the “Public Warrants”, together with the Private Warrants, the “Warrants”). The Company originally classified the Warrants as equity on its financial statements. In 2019, the outstanding Warrants were exchanged for 3.3 million shares of the Company’s Class A common stock. There were no Warrants outstanding as of December 31, 2019.

As a result of the SEC Statement, the Company reevaluated the historical accounting treatment of its Public Warrants and Private Warrants and determined that the Private Warrants should have been ~~made~~recorded at fair value as a liability in the Company’s consolidated balance sheet with changes to the fair value recorded to the consolidated statements of operations. The Company assessed the materiality of this error on prior period ~~amounts reported~~financial statements in ~~the cash flows from operating activities section of the cash flow statement to conform~~accordance with SEC Staff Accounting Bulletin Number 99, Materiality, and ASC 250-10, Accounting Changes and Error Corrections. The Company determined that this error was not material to the ~~current year presentation.~~financial statements of any prior annual or interim period. The ~~reclassification has no effect~~Company reclassified $2,299 from additional paid-in capital to accumulated deficit on the ~~reported~~consolidated balance sheet as of December 31, ~~2019, or net loss or equity or total operating, investing or financing cash flows~~2020 as the cumulative adjustment for this error.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842), as further amended (“ASC 842”), to increase transparency and comparability among organizations by requiring the recognition of, at the lease commencement date, a lease liability for the obligation to make lease payments, and a right-of-use (“ROU”) asset for the right to use the underlying asset, on the balance sheet. Although the Company remains an emerging growth company until December 31, 2021, it elected to early adopt ASC 842 on January 1, 2021. ASC 842 requires a modified retrospective transition method that could either be applied at the earliest comparative period ~~ended March 31, 2019.~~in the financial statements or in the period of adoption. The Company elected to use the period of adoption (January 1, 2021) transition method and therefore did not recast prior periods. Results for reporting periods beginning on January 1, 2021 are presented under ASC 842, while prior period amounts continue to be reported and disclosed in accordance with the Company’s historical accounting treatment under Accounting Standards Codification 840, Leases (“ASC 840”). In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company: (1) to carry forward the historical lease classification; (2) not to reassess whether expired or existing contracts are or contain leases; and, (3) not to reassess the treatment of initial direct costs for existing leases. The Company made an accounting policy election under ASC 842 not to recognize ROU assets and lease liabilities for leases with a term of 12 months or less. The Company also elected to account for lease components and the associated non-lease components in the contracts as a single lease component for most of the leased assets. Upon the adoption of this standard on January 1, 2021, the Company recognized an operating lease liability of $15,935, representing the present value of the minimum lease payments remaining as of the adoption date, and a right-of-use asset in the amount of $13,525. The right-of-use asset reflects adjustments for de-recognition of deferred lease liabilities and lease incentives. The Company’s accounting for finance leases (previously classified as capital leases under ASC 840) remained substantially unchanged. See Note “17. Leases” for further disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In ~~February 2016, the FASBissued ASU 2016-02,~~ ~~Leases (Topic 842)~~ ~~(“ASU 2016-02”), which~~ ~~applies to all leases and will require lessees to record most leases on the balance sheet but recognize expenses in a manner similar to the current standard. In July 2018, the FASB issuedASU 2018-10,~~ ~~Codification Improvements to Topic 842, Leases~~~~, which provides narrow amendments to clarify how to apply certain aspects ofASU 2016-02, andASU 2018-11,~~ ~~Leases (Topic 842): Targeted Improvements~~~~, which provides adopters an additional transition method by allowing entities to initially applyASU 2016-02, and~~ subsequent related standards, at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Additionally, in March 2019, the FASB issued~~ASU 2019-01,~~ ~~Leases (Topic 842): Codification Improvements~~~~, which clarifies the transition guidance related to interim disclosures provided in the year of adoption.ASU 2016-02 and~~ related amendments and improvements are effective for fiscal years beginning after December 15, 2018 for public business entities and interim periods within those years and for all other entities for years beginning after December 15, 2020. Entities are required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginning of the transition date. A full retrospective application is prohibited. The Company is a public entity but took advantage of the relief provided for emerging growth companies to allow them to follow the private company adoption timelines and the Company will adopt this standard and the related improvements on January 1, 2021 by recognizing a cumulative-effect adjustment for any impact. The Company continues to evaluate the impact of adopting this standard on its accounting policies, financial statements, business processes, systems and internal controls. Additionally, the Company has established a project management and implementation team consisting of internal resources and external advisors. These evaluation and implementation processes are expected to continue through 2020. The Company expects to recognize all of its leases with terms over twelve months on the balance sheet by recording~~a right-of-use asset~~ ~~and a corresponding lease liability.~~

In June 2016, the FASB issuedASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). Subsequent to the issuance ofASU 2016-13, the FASB has issued the following updates:ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments- Credit Losses,ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,ASU 2019-05, Financial Instruments—Credit Losses (Topic 326)—Targeted Transition Relief andASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The objective ofASU 2016-13 and all the related updates is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.ASU 2016-13 and the related updates are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019 for public business entities excluding entities eligible to be smaller reporting companies and for fiscal years, and interim periods within those years, beginning after December 15, 2022 for all other entities. Early adoption is permitted. The Company is a smaller reporting company and follows the private company adoption timelines and the Company will adopt this standard and the related improvements on January 1, 2023 by recognizing a cumulative-effect adjustment to retained earnings for any impact. The Company is currently assessing the adoption ofASU 2016-13 and the related ~~improvements is not expected to have a material~~ impact on the Company’s consolidated financial statements.

3. Acquisition

On September 17, 2020 (the “Acquisition Date”), the Company acquired certain assets and assumed certain liabilities of CPN Biosciences, LLC (“CPN”) pursuant to an asset purchase agreement dated July 24, 2020. CPN offered a physician office management solution and advanced wound care products.

The aggregate consideration amounted to $19,024 as of the Acquisition Date. Total consideration consisted of $6,427 in cash, 2,151,438 shares of the Company’s Class A common stock with a fair value of $8,815, and contingent consideration (the “Earnout”) with an Acquisition Date fair value of $3,782. On the Acquisition Date, the Company paid $5,820 in cash and issued 1,947,953 shares of the Company’s Class A common stock. The remaining consideration of $1,436 was held back (the “Holdback”) and will be paid or issued, as applicable, eighteen months after the Acquisition Date, subject to any offsetting indemnification claims against CPN.

The Company is obligated to pay an Earnout to CPN’s former shareholders if CPN’s legacy product revenue in the Earnout Period (defined as a twelve-month period, starting on the first day of the next calendar quarter immediately following the post-closing sales meeting), exceeds CPN’s 2019 revenue. The amount of the Earnout, if any, will be equal to 70% of the excess and will be payable 60 days after the expiration of the Earnout Period. The post-closing sales meeting happened in April 2021 and the Earnout Period will be July 1, 2021 to June 30, 2022. The Company recorded a non-current liability of $3,782 on the Acquisition Date for the fair value of the contingent consideration related to the expected Earnout. The Company assesses the fair value of the Earnout liability at each reporting period. As of March 31, 2021, the Earnout liability was estimated at $3,689. Subsequent changes in the estimated fair value of the liability are reflected in earnings until the liability is settled (see Note “5. Fair Value Measurement of Financial Instruments”).

This transaction was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the Acquisition Date. The fair values of intangible assets were based on valuations using various income approaches and methods, such as the multi-period excess earnings method, relief from royalty method, etc., which require the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill.

Based upon the valuation, the total purchase price allocation was as follows:


Total purchase price		$	19,024

Assets acquired:
Accounts receivable	1,155
Inventory	1,230
Prepaid expenses and other current assets	5
Property and equipment	85
Intangible assets	13,570
Other assets	4

Total assets acquired	16,049
Liabilities assumed:
Accounts payable	27
Accrued expenses and other current liabilities	231

Total liabilities assumed	258
Total identifiable assets acquired, net			15,791

Goodwill		$	3,233

The purchase price allocation resulted in goodwill of $3,233, which will be deductible for income tax purposes. The resulting amount of goodwill is primarily attributed to expected synergies from cross-sale opportunities and future growth. Intangible assets of $13,570 include customer relationships of $10,690, developed technologies of $2,050, non-competition agreements of $750, and trademarks of $80, which are being amortized on a straight-line basis, over weighted-average useful lives of 10 years, 6 years, 5 years and 1 year, respectively.

At the time of the acquisition, CPN had approximately 30 employees. The results of operations of CPN have been included in the Company’s consolidated financial statements beginning on the Acquisition Date.

4. Product and Geographic Sales

The Company generates revenue through the sale of Advanced Wound Care and Surgical & Sports Medicine products. There is a single performance obligation in all of the Company’s contracts, which is the Company’s promise to transfer the Company’s products to customers based on specific payment and shipping terms in the arrangement. The entire transaction price reflects ~~the~~a single performance obligation. Product revenue is recognized when a customer obtains control of the Company’s products which occurs at a point in time and may be upon shipment, procedure date, or delivery, based on the terms of the contract. Revenue is recorded net of a reserve for returns, discounts and ~~GPO~~Group Purchasing Organization (“GPO”) rebates, which represent a direct reduction to the revenue recognized. These reductions are accrued at the time revenue is recognized, based upon historical experience and specific circumstances. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Company recorded GPO fees of ~~$960~~$700 and ~~$380,~~$960, respectively, as a direct reduction of revenue.

The following ~~table sets~~tables set forth revenue by product category:


	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2021		2020
Advanced Wound Care	$	51,288	$	47,844	$	90,708	$	51,288
Surgical & Sports Medicine		10,444		9,279		11,844		10,444

Total net revenue	$	61,732	$	57,123	$	102,552	$	61,732

~~For the three months ended March 31, 2020 and 2019, net PuraPly revenue totaled $32,505 and $25,447, respectively.~~ For all periods presented, net revenue generated outside the United States represented less than 1% of total net revenue.

4.5. Fair Value of Financial Assets and Liabilities

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values as of March 31, 2021 and December 31, 2020.


	Fair Value Measurements
	as of March 31, 2021 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Earnout liability	$	—	$	—	$	3,689	$	3,689

	$	—	$	—	$	3,689	$	3,689


	Fair Value Measurements
	as of December 31, 2020 Using:
	Level 1		Level 2		Level 3		Total
Liabilities:
Earnout liability	$	—	$	—	$	3,985	$	3,985

	$	—	$	—	$	3,985	$	3,985

Earnout Liability

In connection with accounting for the CPN acquisition on September 17, 2020, the Company recorded the Earnout liability of $3,782 on the Acquisition Date, representing the fair value of contingent consideration payable upon the achievement of a certain revenue target. The Earnout Liability is classified as a Level 3 measurement within the fair value hierarchy for which fair value is derived from inputs that are unobservable and significant to the overall fair value measurement. The fair value of such Earnout Liability is estimated using a Monte Carlo simulation model that utilizes key assumptions including forecasted revenues and volatilities of the underlying financial metrics during the Earnout period. The Company assesses the fair value of the Earnout liability at each reporting period. Any subsequent changes in the estimated fair value of the liability are reflected in selling, general and administrative expenses until the liability is settled. For more information about the Earnout liability, refer to Note “3. Acquisition”. As of March 31, 2021, the Earnout liability decreased to $3,689 due to the finalization of the Earnout Period and changes in certain market data assumptions. The following table provides a roll-forward of the fair value of the Company’s Earnout liability, for which fair value is determined using Level 3 inputs:


	Earnout liability
Balance as of December 31, 2020	$	3,985
Change in fair value		(296	)

Balance as of March 31, 2021	$	3,689

The Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of March 31, 2021 or December 31, 2020.

6. Accounts Receivable, Net

Accounts receivable consisted of the following:


							March 31			December 31,
	March 31, 2020			December 31, 2019			2021			2020
Accounts receivable	$	35,928		$	42,408		$	78,079		$	61,792
Less — allowance for sales returns and doubtful accounts		(3,204	)		(3,049	)		(6,076	)		(4,988	)

	$	32,724		$	39,359		$	72,003		$	56,804

The Company’s allowance for sales returns and doubtful accounts was comprised of the following:


	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
Balance at beginning of period	$	3,049		$	3,420		$	4,988		$	3,049
Additions (reductions)		217			(76	)		1,103			217
Write-offs		(62	)		(52	)		(15	)		(62	)

Balance at end of period	$	3,204		$	3,292		$	6,076		$	3,204

5.7. Inventories

Inventories, net of related reserves for excess and obsolescence, consisted of the following:


					March 31,		December 31,
	March 31, 2020		December 31, 2019		2021		2020
Raw materials	$	10,142	$	9,178	$	11,436	$	10,075
Work in process		1,622		781		764		1,305
Finished goods		14,672		12,959		17,521		16,419

	$	26,436	$	22,918	$	29,721	$	27,799

Raw materials include various components used in the Company’s manufacturing process. The Company’s excess and obsolete inventory review process includes analysis of sales forecasts and historical sales as compared to inventory level, and working with operations to maximize recovery of excess inventory. During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Company charged ~~$769~~$2,290 and ~~$257,~~$769, respectively, for inventory excess and obsolescence to cost of goods sold within the consolidated statements of operations.

6.8. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	March 31, 2021		December 31, 2020
Prepaid subscriptions	$	2,529	$	2,013
Prepaid conferences and marketing expenses		240		63
Prepaid deposits		1,586		1,438
Reimbursement of offering expenses		—		1,009
Other		1,202		412

	$	5,557	$	4,935

Prepaid deposits are deposits held by vendors which are expected to be released within twelve months and therefore they are recorded as current assets.

9. Property and Equipment, Net

Property and equipment consisted of the following:


							March 31,			December 31,
	March 31, 2020			December 31, 2019			2021			2020
Leasehold improvements	$	36,633		$	36,344		$	39,977		$	39,574
Furniture, computers and equipment		47,061			46,430			48,792			48,236

		83,694			82,774			88,769			87,810
Accumulated depreciation and amortization		(66,713	)		(65,812	)		(70,525	)		(69,521	)
Construction in progress		33,090			30,222			44,187			41,779

	$	50,071		$	47,184		$	62,431		$	60,068

Depreciation expense was $1,010 and $902 for ~~each of~~ the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had $21,689 of buildings under ~~capital~~finance leases recorded within leasehold improvements. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~$14,076~~$15,274 and ~~$13,777~~$14,974 recorded within accumulated depreciation and amortization related to buildings under ~~capital~~finance leases, respectively. Construction in progress primarily represents unfinished construction work on a building under a ~~capital~~finance lease and, more recently, improvements at the Company’s leased facilities in Canton and Norwood, Massachusetts.

7.10. Goodwill and Intangible Assets

Goodwill was ~~$25,539~~$28,772 as of March 31, ~~2020~~2021 and December 31, ~~2019. There were no impairments recorded against goodwill during the three months ended March 31, 2020 and 2019.~~2020.

In April 2019, the Company purchased $750 of intangibles related to patent andknow-how which were recorded within the developed technology category. The Company paid $250 at the time of the ~~transaction. The~~transaction with the remaining ~~$500 is~~purchase price being paid over two years after the transaction ~~closed~~closed. As of March 31, 2021, $250 was remaining and iswas recorded in accrued expenses and other current liabilities ~~and other liabilities~~ on the consolidated balance sheets.

Identifiable intangible assets consisted of the following as of March 31, ~~2020:~~2021:


	Original		Accumulated			Net Book
	Cost		Amortization			Value		Original		Accumulated			Net Book
								Cost		Amortization			Value
Developed technology	$	30,570	$	(12,007	)	$	18,563	$	32,620	$	(15,175	)	$	17,445
Trade names and trademarks		2,000		(708	)		1,292		2,080		(981	)		1,099
Independent sales agency network		4,500		(4,500	)		—
Customer relationships									10,690		(579	)		10,111
Non-compete agreements		260		(134	)		126		1,010		(286	)		724

Total	$	37,330	$	(17,349	)	$	19,981	$	46,400	$	(17,021	)	$	29,379

Identifiable intangible assets consisted of the following as of December 31, ~~2019:~~2020:


	Original		Accumulated			Net Book		Original		Accumulated			Net Book
	Cost		Amortization			Value		Cost		Amortization			Value
Developed technology	$	30,570	$	(11,266	)	$	19,304	$	32,620	$	(14,330	)	$	18,290
Trade names and trademarks		2,000		(650	)		1,350		2,080		(906	)		1,174
Independent sales agency network		4,500		(4,500	)		—
Customer relationship									10,690		(312	)		10,378
Non-compete agreements		260		(117	)		143		1,010		(230	)		780

Total	$	37,330	$	(16,533	)	$	20,797	$	46,400	$	(15,778	)	$	30,622

Amortization of intangible assets, calculated on a straight-line basis or using an accelerated method, was ~~$817~~$1,243 and ~~$1,498~~$817 for the three months ended March 31, 2021 and 2020, ~~and 2019,~~ respectively.

8.11. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:


	March 31,		December 31,		March 31,		December 31,
	2020		2019		2021		2020
Accrued personnel costs	$	16,463	$	17,640	$	20,374	$	18,943
Accrued royalties						2,851		2,971
Other		5,340		5,810		2,158		2,059

	$	21,803	$	23,450	$	25,383	$	23,973

9.12. Restructuring

On October 21, 2020, the Company committed to a plan to restructure the workforce and consolidate its La Jolla facilities as part of the Company’s long-term plan to consolidate manufacturing operations into Massachusetts in order to reduce the Company’s cost structure. The restructuring is expected to be completed by the end of 2021 and will result in a charge of approximately $5.5 million, of which approximately $4.5 million is attributable to the retention benefits associated with approximately 70 employees and the remaining $1.0 million is related to the facility closures. As employees are required to provide future services, employee retention and other benefit-related costs related to the Company’s restructuring are expensed over the service period.

As a result of this restructuring activity, the Company incurred a pre-tax charge of $927 during the three months ended March 31, 2021. This charge was primarily related to employee retention benefits and was included in selling, general and administrative expenses in the consolidated statements of operations. The liability related to the restructuring activities was $1,545 as of March 31, 2021 and was included in accrued expenses and other current liabilities in the consolidated balance sheets. The following table provides a roll-forward of the restructuring liability.


	Employee		Facility
Liability balance as of December 31, 2020	$	618	$	—
Expenses		910		17
Payments		—		—

Liability balance as of March 31, 2021	$	1,528	$	17

13. Long-Term Debt Obligations

Long-term debt obligations consisted of the following:


	March 31,			December 31,			March 31,			December 31,
	2020			2019			2021			2020
Line of credit	$	33,484		$	33,484		$	10,000		$	10,000

Term loan		60,000			50,000			60,000			60,000
Less debt discount and debt issuance cost		(423	)		(366	)		(249	)		(290	)
less current maturities		(1,667	)		—
Less current maturities								(16,875	)		(16,666	)

Term loan, net of debt discount and debt issuance cost	$	57,910		$	49,634
Term loan, net of debt discount, debt issuance cost and current maturities							$	42,876		$	43,044

2019 Credit Agreement

In March 2019, the Company, its subsidiaries and Silicon Valley Bank (“SVB”), and the several other lenders thereto (collectively, the “Lenders”) entered into a credit agreement, as amended (the “2019 Credit Agreement”), providing for a term loan (the “Term Loan Facility”) and a revolving credit facility (the “Revolving Facility”) in an aggregate principal amount of $100,000. Capitalized terms used herein and not otherwise defined are defined as set forth in the 2019 Credit Agreement.

The Term Loan Facility is structured in three tranches, as follows: (i) the first tranche of $40,000 was made available to the Company and fully funded on March 14, 2019; (ii) the second tranche of $10,000 was made available to the Company and fully funded in September 2019 ~~upon: (a) the Company’s demonstrated compliance with the financial covenants in the 2019 Credit Agreement and (b) the Company’s~~upon achievement of ~~trailing twelve month Consolidated Revenue of not less than $221,250 and a trailing three month Adjusted EBITDA loss not in excess of $5,000;~~certain financial metrics; and (iii) the third tranche of $10,000 was made available to the Company and fully funded in March 2020 ~~upon: (a) the Company’s demonstrated compliance with the financial covenants in the 2019 Credit Agreement through December 31, 2019 and (b) the Company’s~~upon achievement of ~~trailing twelve month Consolidated Revenue not less than $231,500.~~a certain financial metric. The interest rate for the Term Loan Facility is a floating per annum interest rate equal to the greater of 3.75% above the Wall Street Journal Prime Rate and 9.25%. The interest rate atas of March 31, ~~2020~~2021 was 9.25%. The 2019 Credit Agreement requires the Company to make monthly interest-only payments on outstanding balances under the Term Loan Facility through ~~February~~June 2021. Thereafter, each term loan advance will be repaid in~~thirty-six~~thirty-two equal monthly installments of principal, plus accrued interest, with the Term Loan Facility maturing on ~~March~~February 1, 2024 (the “Term Loan Maturity Date”).

The Company’s final payment on the Term Loan Facility, due on the Term Loan Maturity Date, will include all outstanding principal and accrued and unpaid interest under the Term Loan Facility, plus a final payment (the “Final Payment”) equal to the original aggregate principal amount of the Term Loan Facility multiplied by 6.5%. The Company may prepay the Term Loan Facility, subject to paying the Prepayment Premium (described below) and the Final Payment. The Prepayment Premium is equal to 3.50% of the outstanding principal amount of the Term Loan Facility if the prepayment occurs on or prior to the one year anniversary of the closing, 2.50% of the outstanding principal amount of the Term Loan Facility if the prepayment occurs after such one year anniversary and prior to the second anniversary of the closing, and 1.50% of the outstanding principal amount of the Term Loan Facility if the prepayment occurs after the two year anniversary but prior to the three year anniversary of the closing, and 0.50% thereafter. Once repaid, amounts borrowed under the Term Loan Facility may not bere-borrowed.

The Revolving Facility is equal to the lesser of $40,000 and the amount determined by the Borrowing Base, which is defined as a percentage of the Company’s book value of qualifying finished goods inventory and eligible accounts receivable. The interest rate for advances under the Revolving Facility is a floating per annum interest rate equal to the greater of the Wall Street Journal Prime Rate and 5.50%. The interest rate atas of March 31, ~~2020~~2021 was 5.50%. If the actual outstanding advances are less than 25% of the then-available Revolving Commitments, the Company must pay monthly interest equal to the interest that would have accrued if the average outstanding advances had been 25% of the then-available Revolving Commitments. The Company is also required to pay an unused line fee equal to 0.25% per annum, calculated based on the difference of $40,000minus the greater of (i) the average balance outstanding under the Revolving Facility for such period and (ii) 25% of the then-available Revolving Commitments. The maturity date for advances made under the Revolving Facility is March 1, 2024.

The Company may elect to reduce or terminate the Revolving Facility in its entirety at any time by repaying all outstanding principal, unpaid accrued interest and a reduction or termination fee equal to 4.00% of the aggregate Revolving Commitments so reduced or terminated if the reduction or termination occurs on or prior to the one year anniversary of the closing, 3.00% of the aggregate Revolving Commitments so reduced or terminated if the reduction or termination occurs after such one year anniversary and prior to the second anniversary of the closing, and 2.00% of the aggregate Revolving Commitments so reduced or terminated if the reduction or termination occurs after the two year anniversary but prior to the three year anniversary of the closing, and $0 thereafter.

The Company is required to achieve certain financial covenants under the 2019 Credit Agreement, including Minimum Trailing Twelve Month Consolidated Revenue andNon-PuraPly Revenue, tested quarterly. ~~The Minimum Trailing Twelve Month Consolidated Revenue thresholds for the year ending December 31, 2020 were agreed to and the covenant requiring Trailing Twelve MonthNon-PuraPly~~ ~~Revenue beginning with the quarter ending September 30, 2020 was added in connection with the third amendment to the 2019 Credit Agreement entered into on March 26, 2020.~~ In addition, the Company is required to maintain Minimum Liquidity equal to the greater of (i) 6 months Monthly Burn and (ii) $10,000.

As of March 31, ~~2020, the Company was in compliance with the financial covenants under the 2019 Credit Agreement.~~

~~As of March 31, 2020,~~2021, the Company had outstanding borrowings of $60,000 under the Term Loan Facility and ~~$33,484~~$10,000 under the Revolving Facility with ~~$2,573~~up to $30,000 available (subject to Borrowing Base) for future revolving borrowings. The Company accrues for the Final Payment of $3,900 over the term of the Term Loan Facility through a charge to the interest expense. The related liability of ~~$912~~$2,144 and ~~$681~~$1,858 as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, was included in other liabilities inon the consolidated balance sheets. The Company incurred costs of $554 in connection with the Term Loan Facility, which are recorded as a reduction of the carrying value of the term loan on the Company’s consolidated balance ~~sheet.~~sheets. In connection with the Revolving Facility, the Company incurred costs of $370, which are recorded as other assets. Both of these costs are being amortized to interest expense through ~~March 1, 2024.~~the maturity date of the facilities.

Future payments of the 2019 Credit ~~Facility,~~Agreement, as of March 31, ~~2020,~~2021, are as follows for the calendar years ending December 31:


2020	$	—
2021		16,667	$	11,250
2022		20,000		22,500
2023		20,000		22,500
2024		36,817		13,750

Total	$	93,484	$	70,000

~~2017 Credit Agreement~~

On March 21, 2017, the Company entered into a credit agreement (the “2017 Credit Agreement”) with SVB whereby SVB agreed to extend to the Company a revolving credit facility in an aggregate amount not to exceed $30,000 with a letter of credit~~sub-facility~~ ~~and a swing linesub-facility~~ ~~as a sublimit of the revolving loan facility. The amount available to borrow under bothsub-facilities~~ was dependent on a borrowing base, which was defined as a percentage of the Company’s book value of qualifying finished goods and eligible accounts receivable. In April 2018, the Company further amended its 2017 Credit Agreement in order to receive additional funding of $5,000 through a term loan. The amendment increased the commitment under the 2017 Credit Agreement to an aggregate amount not to exceed $35,000, consisting of a term loan not to exceed $5,000 and a revolving loan not to exceed $30,000. In December 2018, the Company fully repaid and canceled the term loan including the outstanding principal and accrued and unpaid interest.

On March 14, 2019, $26,541, representing all outstanding unpaid principal and accrued interest relating to the revolving borrowing due under the 2017 Credit Agreement, was rolled into the 2019 Credit Agreement.

~~Master Lease Agreement~~

On April 28, 2017, the Company entered into the Master Lease Agreement (the “ML Agreement”) with Eastward Fund Management LLC that allowed the Company to borrow up to $20,000 on or prior to June 30, 2018. If the Company elected to prepay the loan or terminated the loan early within the first 24 months, the Company was required to pay an additional 3% of the outstanding principal and any accrued and unpaid interest and fees. This prepayment fee decreased to 2% after the first 24 months. A final payment fee of 6.5% multiplied by the principal amount of the borrowings under the ML Agreement was due upon the earlier to occur of the first day of the final payment term month or prepayment of all outstanding principal. In March 2019, upon entering into the 2019 Credit Agreement, the Company paid an aggregate amount of $17,649 due under the ML Agreement, including unpaid principal, accrued interest, final payment, and early termination penalty, with proceeds from the 2019 Credit Agreement, and the ML Agreement was terminated. Upon termination of the ML Agreement, the Company recognized $1,862 as loss on the extinguishment of the loan.

~~10.~~14. Stockholders’ Equity

Common Stock

As of March 31, ~~2020,~~2021, the Company was authorized to issue 400,000,000 shares of $0.0001 par value Class A common stock and 1,000,000 shares of $0.0001 par value preferred stock. ~~106,088,563~~128,830,803 shares of Class A common stock were issued and 128,102,255 shares were outstanding as of March 31, ~~2020, which included 728,548~~2021. No shares of ~~treasury stock. These~~preferred stock were outstanding as of March 31, 2021. The issued shares of Class A common stock include 728,548 treasury shares that were ~~initially issued~~reacquired in connection with the ~~acquisition~~redemption of ~~Nutech Medical, Inc. (“NuTech Medical”)~~redeemable shares in ~~2017 and included a put right. The holders of the shares exercised the right to put the shares back to the Company at an agreed-upon exercise price of $9.28 per share on~~ March ~~24,~~ 2019.

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company reserved the following shares of Class A common stock for future issuance:


	March 31,		December 31,		March 31		December 31,
	2020		2019		2021		2020
Shares reserved for issuance for outstanding options		5,919,490		6,503,646		7,171,415		6,425,040
Shares reserved for issuance for outstanding restricted stock units		574,300		—		933,214		806,048
Shares reserved for issuance for future grant		8,434,696		9,008,996
Shares reserved for issuance for future grants						5,578,422		6,832,649

Total shares of authorized common stock reserved for future issuance		14,928,486		15,512,642		13,683,051		14,063,737

~~11.~~15. Stock-Based Compensation

Stock Incentive ~~Plans~~-~~the~~Plans-the 2018 Plan

On November 28, 2018, the Board of Directors of the Company adopted, and on December 10, 2018 the Company’s stockholders approved, the Organogenesis 2018 Equity and Incentive Plan (the “2018 Plan”). The purposes of the 2018 Plan are to provide long-term incentives and rewards to the Company’s employees, officers, directors and other key persons (including consultants), to attract and retain persons with the requisite experience and ability, and to more closely align the interests of such employees, officers, directors and other key persons with the interests of the Company’s stockholders.

The 2018 Plan authorizes the Company’s Board of Directors or a committee of not less than two independent directors (in either case, the “Administrator”) to grant the following types of awards:non-statutory stock options; incentive stock options; restricted stock awards; restricted stock units; stock appreciation rights; unrestricted stock awards; performance share awards; and dividend equivalent rights. The 2018 Plan is administered by the Company’s Board of Directors.

As of March 31, ~~2020,~~2021, a total of 9,198,996 shares of Class A common stock have been authorized to be issued under the 2018 Plan (subject to adjustment in the case of any stock dividend, stock split, reverse stock split, or similar change in capitalization of the Company).

Stock Incentive ~~Plans~~-~~the~~Plans-the 2003 Plan

The Organogenesis 2003 Stock Incentive Plan (the “2003 Plan”), provides for the Company to issue restricted stock awards, or to grant incentive stock options ornon-statutory stock options. Incentive stock options may be granted only to the Company’s employees. Restricted stock awards andnon-statutory stock options may be granted to employees, members of the Board of Directors, outside advisors and consultants of the Company.

Effective as of the closing of the Avista Merger on December 10, 2018, no additional awards may be made under the 2003 Plan and as a result (i) any shares in respect of stock options that are expired or terminated under the 2003 Plan without having been fully exercised will not be available for future awards; (ii) any shares in respect of restricted stock that are forfeited to, or otherwise repurchased by the Company, will not be available for future awards; and (iii) any shares of common stock that are tendered to the Company by a participant to exercise an award will not be available for future awards.

~~Following the closing of the Avista Merger, the 2003 Plan is administered by the Company’s Board of Directors.~~

Stock-Based Compensation Expense

Stock options awarded under the stock incentive plans expire 10 years after the grant date and typically vest over four or five years. Restricted stock units awarded typically vest over four years.

Stock-based compensation expense was ~~$209~~$698 and ~~$224~~$209 for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. The total amount of stock-based compensation expense was included within selling, general and administrative expenses on the consolidated statements of operations.

Restricted Stock Units (RSUs)

In the three months ended March ~~2020,~~31, 2021, the Company granted ~~584,300~~284,708 time-based restricted stock units to ~~employees.~~its employees, executives and the Board of Directors. Each restricted stock unit represents the contingent right to receive one share of the Company’s common stock. A majority of the restricted stock ~~and~~units will vest in four equal annual ~~installments on January 15, 2021, 2022, 2023 and 2024.~~installments. The fair value of the restricted stock units was based on the fair market value of the Company’s stock on the date of grant.

The activity of ~~unvested~~ restricted stock units is set forth below:


	Number			Weighted Average		Number of Shares			Weighted Average Grant Date Fair Value
	of Shares			Grant Date
				Fair Value
Unvested at December 31, 2019		—		$	—
Unvested at December 31, 2020							806,048		$	3.82
Granted		584,300			4.04		284,708			14.33
Vested		—			—		(133,811	)		4.04
Canceled/Forfeited		(10,000	)		4.04		(23,731	)		5.95

Unvested at March 31, 2020		574,300		$	4.04
Unvested at March 31, 2021							933,214		$	6.94

As of March 31, ~~2020,~~2021, the total unrecognized compensation cost related to unvested restricted stock units expected to vest was ~~$1,674~~$4,391 and the weighted average remaining recognition period for unvested awards was ~~3.79~~3.25 years.

Stock Option ~~Activity~~Valuation

The stock options granted during the three months ended March 31, 2021 were 1,037,099. No stock options were granted during the three months ended March 31, ~~2020 and 2019.~~ 2020. The assumptions that the Company used to determine the grant-date fair value of stock options granted during this period were as follows, presented on a weighted-average basis:


	March 31,
	2021
Risk-free interest rate		0.82	%
Expected term (in years)		6.21
Expected volatility		39.30	%
Expected dividend yield		0.0	%
Exercise price	$	13.54
Underlying stock price	$	13.54

These assumptions resulted in an estimated weighted-average grant-date fair value per share of stock options granted during the three months ended March 31, 2021 of $5.31.

Stock Option Activity

The following table summarizes the Company’s stock option activity since December 31, ~~2019:~~2020:

         Weighted
         Average
      Weighted    Remaining
      Average    Contractual    Aggregate
   Number of    Exercise    Term    Intrinsic
   Shares    Price    (in years)    Value
Outstanding as of December 31, 2019
   7,179,636    $ 1.98    5.06    $ 20,799
Granted
   —      —
Exercised
   (489,129 )    1.67       1,491
Canceled / forfeited
   (95,027 )    3.73



Outstanding as of March 31, 2020
   6,595,480    1.98    5.15    9,712



Options exercisable as of March 31, 2020
   5,769,399    1.66    4.76    9,712



Options vested or expected to vest as of March 31, 2020
   6,457,205    $ 1.93    5.08    $ 9,712


						Weighted
						Average
				Weighted		Remaining
				Average		Contractual		Aggregate
	Number of			Exercise		Term		Intrinsic
	Shares			Price		(in years)		Value
Outstanding as of December 31, 2020		6,620,318		$	2.33		5.22	$	34,458
Granted		1,037,099			13.54
Exercised		(480,622	)		2.04				4,283
Canceled / forfeited		(5,380	)		4.10

Outstanding as of March 31, 2021		7,171,415			3.96		5.80		102,239

Options exercisable as of March 31, 2021		4,418,977			1.64		3.76		73,271

Options vested or expected to vest as of March 31, 2021		6,588,701		$	3.54		5.50	$	96,754

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s Class A common stock for those stock options that have exercise prices lower than the fair value of the Company’s Class A common stock.

The total fair value of options vested during the three months ended March 31, 2021 and 2020 was $143 and ~~2019 was~~ $144, ~~and $266,~~ respectively.

As of March 31, ~~2020,~~2021, the total unrecognized stock compensation expense related to unvested stock options expected to vest was ~~$1,057~~$5,098 and was expected to be recognized over a weighted-average period of ~~2.15~~3.46 years.

As of ~~March~~December 31, ~~2020,~~2019, there were partial recourse notes outstanding totaling $635. These notes were taken by a former executive to exercise his 675,990 shares of stock options ~~between 2011 and 2013 (see Note “14. Related Parties Transactions”)~~ and the notes ~~are~~were secured with ~~the 675,990~~these shares held by the former executive. AsWhen the loans ~~are still~~were outstanding, the options ~~are~~were not considered exercised and ~~are~~were included within the options ~~outstanding. Accordingly,~~outstanding for accounting purposes. As of December 31, 2020, $334 of the ~~675,990~~principal balance of the partial recourse notes was outstanding and 195,278 shares ~~are~~were not considered outstanding for accounting ~~purposes~~purposes. In the three months ended March 31, 2021, the former executive repaid the remaining principal balance of the notes (see Note “19. Related Parties Transactions”). The repayments were treated as the exercise price for 195,278 shares of the options and were included in the ~~additionalpaid-in~~ ~~capital associated with these~~consolidated statement of stockholders’ equity. As of March 31, 2021, $0 of the principal balance of the partial recourse notes was outstanding and all of the 675,990 shares used to secure the notes were ~~deducted from~~considered outstanding for accounting purposes.

16. Net Income (Loss) per Share (EPS)

Basic EPS is calculated by dividing net income (loss) by the weighted-average number of shares outstanding during the period. Diluted EPS is calculated by dividing net income (loss) by the weighted-average number of shares outstanding plus the dilutive effect, if any, of outstanding equity ~~in prior periods.~~awards using the treasury stock method which includes consideration of unrecognized compensation expenses as additional proceeds.

~~12. Net Loss per Share~~A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net income (loss) attributable to the common stockholders of Organogenesis Holdings Inc. is as follows.

~~The Company’s~~


	Three Months Ended March 31,
	2021		2020
Numerator:
Net Income (loss)	$	9,943	$	(16,313	)
Denominator:
Weighted average common shares outstanding —basic		127,870,065		104,486,924
Dilutive effect of restricted stock units		527,658		—
Dilutive effect of options		5,054,227		—

Weighted-average common shares outstanding—diluted		133,451,950		104,486,924
Earnings (loss) per share—basic	$	0.08	$	(0.16	)

Earnings (loss) per share—diluted	$	0.07	$	(0.16	)

For the three months ended March 31, 2021, outstanding stock-based awards of 1,202,193 were excluded from the diluted EPS calculation as they were anti-dilutive. For the three months ended March 31, 2020, the Company had a net loss. As such, 7,169,780 shares of potentially dilutive securities ~~which include stock options, restricted stock units and warrants to purchase shares of Class A common stock, have been~~were excluded from the computation of diluted net loss per share as ~~the~~these securities had anti-dilutive effect and including them would ~~be to~~ reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders was the same for this period.

17. Leases

As of December 31, 2020 and March 31, 2021, the Company’s contracts that contained a lease consisted primarily of real estate, equipment and vehicle leases.

The Company leases real estate for office, lab and production space under noncancelable operating and finance leases that expire at various dates through 2031, subject to the Company’s options to terminate or renew certain leases for an additional five to ten years.

The Company leases vehicles under operating leases for certain employees and has fleet services agreements for service on these vehicles. The minimum lease term for each newly leased vehicle is 367 days with renewal options. The Company may terminate the vehicle lease after the minimum lease term upon thirty days’ prior notice.

The Company also leases other equipment under noncancelable operating and finance leases that expire at various dates through 2025.

The Company determines if an arrangement is a lease at lease inception. The options to extend or terminate a lease are included in the lease terms when it is reasonably certain that the Company will exercise the options. Operating leases are included in operating lease right-of-use assets and operating lease obligations on the consolidated balance sheets. Finance leases right-of-use assets are included in property and equipment, net, and finance lease obligations on the consolidated balance sheets.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Right-of-use assets and lease liabilities are recognized based on the present value of the fixed lease payments over the lease term at the commencement date. The Right-of-use assets also include any initial direct costs incurred and lease payments made at or before the commencement date and are reduced by lease incentives. The Company uses its incremental borrowing rate as the discount rate to determine the present value of the lease payments for leases that do not have a readily determinable implicit discount rate. The Company’s incremental borrowing rate is the ~~same.~~rate of interest that it would have to borrow on a collateralized basis over a similar term and amount in a similar economic environment. The Company ~~excluded~~determines the ~~following potential shares~~incremental borrowing rates for its leases by adjusting the risk-free interest rate with a credit risk premium corresponding to the Company’s credit rating.

The Company records rent expense for its operating leases on a straight-line basis from the lease commencement date until the end of ~~Class A~~the lease term. The Company records finance lease cost as a combination of the depreciation expense for the right-of-use assets and interest expense for the outstanding lease liabilities using the discount rate discussed above. Variable lease payments are primarily related to the office and fleet leases which include but are not limited to taxes, insurance, common ~~stock, presented~~area maintenance and maintenance programs for leased vehicles. Variable lease payments are based on ~~amounts outstanding at each period end,~~the occurrence or usage; therefore, they are not included as part of the initial right-of-use assets and liabilities calculation.

In August 2020, the Company entered into a lease for approximately 23,000 square feet in San Diego, California for office and laboratory use. The lease commences on April 1, 2021. The initial lease term is ten years from the ~~computation~~lease commencement date, with an option to extend the term for a period of ~~diluted net loss per share attributable~~five years. Annual lease payments during the first year are $1,562 with 3% increase each year during the lease term. A security deposit of $237 is required throughout the term of the lease.

In conjunction with the acquisition of NuTech Medical in March 2017, the Company entered into an operating lease with Oxmoor Holdings, LLC, an entity that is affiliated with the former sole shareholder of NuTech Medical, related to the ~~common stockholders~~facility at NuTech Medical’s headquarters in Birmingham, Alabama. Under the lease, the Company is required to make monthly rent payments of ~~Organogenesis Holdings Inc. for~~approximately $22 through the ~~periods indicated because including them would have had an anti-dilutive effect:~~

   Three Months Ended
March 31,
   2020    2019
Options to purchase common stock
   6,595,480    7,260,387
Restricted stock units
   574,300    —
Warrants to purchase common stock
   —      17,678,074




   7,169,780    24,938,461

~~13. Commitments and Contingencies~~

~~Capitalized Leases~~lease termination date on December 31, 2022.

On January 1, 2013, the Company entered into ~~capital~~finance lease arrangements with 65 Dan Road SPE, LLC, 85 Dan Road Associates, LLC, Dan Road Equity I, LLC and 275 Dan Road SPE, LLC for office and laboratory space in Canton, Massachusetts. 65 Dan Road SPE, LLC, 85 Dan Road Associates, LLC, Dan Road Equity I, LLC and 275 Dan Road SPE, LLC are related parties as the owners of these entities are also stockholders of the Company. The leases terminate on December 31, 2022 and each contains a renewal option for a five-year period with the rental rate at the greater of (i) rent for the last year of the prior term, or (ii) the then fair market value. Notice of the exercise of this renewal option is due one year prior to the expiration of the initial term. Aggregate annual lease payments are approximately $4,308 with future rent increases of 10% effective January 1, 2022.

~~The Company records the capital lease asset within property and equipment and the liability is recorded within the capital lease obligations on the consolidated balance sheets.~~

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company owed an aggregate of $10,336 of accrued but unpaid lease obligations, which are subordinated to the 2019 Credit Agreement and will not be paid until the debt under the 2019 Credit Agreement is paid off in 2024 even though the ~~capital~~finance leases expire in December 2022. The accrued but unpaid lease obligations include rent in arrears and unpaid operating and common area maintenance costs under the aforementioned leases. The principal portion of rent in arrears on the ~~capital~~finance leases totaled ~~$6,489~~$7,120 and ~~$6,321~~$6,946 as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and is included in the long-term portion of ~~capital~~finance lease obligations. The interest portion of rent in arrears totaled ~~$3,365~~$2,676 and ~~$3,512~~$2,865 as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and is included in other liabilities on the consolidated balance sheets. The unpaid operating and common area maintenance costs totaled ~~$482~~$540 and ~~$503~~$525 as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and are included in other liabilities on the consolidated balance sheets.

Effective April 1, 2019, the Company agreed to accrue interest on the accrued but unpaid lease obligations at an interest rate equal to the rate charged in the 2019 Credit Agreement (see Note ~~“9.~~“13. Long-Term Debt Obligations”). The accrued interest is also subordinated to the 2019 Credit Agreement and, as such, is included in other liabilities on the consolidated balance sheet. Interest ~~accrued~~accrual as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 totaled ~~$956~~$2,144 and ~~$717,~~$1,673, respectively.

The components of lease cost were as follows:


	Classification		Three Months Ended March 31, 2021
Finance lease
Amortization of right-of-use assets		COGS and SG&A	$	299
Interest on lease liabilities		Interest Expense		349

Total Finance lease cost				648
Operating lease cost		COGS, R&D, SG&A		1,280
Short-term lease cost		COGS, R&D, SG&A		715
Variable lease cost		COGS, R&D, SG&A		1,363

Total lease cost			$	4,006

Supplemental balance sheet information related to finance leases was as follows:


	March 31, 2021			January 1, 2021
Property and equipment, gross	$	22,989		$	22,989
Accumulated depreciation		(15,274	)		(14,974	)

Property and equipment, net	$	7,715		$	8,015

Current portion of finance lease obligations	$	3,870		$	3,619
Finance lease long-term obligations		10,516			11,442

Total finance lease liabilities	$	14,386		$	15,061

~~In addition~~Supplemental cash flow information related to ~~the capital~~ leases ~~with affiliates discussed above, the Company also has certain insignificant capital leaseswith non-affiliates. Future~~ ~~obligations under capital leases in the aggregate and for the next five years are~~was as follows:

2020 (remaining 9 months)
   $ 3,594
2021
   4,786
2022
   4,945
2023
   —
2024
   9,853


   23,178
Less amount representing interest
   (6,234 )


Present value of minimum lease payments
   16,944
Less current maturities
   (3,189 )


Long-term portion
   $ 13,755


	Three Months Ended March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		1,362
Operating cash flows for finance leases		523
Financing cash flows for finance leases		675
Right-of-use assets obtained in exchange for lease obligations—upon adoption:
Operating leases		13,525
Finance leases		—
Right-of-use assets obtained in exchange for lease obligations—post adoption:
Operating leases		310
Finance leases		—

~~Operating Leases~~


	March 31, 2021
Weighted-average remaining lease term
Finance leases		1.73
Operating leases		6.39

	March 31, 2021
Weighted-average discount rate
Finance leases		19.58	%
Operating leases		3.98	%

As of March 31, 2021, maturities of lease liabilities were as follows:

The Company leases vehicles for certain employees and has fleet services agreements for service on these vehicles. The minimum lease term for each newly leased vehicle is one year with three consecutive~~one-year~~ ~~renewal terms.~~


	Operating leases			Finance leases
2021 (remaining 9 months)	$	3,785		$	3,588
2022		2,831			4,945
2023		2,159			—
2024		1,443			9,796
2025		1,383			—
Thereafter		5,631			—

Total lease payments		17,232			18,329
Less: interest		(2,197	)		(3,943	)

Total lease liabilities	$	15,035		$	14,386

~~In March 2014, in conjunction with the acquisition~~Under ASC 840, as of ~~Dermagraft from Shire plc,~~December 31, 2020, the Company ~~entered into a rental sublease agreement for certain operating~~had total capital lease assets of $22,989 and ~~office space in California.~~accumulated depreciation of $14,974, which were included within property and equipment, net, on the unaudited consolidated balance sheet. The ~~sublease agreements called for escalating monthly rental payments and expires in December 2021.~~

~~In conjunction with the acquisition~~related capital lease obligations totaled $15,061 as of NuTech Medical in March 2017, the Company entered into an operating lease with Oxmoor Holdings, LLC, an entity that is affiliated with the former sole shareholder of NuTech Medical, related to the facility at NuTech Medical’s headquarters in Birmingham, Alabama. Under the lease, the Company is required to make monthly rent payments of approximately $21 through the lease termination date on December 31, ~~2021.~~

In March 2019, the Company entered into an agreement to lease approximately 43,850 square feet of office and laboratory space in Norwood, Massachusetts. Pursuant to the lease agreement, the rent commencement date is February 1, 2020. The initial lease term is ten years from the rent commencement date and includes an option for an early extension term of five years which is exercisable during the first two years after the rent commencement date. In addition to the early extension term, the lease provides the Company with an option to extend the lease term for a period of ten years, if exercised, at rental rates equal to the then fair market value. Annual lease payments during the first year are $1,052 with increases of $44 each year during the initial~~ten-year~~ lease term, an increase of $44 during the first year of the early extension term and $33 during year two through five of the early extension term. Upon execution of the agreement, the Company delivered a security deposit in the form of a letter of credit of $526 to the landlord. Following 36 months from the rent commencement date, the security deposit may be reduced by $263.

~~Operating lease expenses were $1,514 and $1,384 for~~For the three months ended March 31, 2020, the Company recorded lease expense of $1,514 for operating leases.

18. Commitments and ~~2019, respectively.~~Contingencies

~~Future minimum lease payments due under noncancelable operating lease agreements as of March 31, 2020 are as follows:~~

2020 (remaining 9 months)
   $ 4,355
2021
   5,461
2022
   2,887
2023
   2,145
2024
   1,224
Thereafter
   6,899


   $ 22,971

Royalty Commitments

The Company entered into a license agreement with a university for certain patent rights related to the development, use, and production of one of its advanced wound care products. Under this agreement, the Company incurred a royalty based on a percentage of net product sales, for the use of these patents until the patents expired, which was in November 2006. Accrued royalties totaled $1,187 as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and ~~are~~were classified as part of accrued expenses on the Company’s consolidated balance sheets. There was no royalty expense incurred during the three months ended March 31, ~~2020~~2021 or ~~2019~~2020 related to this agreement.

In October 2017, the Company entered into a license agreement with a third party. Under the license agreement, the Company is required to pay royalties based on a percentage of net sales of the licensed product that occur, after December 31, 2017, through the expiration of the underlying patent in October 2026, subject to minimum royalty payment provisions. The Company recorded royalty expense of ~~$979~~$1,220 and ~~$788~~$979 during the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively, within selling, general and administrative expenses on the consolidated statement of operations.

As part of the NuTech Medical acquisition, the Company inherited certain product development and consulting agreements for ongoing consulting services and royalty payments based on a percentage of net sales on certain products over a period of 15 years from the execution of the agreements. These product development and consulting agreements were cancelled in January 2020 for total consideration of $1,950 that was paid on February 14, 2020. The $1,950 cancellation fee was recorded within selling, general and ~~administration in~~administrative expenses on the consolidated statement of operations for the three months ended March 31, 2020.

Ransomware Attack

In August 2020, the Company’s information technology (“IT”) systems were exposed to a ransomware attack, which partially impaired certain IT systems for a short period of time. The Company finished investigating the incident, together with legal counsel and other incident response professionals. The Company did not experience any material loss related to the incident, and substantially all costs incurred were reimbursed by insurance.

Legal Proceedings

In conducting its activities, the Company, from time to time, is subject to various claims and also has claims against others. In management’s opinion, the ultimate resolution of such claims would not have a material effect on the financial position, operating results or cash flows of the Company. The Company accrues for these claims when amounts due are probable and estimable.

The Company accrued ~~$1,109 and $542~~$150 as of March 31, ~~2020~~2021 and December 31, ~~2019, respectively,~~2020 in relation to certain pending lawsuits.

The purchase price for NuTech Medical acquired in 2017 included $7,500 deferred acquisition consideration of which the Company paid $2,500 in 2017. The ~~amount of the~~ remaining $5,000 of deferred acquisition consideration plus accrued interest owed to the sellers of NuTech Medical was previously in dispute. The Company asserted certain claims for indemnification that would offset in whole or in part its payment obligation and the sellers of NuTech Medical filed a lawsuit alleging breach of contract and seeking specific performance of the alleged payment obligation and attorneys’ fees. In February 2020, the Company entered into a settlement agreement with the sellers of NuTech Medical and settled the dispute for $4,000, of which, $2,000 was paid immediately on February 24, 2020 ~~(the “Settlement Date”)~~ and the remaining $2,000 ~~is to be~~was paid in four quarterly installments of $500 ~~each with~~each. As of March 31, 2021, the ~~first quarterly payment due and payable on the date that is 90 days from the Settlement Date.~~entire settlement was paid off. In addition, the Company assumed from the sellers of NuTech Medical the payment responsibilities related to a legacy lawsuit existing at the acquisition date of NuTech Medical. The assumed legacy lawsuit was settled in October 2020. In connection with the settlement of the deferred acquisition consideration dispute and the legacy lawsuit, the Company recorded a gain of $1,295 ~~which~~and $951 for the three months ended March 31, 2020 and September 30, 2020, respectively. The gain was included as a component of other expense, net, inon the consolidated statement of ~~operations for the three months ended March 31, 2020.~~operations.

~~14.~~19. Related Party Transactions

~~Capital~~Finance lease obligations to affiliates, including unpaid lease obligations, and an operating lease with affiliates are further described in Note ~~“13. Commitments and Contingencies”~~“17. Leases”.

During 2010, the Company’s Board of Directors approved a loan program that permitted the Company to make loans to three executives of the Company (the “Employer Loans”) to (i) provide them with liquidity (“Liquidity Loans”) and (ii) fund the exercise of vested stock options (“Option Loans”). Two of the executives left the Company in 2014. The Employer Loans ~~mature~~matured with all principal and accrued interest due on the tenth anniversary of the issuance date of each subject ~~loan, except that in certain circumstances, the Employer Loans may mature earlier. The borrower may prepay all or any portion of his Employer Loan at any time without premium or penalty.~~loan. Interest on the Employer Loans ~~accrues~~was at various rates ranging from 2.30%—3.86% per annum, compounded annually. The Employer Loans ~~are~~were secured by ~~1,857,450 and 675,990~~ shares of the Company’s Class A common stock held by ~~two~~the former ~~executives, respectively.~~executives. With respect to the Liquidity Loans, the Company ~~has~~had no personal recourse against the borrowers beyond the pledged shares.

As of ~~March~~December 31, 2020, ~~and December 31, 2019,~~ Liquidity Loans ~~to two former executives were outstanding with an aggregate principal balance of $2,350~~ and Option Loans to one former executive were outstanding with an aggregate principal balance of ~~$635. The~~$100 and $334, respectively. During the three months ended March 31, 2021, this former executive paid off the outstanding principal balance of his Employer Loans and ~~part~~the related interest receivable. As a result, the Company recorded $179 as a recovery of the ~~interest receivable under~~previously reserved related party receivables within selling, general and administrative expenses on the ~~Employer Loans were fully reserved with net interest receivable~~consolidated statement of ~~$576 and $556 as of~~operations for the three months ended March 31, ~~2020 and December 31, 2019, respectively, included~~2021. The $334 of the repaid principal balance of the Option Loans was recorded to equity. See Note “15. Share-Based Compensation”

20. Taxes

The Company is principally subject to taxation in the ~~notes receivable~~United States. The Company has a history of net operating losses both federally and in various states and began utilizing those losses to offset current taxable income in 2020. The Company’s wholly owned Swiss subsidiary, Organogenesis Switzerland GmbH, is subject to taxation in Switzerland and generally has profits as a result of a transfer pricing arrangement in place with Organogenesis Inc., its U.S. parent and a wholly owned subsidiary of the Company.

The income tax rate for the three months ended March 31, 2021 varied from ~~related parties balance~~the U.S. statutory rate of 21% primarily due to the utilization of net operating losses federally and in many states as well as the ~~consolidated balance sheets. Interest~~cash taxes in Switzerland. The Company maintains a full valuation allowance against its U.S. deferred tax assets and as such, the Company’s provision for income taxes primarily relates to cash taxes to be paid in certain states where the net operating losses are expected to be fully utilized or limited based on state statute. Income tax expense for the three months ended March 31, 2021 was $200 and included discrete tax expense of $10 related to ~~these notes was $20 and $19,~~the interest on certain uncertain tax positions. Income tax expense for the three months ended March 31, 2020 was $35 and ~~2019, respectively.~~related primarily to state and foreign taxes.

~~15.~~The Company examines all positive and negative evidence to estimate whether sufficient future taxable income in the U.S. will be generated to permit the use of existing deferred tax assets. As a result of significant cumulative tax benefits associated with share-based compensation taxable events, the Company has significant negative evidence in the form of cumulative losses and believes that it is more likely than not that these United States deferred tax assets will not be utilized. As such, the Company maintained the valuation allowance against its U.S. deferred tax asset as of March 31, 2021. There were no material deferred tax assets in the other jurisdictions.

21. Subsequent Events

The Company has evaluated subsequent events through May ~~11, 2020,~~10, 2021, the date on which these consolidated financial statements were issued and has determined that there ~~are~~were no such events to report.

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

The following discussion and analysis should be read in conjunction with our financial statements and accompanying notes included in this Quarterly Report on Form10-Q and the financial statements and accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form10-K for the fiscal year ended December 31, ~~2019,~~2020, filed with the Securities and Exchange Commission, or SEC, on March ~~9, 2020,~~16, 2021, as amended. Please refer to our note regarding forward-looking statements on page 3 of this Form10-Q, which is incorporated herein by this reference.

Overview

Organogenesis is a leading regenerative medicine company focused on the development, manufacture, and commercialization of solutions for the Advanced Wound Care and Surgical & Sports Medicine markets. Our products have been shown through clinical and scientific studies to support and in some cases accelerate tissue healing and improve patient outcomes. We are advancing the standard of care in each phase of the healing process through multiple breakthroughs in tissue engineering and cell therapy. Our solutions address large and growing markets driven by aging demographics and increases in comorbidities such as diabetes, obesity, cardiovascular and peripheral vascular disease and smoking. We offer our differentiated products andin-house customer support to a wide range of health care customers including hospitals, wound care centers, government facilities, ambulatory service centers (“ASCs”), and physician offices. Our mission is to provide integrated healing solutions that substantially improve medical outcomes and the lives of patients while lowering the overall cost of care.

We offer a comprehensive portfolio of products in the markets we serve that address patient needs across the continuum of care. We have and intend to continue to generate data from clinical trials, real-world outcomes and health economics research that validate the clinical efficacy and value proposition offered by our products. Several of our existing and pipeline products in our portfolio have PMA approval, BLA approval or 510(k) clearance from the FDA. Given the extensive time and cost required to conduct clinical trials and receive FDA approvals, we believe that our data and regulatory approvals provide us a strong competitive advantage. Our product development expertise and multiple technology platforms provide a robust product pipeline, which we believe will drive future growth.

Historically we have concentrated our efforts in the Advanced Wound Care market. In 2017, we acquired NuTech Medical which further expanded our wound care portfolio and broadened our addressable market to include the Surgical & Sports Medicine market. We believe the expanded product portfolio facilitated by this acquisition is enhancing the ability of our sales representatives to reach and penetrate customer accounts, contributing to strong growth over time.

In the Advanced Wound Care market, we focus on the development and commercialization of advanced wound care products for the treatment of chronic and acute wounds ~~primarily~~ in ~~the outpatient setting.~~various treatment settings. We have a comprehensive portfolio of regenerative medicine products, capable of supporting patients from early in the wound healing process through to wound closure regardless of wound type. Our Advanced Wound Care products include Apligraf for the treatment of venous leg ulcers (“VLUs”) and diabetic foot ulcers (“DFUs”); Dermagraft for the treatment of DFUs; PuraPly AM ~~to address biofilm across~~and PuraPly XT as antimicrobial barriers for a broad variety of wound types; and the Affinity and NuShield wound coverings to address a variety of wound sizes and types. We have a highly trained and specialized direct wound care sales force paired with exceptional customer support services.

In the Surgical & Sports Medicine market, we focus on products that support the healing of musculoskeletal injuries, including degenerative conditions such as osteoarthritis and tendonitis. We are leveraging our regenerative medicine capabilities in this attractive, adjacent market. Our Surgical & Sports Medicine products include ReNu forin-office ~~joint and tendon applications;~~knee osteoarthritis treatment; NuCel for bony fusion in the ~~spine and extremities;~~lumbar spine; NuShield and Affinity barrier products for surgical application in targeted soft tissue repairs; and PuraPly AM for ~~surgical treatment~~management of open ~~wounds.~~wounds in the surgical setting. We currently sell these products through independent agencies and our growing direct sales force.

On December 10, 2018, Avista Healthcare Public Acquisition Corp., our predecessor company (“AHPAC”), consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger, dated as of August 17, 2018 (as amended, the “Avista Merger Agreement”), by and among AHPAC, Avista Healthcare Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of AHPAC (“Avista Merger Sub”) and Organogenesis Inc., a Delaware corporation. As a result of the transactions contemplated by the Avista Merger Agreement, Avista Merger Sub merged with and into Organogenesis Inc., with Organogenesis Inc. surviving the merger (the “Avista Merger”). In addition, in connection with the business combination, AHPAC redomesticated as a Delaware corporation (the “Domestication”). After the Domestication, AHPAC changed its name to “Organogenesis Holdings Inc.” As a result of the Avista Merger, Organogenesis Inc. became a wholly-owned direct subsidiary of Organogenesis Holdings Inc.

For the three months ended March 31, ~~2020,~~2021, we generated $102.6 million of net revenue and $9.9 million of net income compared to $61.7 million of net revenue and ~~had~~ $16.3 ~~million of net loss compared to $57.1 million of net revenue and $15.7~~ million of net loss for the three months ended March 31, ~~2019.~~2020. We ~~expect to~~have incurred significant losses since inception and, while we have reported net income for three consecutive quarters ended March 31, 2021, we may incur operating losses ~~for~~in the ~~foreseeable~~ future as we expend resources as part of our efforts to grow our organization to support the planned expansion of our business. As of March 31, ~~2020,~~2021, we had an accumulated deficit of ~~$187.3~~$140.8 million. Our primary sources of capital to date have been from sales of our products, borrowings from related parties and institutional lenders and proceeds from the sale of our common stock. We operate in one segment of regenerative medicine.

~~On March 11, 2020, the World Health Organization declared the outbreak of~~COVID-19 a pandemic

The emergence of the coronavirus (COVID-19) around the world, and ~~it continues to spread throughout~~particularly in the United States, continues to present risks to the Company. While the COVID-19 pandemic has not materially adversely affected our financial results and business operations through the ~~rest~~first quarter ended March 31, 2021, we are unable to predict the impact that COVID-19 will have on our financial position and operating results because of the ~~world. Various public and private sector measures have been taken and may continue to be taken to reduce its transmission, such as~~numerous uncertainties created by the ~~imposition~~unprecedented nature of ~~social distancing,stay-at-home~~ ~~andshelter-in-place~~ ~~orders, which are having~~ the ~~effect of suspending or severely curtailing operations for most industries and businesses.~~pandemic. We are ~~one~~closely monitoring the evolving impact of ~~many companies providing essential services during this national emergency related to~~ the~~COVID-19~~ ~~pandemic.~~ pandemic on all aspects of our business. We have ~~acted quickly and~~ implemented a number of measures designed to protect the health and safety of our employees, support our customers and promote business continuity. We ~~are also actively reviewing~~have reviewed and ~~implementing~~implemented cost-saving measures ~~including discontinuing allnon-essential~~ ~~services~~ and ~~programs,~~will continue to review and ~~instituting controls on travel, events, marketing and clinical studies~~implement additional cost-saving measures, as necessary, to ~~adapt our financial business plan for~~address the evolvingCOVID-19 challenges.

~~While theCOVID-19~~ pandemic has not materially adversely affected our financial results and business operations in the first quarter ended March 31, 2020, the pandemic may pose significant risks to our business, not all of which we are able to fully evaluate or even to foresee at the current time. It is too early to quantify the impact this situation will have on revenue for the remainder of our fiscal year ending December 31, 2020 or beyond, but the public health actions being undertaken to reduce the spread of the virus may create significant disruptions with respect to: (i) the demand for our products, (ii) the ability of our sales representatives to reach our healthcare customers, (iii) our ability to maintain staffing levels to support our operations, (iv) our ability to We continue to manufacture certain of our products, (v) the reliability of our supply chain and (vi) our ability to achieve the financial covenants required to borrow under the 2019 Credit Agreement. Accordingly, management is evaluatingevaluate the Company’s liquidity position, ~~communicating~~communicate with and ~~monitoring~~monitor the actions of our customers and suppliers, and ~~reviewing~~review our near-term financial performance as we manage the Company through this period of uncertainty.

CPN Acquisition

On September 17, 2020, we acquired certain assets and assumed certain liabilities of CPN Biosciences, LLC (“CPN”) pursuant to an asset purchase agreement dated July 24, 2020. This transaction was accounted for as a business combination using the ~~uncertainty related~~acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. The aggregated consideration amounted to ~~the coronavirus. Please see “Item 1A. Risk Factors” in this Quarterly Report on Form10-Q~~ ~~for an additional discussion of risks and potential risks~~$19.0 million as of the~~COVID-19~~ ~~pandemic on~~ acquisition date which consisted of $6.4 million in cash, 2,151,438 shares of our ~~business, financial condition~~common stock with a fair value of $8.8 million, and a contingent consideration (the “Earnout”) with a fair value of $3.8 million. At the closing, we paid $5.8 million in cash and issued 1,947,953 shares of our Class A common stock. The remaining consideration was held back and will be paid or issued, as applicable, eighteen months after the closing date, subject to any offsetting indemnification claims against CPN. The results of ~~operations.~~operations of CPN have been included in our consolidated financial statements beginning on the acquisition date. Revenue and expenses of CPN since the acquisition date were not material.

End of Enforcement Grace Period for ReNu and NuCel

On November 16, 2017, the FDA issued a final guidance document entitled, “Regulatory Considerations for Human Cells, Tissues, and Cellular and Tissue-Based Products: Minimal Manipulation and Homologous Use”, or 361 HCT/P Guidance, which provided FDA’s thinking on how to apply the existing regulatory criteria for regulation as a Section 361 HCT/P. The 361 HCT/P Guidance clarified the FDA’s views about the criteria that differentiate those products subject to regulation under Section 361 of the Public Health Service Act from those considered to be drugs, devices, and/or biological products subject to licensure under Section 351 and related regulations. The 361 HCT/P Guidance originally indicated that the FDA was providing a 36-month enforcement grace period to allow time for distributors of HCT/Ps to make any regulatory submissions and obtain any premarket approvals necessary to comply with the guidance. In July 2020, the FDA announced that the enforcement grace period would be extended until May 31, 2021 as a result of the challenges presented by the COVID-19 public health emergency. On April 21, 2021, the FDA reaffirmed that the enforcement grace period will end on May 31, 2021 and will not be extended. At that time, the FDA will regulate our ReNu and NuCel products under Section 351. We have continued to market our ReNu and NuCel products during the enforcement grace period, but we plan to cease commercial distribution after May 31, 2021 and continue investigating ReNu and NuCel in clinical studies until the FDA approves a Biologics License Application.

Components of Our Consolidated Results of Operations

In assessing the performance of our business, we consider a variety of performance and financial measures. We believe the items discussed below provide insight into the factors that affect these key measures.

Revenue

We derive our net revenue from our portfolio of Advanced Wound Care and Surgical & Sports Medicine products. We primarily sell our Advanced Wound Care products through direct sales representatives who manage and maintain the sales relationships with hospitals, wound care centers, government facilities, ASCs and physician offices. We primarily sell our Surgical & Sports Medicine products through third party agencies. As of March 31, ~~2020,~~2021, we had approximately ~~275~~290 direct sales representatives and approximately ~~165~~190 independent agencies.

We recognize revenue from sales of our Advanced Wound Care and Surgical & Sports Medicine products when the customer obtains control of our product, which occurs at a point in time and may be upon procedure date, shipment, or delivery, based on the contractual terms of a contract. We record revenue net of a reserve for returns, discounts and GPO rebates, which represent a direct reduction to the revenue we recognize.

Several factors affect our reported revenue in any period, including product, payer and geographic sales mix, operational effectiveness, pricing realization, marketing and promotional efforts, the timing of orders and shipments, regulatory actions including healthcare reimbursement scenarios, competition and business acquisitions.

Included within our ~~Advanced Wound Care~~product revenue is our PuraPly ~~product portfolio that consists of PuraPly~~ and PuraPly ~~AM.~~AM products. We launched PuraPly inmid-2015, and introduced PuraPly AM in 2016. In order to encourage the development of innovative medical devices, drugs and biologics, ~~the Center for Medicare & Medicaid Services, or~~ CMS can grant new products an additional ~~“pass-through~~

“pass-through payment” in addition to the bundled payment amount for a limited period of no more than three years. Our PuraPly and PuraPly AM products were granted pass-through status from launch through December 31, 2017, which created an economic incentive for practitioners to use PuraPly and PuraPly AM over other skin substitutes. As a result, we saw increases in revenue related to ~~our PuraPly portfolio~~these products in ~~the reported periods.~~2017. Beginning January 1, 2018, PuraPly AM and PuraPly transitioned to the bundled payment structure for skin substitutes, which provides for atwo-tiered payment system in the hospital outpatient and ASC setting. Thetwo-tiered Medicare payment system bundles payment for our Advanced Wound Care products (and all skin substitutes) into the payment for the procedure for applying the skin substitute, resulting in a single payment to the provider that includes reimbursement for both the procedure and the product itself.

As a result of the transition to the bundled payment structure, total Medicare reimbursement for procedures using our PuraPly AM and PuraPly products decreased substantially. This reduction in reimbursement resulted in a substantial decrease in revenue from our PuraPly AM and PuraPly products during the first nine months of 2018 and had a negative effect on our business, results of operations and financial condition. On March 23, 2018, Congress passed, and the President signed into law, the Consolidated Appropriations Act of 2018, or the Act. The Act restored the pass-through status of PuraPly and PuraPly AM effective October 1, 2018. As a result, effective October 1, 2018, Medicare resumed making pass-through payments to hospitals using PuraPly and PuraPly AM in the outpatient hospital setting and in ASCs. PuraPly and PuraPly AM ~~retain~~had pass-through reimbursement status ~~until~~through September 30, 2020. ~~After September 30, 2020, we expect~~With the expiration of the pass-through reimbursement status, our net revenue from PuraPly and PuraPly AM tomay decrease as they transition to the bundled payment ~~structure and~~structure. As of March 31, 2021, we ~~expect our net revenue fromNon-PuraPly~~ ~~products to increase which would offset in whole or in part the revenue~~have not observed such decrease ~~from PuraPly products. We are not able to estimate the extent of the changes in revenue~~primarily due to ~~the uncertainties related to the impact from theCOVID-19~~ ~~pandemic which could have material adverse effects on~~ our ~~revenue, especially to the extent that the pandemic persists or exacerbates over an extended period of time.~~recently launched PuraPly line extensions.

Cost of goods sold, gross profit and gross profit margin

Cost of goods sold includes personnel costs, product testing costs, quality assurance costs, raw materials and product costs, manufacturing costs, and the costs associated with our manufacturing and warehouse facilities. The increases in our cost of goods sold correspond with the increases in sales units driven by the expansion of our sales force and sales territories, expansion of our product portfolio offerings, and the number of healthcare facilities that offer our products. We expect our cost of goods sold to increase due primarily to increased sales volumes.

Gross profit is calculated as net revenue less cost of goods sold and generally increases as revenue increases. Gross profit margin is calculated as gross profit divided by total net revenue. Our gross profit and gross profit margin are affected by product and geographic sales mix, realized pricing of our products, the efficiency of our manufacturing operations and the costs of materials used and fees charged by third-party manufacturers to produce our products. Regulatory actions, including healthcare reimbursement scenarios, which may require costly expenditures or result in pricing pressures, may decrease our gross profit and gross profit margin.

Selling, general and administrative expenses

Selling, general and administrative expenses generally include personnel costs for sales, marketing, sales support, customer support, and general and administrative personnel, sales commissions, incentive compensation, insurance, professional fees, depreciation, amortization, bad debt expense, royalties, information systems costs and costs associated with our administrative facilities. We generally expect our selling, general and administrative expenses to continue to increase due to increased investments in market development and the geographic expansion of our sales forces as we drive for ~~the~~ continued revenue growth.

Research and development expenses

Research and development expenses include personnel costs for our research and development personnel, expenses related to improvements in our manufacturing processes, enhancements to our currently available products, and additional investments in our product and platform development pipeline. Our research and development expenses also include expenses for clinical trials. We expense research and development costs as incurred. We generally expect that research and development expenses will increase as we continue to conduct clinical trials on new and existing products, move products through the regulatory pathway (e.g., seek BLA approval), add personnel to support product enhancements as well as to bring new products to market, and enhance our manufacturing process and procedures.

Other expense, net

Interest expense, net—Interest expense, net consists of interest on our outstanding indebtedness, including amortization of debt discount and debt issuance costs, net of interest income recognized.

~~Loss on the extinguishment of debt~~—In March 2019, upon entering into the 2019 Credit Agreement, we paid an aggregate amount of $17.6 million associated with the termination of the ML Agreement, including unpaid principal, accrued interest and an early termination penalty. We recognized $1.9 million as loss on the extinguishment of the loan for the three months ended March 31, 2019.

Gain on settlement of deferred acquisition consideration—In February 2020, we settled the dispute on the $5.0 million deferred purchase acquisition consideration with the sellers of NuTech Medical for $4.0 million and assumed from the sellers of NuTech Medical the responsibilities related to a legacy lawsuit of NuTech ~~Medical.~~Medical, which was settled in October 2020. In connection with the settlement of this dispute and the legacy lawsuit, we recorded a gain of $1.3 million and $1.0 million for the three months ended March 31, ~~2020.~~2020 and December 31, 2020, respectively.

Income taxes

We account for income taxes using an asset and liability approach. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are provided when necessary to reduce net deferred tax assets to an amount that is more likely than not to be realized.

In determining whether a valuation allowance for deferred tax assets is necessary, we analyze both positive and negative evidence related to the realization of deferred tax assets and inherent in that, assess the likelihood of sufficient future taxable income. We also consider the expected reversal of deferred tax liabilities and analyze the period in which these liabilities would be expected to reverse to determine whether the taxable temporary difference amounts serve as an adequate source of future taxable income to support realizability of the deferred tax assets. In addition, we consider whether it is more likely than not that the tax position will be sustained on examination by taxing authorities based on the technical merits of the position. Based on a consideration of the factors discussed above, including the fact that through the period ended March 31, ~~2020,~~2021, our results reflected a ~~three-year~~twelve-quarter cumulative loss position, we have determined that a valuation allowance is necessary against the full amount of our net U.S. deferred tax ~~assets, excluding alternative minimum~~assets.

Our U.S. provision for income taxes relates to current tax ~~credits. On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which provides for an accelerated refund~~expense associated with taxable income that could not be offset by state net operating losses. We will utilize net operating losses to offset all of the ~~remaining alternative minimum tax credit (“AMT credit”) carryforward which was held as a deferred tax asset of $0.1 million as of December 31, 2019. The CARES Act modifications~~projected 2021 federal taxable income, but have exhausted net operating losses and are subject to limitations in the ~~limitation on business interest expense and~~ net operating loss ~~provisions are not expected~~utilization in certain states. The Company has also recorded a foreign provision for income taxes related to ~~have a material impact on our~~its wholly owned Swiss subsidiary.

We account for uncertainty in income taxes recognized in the consolidated financial ~~statement.~~statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Results of Operations

The following table sets forth, for the periods indicated, our results of operations:


	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
Net revenue	$	61,732		$	57,123		$	102,552		$	61,732
Cost of goods sold		18,793			16,980			25,495			18,793

Gross profit		42,939			40,143			77,057			42,939
Operating expenses:
Selling, general and administrative		52,613			48,893			58,232			52,613
Research and development		5,410			3,371			6,209			5,410

Total operating expenses		58,023			52,264			64,441			58,023

Loss from operations		(15,084	)		(12,121	)
Income (loss) from operations								12,616			(15,084	)

Other expense, net:
Interest expense, net		(2,510	)		(1,778	)		(2,470	)		(2,510	)
Loss on the extinguishment of debt		—			(1,862	)
Gain on settlement of deferred acquisition consideration		1,295			—			—			1,295
Other income, net		21			132
Other income (expense), net								(3	)		21

Total other expense, net		(1,194	)		(3,508	)		(2,473	)		(1,194	)

Net loss before income taxes		(16,278	)		(15,629	)
Net income (loss) before income taxes								10,143			(16,278	)
Income tax expense		(35	)		(37	)		(200	)		(35	)

Net loss	$	(16,313	)	$	(15,666	)
Net income (loss)							$	9,943		$	(16,313	)

EBITDA and Adjusted EBITDA

Our management uses financial measures that are not in accordance with generally accepted accounting principles in the United States, or GAAP, in addition to financial measures in accordance with GAAP to evaluate our operating results.These non-GAAP financial measures should be considered supplemental to, and not a substitute for, our reported financial results prepared in accordance with GAAP. Our management uses Adjusted EBITDA to evaluate our operating performance and trends and make planning decisions. Our management believes Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the items that we exclude. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision-making.

The following is a reconciliation of GAAP net ~~loss~~income (loss) tonon-GAAP EBITDA andnon-GAAP Adjusted EBITDA for each of the periods presented:


	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
	(in thousands)						(in thousands)
Net loss	$	(16,313	)	$	(15,666	)
Net income (loss)							$	9,943		$	(16,313	)
Interest expense, net		2,510			1,778			2,470			2,510
Income tax expense		35			37			200			35
Depreciation		902			902			1,010			902
Amortization		817			1,498			1,243			817

EBITDA		(12,049	)		(11,451	)		14,866			(12,049	)

Stock-based compensation expense		209			224			698			209
Gain on settlement of deferred acquisition consideration (1)		(1,295	)		—			—			(1,295	)
Loss on extinguishment of debt (2)		—			1,862
Recovery of certain notes receivable from related parties (2)								(179	)		—
Change in fair value of Earnout (3)								(296	)		—
Restructuring charge (4)								927			—
Transaction cost (5)								—			243
Cancellation fee (6)								—			1,950

Adjusted EBITDA	$	(13,135	)	$	(9,365	)	$	16,016		$	(10,942	)

(1)	~~The amount~~Amount reflects the gain recognized related to the settlement of the deferred acquisition consideration dispute with the sellers of NuTech ~~Medical.~~Medical in February 2020. See Note “18. Commitments and Contingencies”.

(2)	~~The amount~~Amount reflects the ~~loss recognized on~~collection of certain notes receivable from related parties previously reserved. See Note “19. Related Party Transactions”.

(3)	Amount reflects the ~~extinguishment~~change in the fair value of the ~~Master Lease Agreement upon repayment.~~Earnout liability in connection with the CPN acquisition. See Note “3. Acquisition”.

(4)	Amount reflects employee retention and other benefit-related costs related to the Company’s restructuring activities. See Note “12. Restructuring”.

(5)	Amount reflects the legal, advisory and other professional fees incurred in the three months ended March 31, 2020 related directly to the CPN acquisition. See Note “3. Acquisition”.

(6)	Amount reflects the cancellation fee for terminating certain product development and consulting agreements the Company inherited from NuTech Medical. See Note “18. Commitments and Contingencies”.

Comparison of the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020

Revenue


	Three Months Ended March 31,				Change					Three Months Ended March 31,				Change
	2020		2019		$		%			2021		2020		$		%
	(in thousands, except for percentages)									(in thousands, except for percentages)
Advanced Wound Care	$	51,288	$	47,844	$	3,444		7	%	$	90,708	$	51,288	$	39,420		77	%
Surgical & Sports Medicine		10,444		9,279		1,165		13	%		11,844		10,444		1,400		13	%

Net revenue	$	61,732	$	57,123	$	4,609		8	%	$	102,552	$	61,732	$	40,820		66	%

Net revenue from our Advanced Wound Care products increased by ~~$3.4~~$39.4 million, or 7%77%, to $90.7 million in the three months ended March 31, 2021 from $51.3 million in the three months ended March 31, ~~2020 from $47.8 million in the three months ended March 31, 2019.~~2020. The increase in Advanced Wound Care net revenue was primarily attributable to the ~~additional~~expanded sales ~~personnel and~~force, increased sales to existing and new ~~customers.~~customers and increased adoption of our amniotic product portfolio, including our Affinity product.

Net revenue from our Surgical & Sports Medicine products increased by ~~$1.2~~$1.4 million, or 13%, to $11.8 million in the three months ended March 31, 2021 from $10.4 million in the three months ended March 31, ~~2020 from $9.3 million in the three months ended March 31, 2019.~~2020. The increase in Surgical & Sports Medicine net revenue was primarily ~~due~~attributable to the ~~expansion of the~~expanded sales force and penetration of existing and new customer accounts.

Included within net revenue is PuraPly revenue of ~~$32.5~~$41.3 million and ~~$25.4~~$32.5 million for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. PuraPly ~~had~~exited pass-through status ~~in both of the periods.~~on October 1, 2020. The continued increase in PuraPly revenue in the ~~current period~~three months ended March 31, 2021 was due to the expanded sales forces, ~~and~~ increased sales to existing and new ~~customers.~~customers, and increased adoption of our recently launched line extensions.

Cost of goods sold, gross profit and gross profit margin

Three Months Ended
March 31,
Change
   2020 2019 $    %
   (in thousands, except for percentages)
Cost of goods sold
   $ 18,793 $ 16,980 $ 1,813    11 %




Gross profit
   $ 42,939 $ 40,143 $ 2,796    7 %




Gross profit%
   70 % 70 %


	Three Months Ended March 31,						Change
	2021			2020			$		%
	(in thousands, except for percentages)
Cost of goods sold	$	25,495		$	18,793		$	6,702		36	%

Gross profit	$	77,057		$	42,939		$	34,118		79	%

Gross profit%		75	%		70	%

Cost of goods sold increased by ~~$1.8~~$6.7 million, or ~~11%~~36%, to $25.5 million in the three months ended March 31, 2021 from $18.8 million in the three months ended March 31, ~~2020 from $17.0 million in the three months ended March 31, 2019.~~2020. The increase in cost of goods sold was primarily due to increased unit volumes, and additional manufacturing and quality control ~~headcount, and facility improvement projects.~~headcount.

Gross profit increased by ~~$2.8~~$34.1 million, or 7%79%, to ~~$42.9~~$77.1 million in the three months ended March 31, ~~2020~~2021 from ~~$40.1~~$42.9 million in the three months ended March 31, ~~2019.~~2020. The increase in gross profit resulted primarily from increased sales volume due to the strength in our Advanced Wound Care and Surgical & Sports Medicine products as well as a shift in product mix to our higher gross margin products.

Research and Development Expenses


	Three Months Ended March 31,						Change					Three Months Ended March 31,						Change
	2020			2019			$		%			2021			2020			$		%
	(in thousands, except for percentages)											(in thousands, except for percentages)
Research and development	$	5,410		$	3,371		$	2,039		60	%	$	6,209		$	5,410		$	799		15	%

Research and development as a percentage of net revenue		9	%		6	%							6	%		9	%

Research and development expenses increased by ~~$2.0~~$0.8 million, or ~~60%~~15%, to $6.2 million in the three months ended March 31, 2021 from $5.4 million in the three months ended March 31, ~~2020 from $3.4 million in the three months ended March 31, 2019.~~2020. The increase in research and development expenses iswas primarily due to ~~an increase in process development costs associated with a new contract manufacturer,~~ increased headcount associated with our existing Advanced ~~World~~Wound Care and Surgical & Sports Medicine products, an increase in product costs associated with our pipeline products not yet commercialized and an increase in the clinical study and related costs necessary to ~~move products through the~~seek regulatory ~~pathway (e.g., seek BLA approval).~~approvals for certain of our products. These increases were partially offset by a decrease in process development costs associated with a new contract manufacturer in 2020.

Selling, General and Administrative Expenses


												Three Months Ended March 31,						Change
	Three Months Ended March 31,						Change					2021			2020			$		%
	2020			2019			$		%
	(in thousands, except for percentages)											(in thousands, except for percentages)
Selling, general and administrative	$	52,613		$	48,893		$	3,720		8	%	$	58,232		$	52,613		$	5,619		11	%

Selling, general and administrative as a percentage of net revenue		85	%		86	%							57	%		85	%

Selling, general and administrative expenses increased by ~~$3.7~~$5.6 million, or 8%11%, to $58.2 million in the three months ended March 31, 2021 from $52.6 million in the three months ended March 31, ~~2020 from $48.9 million in the three months ended March 31, 2019.~~2020. The increase in selling, general and administrative expenses iswas primarily due to ana $9.4 million increase ~~of $2.4 million~~ related to additional headcount, primarily in our direct sales force and increased sales commissions due to increased sales, ana $0.9 million increase ~~of $2.1 million~~ in royalties, of which $2.0 million was the cancellation fee for certain product development and consulting agreements, and an increase of $0.3 million in credit card processing fees due to increased collection. These increases were partially offset by a decrease of amortization of $0.7 millionrestructuring cost associated with ~~intangible assets amortized using the economic benefits method~~closing La Jolla office, and a ~~decrease of $0.4~~$0.9 million increase in legal, consulting fees and other costs associated with the ongoing operations of our business. These increases were partially offset by a $4.4 million decrease related to reduced travel and marketing programs amid travel restrictions in place due to the COVID-19 pandemic, and a decrease of royalty expenses of $1.7 million, of which $2.0 million was the cancellation fee incurred in the three months ended March 31, 2020 to cancel certain product development and consulting agreements.

Other Expense, net


	Three Months Ended March 31,						Change						Three Months Ended March 31,						Change
	2020			2019			$			%			2021			2020			$			%
	(in thousands, except for percentages)												(in thousands, except for percentages)
Interest expense, net	$	(2,510	)	$	(1,778	)	$	(732	)		41	%	$	(2,470	)	$	(2,510	)	$	40			(2	%)
Loss on the extinguishment of debt	$	—		$	(1,862	)	$	1,862			*	*
Gain on settlement of deferred acquisition consideration		1,295			—			1,295			*	*		—			1,295			(1,295	)		100	%
Other income, net		21			132			(111	)		(84	%)
Other income (expense), net														(3	)		21			(24	)		*	*

Total other expense, net	$	(1,194	)	$	(3,508	)	$	2,314			(66	%)	$	(2,473	)	$	(1,194	)	$	(1,279	)		107	%

**	not meaningful

Other expense, net, ~~decreased~~increased by ~~$2.3~~$1.3 million, or ~~66%~~107%, to $2.5 million in the three months ended March 31, 2021 from $1.2 million in the three months ended March 31, ~~2020 from $3.5 million in the three months ended March 31, 2019. Interest expense, net, increased by $0.7 million or 41%~~2020. The increase was primarily due to ~~the increased borrowings under the 2019 Credit Agreement. The loss on the extinguishment of debt of $1.9~~a $1.3 million gain for the three months ended March 31, ~~2019 reflectsthe write-off of~~ unamortized debt discount upon repayment of the Master Lease Agreement as well as early payment penalties. The gain on settlement of deferred acquisition consideration of $1.3 million for the three months ended March 31, 2020 is related to the settlement of the deferred acquisition consideration dispute with the sellers of NuTech Medical.

Liquidity and Capital Resources

Since our inception, we have funded our operations and capital expenditures through cash flows from product sales, loans from affiliates and entities controlled by certain of our affiliates, third-party debt and proceeds from the sale of our capital stock. As of March 31, ~~2020,~~2021, we had ~~$46.9 million in cash, $56.6~~$111.2 million in working capital ~~and $2.6~~which included $77.5 million in cash. We also had up to $30,000 available (subject to Borrowing Base) for future revolving borrowings under ~~the~~our Revolving Facility ~~of our 2019 Credit Agreement.~~(see Note “13. Long-Term Debt Obligations”). We expect that our cash on hand and other components of working capital as of March 31, ~~2020, plus~~2021, availability under ~~our~~the 2019 Credit Agreement, ~~and~~plus net cash flows from product sales, will be sufficient to fund our operating expenses, capital expenditure requirements and debt service payments for at least 12 months beyond the filing date of this quarterly report. We ~~are~~continue to closely ~~monitoring~~monitor ongoing developments in connection with theCOVID-19 pandemic, which may negatively impact our commercial prospects, cash position and access to capital in fiscal ~~2020.~~2021 or beyond. We will continue to assess our cash and other sources of liquidity and, if circumstances warrant, we will make appropriate adjustments to our operating plan. ~~Please see “Item 1A. Risk Factors” in this Quarterly Report on Form10-Q~~ ~~for an additional discussion of risks and potential risks of theCOVID-19~~ ~~pandemic on our business, financial condition and results of operations.~~

Our primary uses of cash are working capital requirements, capital ~~expenditures~~expenditure and debt service payments. Additionally, from time to time, we may use capital for acquisitions and other investing and financing activities. Working capital is used principally for our personnel as well as manufacturing costs related to the production of our products. Our working capital requirements vary fromperiod-to-period depending on manufacturing volumes, the timing of shipments and the payment cycles of our customers and payers. Our capital expenditures consist primarily of building improvements, manufacturing equipment, and computer hardware and software.

To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute on our business strategy, we anticipate that they will be obtained through ~~the incurrence of additional indebtedness under our 2019 Credit Facility,~~ additional equity or debt financings, other strategic transactions or a combination of these potential sources of funds. There can be no assurance that we will be able to obtain additional funds on terms acceptable to us, on a timely basis or at ~~all, particularly in light of the adverse impacts of theCOVID-19~~ pandemic on the capital markets. Our ability to borrow under the 2019 Credit Facility is subject to compliance with certain financial covenants that include maintaining Minimum Trailing Twelve Month Consolidated Revenue and~~Non-PuraPly~~ ~~revenue. If we are not able to comply with these covenants, due to the impacts ofCOVID-19~~ or otherwise, we will be unable to borrow under the Revolving Facility without obtaining an amendment from our lenders. There can be no assurance that our lenders would agree to any such amendment on acceptable terms, or at all. ~~The~~Any failure ~~of us~~ to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations, and financial condition.

Cash Flows

The following table summarizes our cash flows for each of the periods presented:


	Three Months Ended March 31,						Three Months Ended March 31,
	2020			2019			2021			2020
	(in thousands)						(in thousands)
Net cash used in operating activities	$	(17,283	)	$	(9,558	)	$	(1,479	)	$	(17,283	)
Net cash used in investing activities		(4,243	)		(317	)		(4,778	)		(4,243	)
Net cash provided by financing activities		8,230			19,133
Net cash (used in) provided by financing activities								(591	)		8,230

Net change in cash and restricted cash	$	(13,296	)	$	9,258		$	(6,848	)	$	(13,296	)

Operating Activities

During the three months ended March 31, 2021, net cash used in operating activities was $1.5 million, resulting from our net cash used in connection with changes in our operating assets and liabilities of $19.3 million, partially offset by net income of $9.9 million and non-cash charges of $7.8 million. Net cash used in changes in our operating assets and liabilities included an increase in accounts receivable of $16.3 million, an increase in inventory of $4.2 million, an increase in prepaid expenses and other current assets of $0.6 million, and a decrease in operating leases and other liabilities of $1.4 million, all of which were partially offset by an increase in accounts payable of $1.8 million, and an increase of accrued expenses and other current liabilities of $1.4 million.

During the three months ended March 31, 2020, net cash used in operating activities was $17.3 million, resulting from our net loss of $16.3 million and net cash used in connection with changes in our operating assets and liabilities of $3.4 million, partially offset bynon-cash charges ~~charges~~ of $2.4 million. Net cash used in changes in our operating assets and liabilities included an increase in inventory of $4.3 million, an increase in prepaid expenses and other current assets of $2.1 million, a decrease in accounts payable of $1.9 million, and a decrease in accrued expenses and other liabilities of $1.4 million, all of which were partially offset by a decrease in accounts receivable of $6.3 million.

Investing Activities

During the three months ended March 31, ~~2019, net~~2021, we used $4.8 million of cash ~~used~~ in ~~operating~~investing activities ~~was $9.6~~consisting of capital expenditures of $5.0 million ~~resulting~~partially offset by notes receivable repayment of $0.2 million from our ~~net loss of $15.7 million and offset by net cash provided in connection with changes in our operating assets and liabilities of $1.2 million andnon-cash~~ charges of $4.9 million. Net cash provided by changes in our operating assets and liabilities included an increase in accounts payable and accrued expenses of $5.1 million and a decrease in accounts receivable of $2.5 million, all of which were offset by an increase in inventory of $5.1 million, an increase in prepaid expenses and other current assets of $1.0 million and a decrease in other liabilities of $0.3 million.

~~Investing Activities~~former executives.

During the three months ended March 31, 2020, we used $4.2 million of cash in investing activities solely consisting of capital expenditures.

Financing Activities

During the three months ended March 31, ~~2019, we~~2021, net cash used ~~$0.3~~by financing activities was $0.6 million. This consisted primarily of the payment of finance lease obligations of $0.7 million, the payment of $0.5 million related to the NuTech Medical deferred acquisition consideration, and the payments of $0.4 million withholding taxes in connection with stock-based awards. The net cash used by financing activities was partially offset by the $1.0 million in ~~investing activities solely consisting~~proceeds from the exercise of ~~capital expenditures.~~

~~Financing Activities~~common stock options.

During the three months ended March 31, 2020, net cash provided by financing activities was $8.2 million. This consisted primarily of $10.0 million in proceeds from the Term Loan under the 2019 Credit Agreement, and $0.8 million in proceeds from the exercise of common stock options. The net cash provided by financing activities was partially offset by the payment of ~~capital~~finance lease obligations of $0.5 million and the payment of $2.0 million related to the NuTech Medical deferred acquisition consideration.

During the three months ended March 31, 2019, net cash provided by financing activities was $19.1 million that consisted primarily of $40.0 in proceeds from the Term Loan under the 2019 Credit Agreement and $4.5 million in proceeds from the Revolving Facility under this agreement. The net cash provided by financing activities was partially offset by the payment of the put option on redeemable common stock of $6.8 million, repayment of Master Lease Agreement of $17.6 million, the payment of capital lease obligations of $0.2 million, and the payment of $0.8 million of debt issuance costs related to the 2019 Credit Agreement.

Indebtedness

2019 Credit Agreement

On March 14, 2019, we and our subsidiaries entered into a credit agreement with SVB and several other lenders, which we refer to as the 2019 Credit Agreement. Capitalized terms used herein and not otherwise defined are defined as set forth in the 2019 Credit Agreement.

The 2019 Credit Agreement, as amended, provides for a revolving credit facility (the “Revolving Facility”) of up to the lesser of $40.0 million and the amount determined by the Borrowing Base. Additionally, we entered into a $60.0 million term loan (the “Term Loan Facility”) structured in three tranches. The first tranche of $40.0 million was made available to us and fully funded on March 14, 2019; (ii) the second tranche of $10.0 million was made available to us and fully funded in September 2019 upon ~~our demonstrated compliance with the financial covenants in the 2019 Credit Agreement and our~~ achievement of ~~trailing twelve month Consolidated Revenue of not less than $221.3 million and a trailing three month EBITDA loss not in excess of $5.0 million;~~certain financial metrics; and (iii) the third tranche of $10.0 million was made available to us and fully funded in March 2020 upon ~~our demonstrated compliance with the financial covenants in the 2019 Credit Agreement through December 31, 2019 and our~~ achievement of ~~trailing twelve month Consolidated Revenue not less than $231.5 million.~~a certain financial metric.

We are required to comply with certain covenants and restrictions under the 2019 Credit Agreement. If we fail to comply with these requirements, the lenders will be entitled to exercise certain remedies, including the termination of the lending commitments and the acceleration of the debt payments under either or both of the Revolving Facility orand the Term Loan Facility. We are also required to achieve certain financial covenants, including Minimum Trailing Twelve Month Consolidated Revenue andNon-PuraPly Revenue, tested quarterly. The Minimum Trailing Twelve Month Consolidated Revenue ~~thresholds for the year ending December 31, 2020 were agreed to and the covenant requiring Trailing Twelve MonthNon-PuraPly~~ Revenue beginning with the quarter ending September 30, 2020 was added in connection with the third amendment to the 2019 Credit Agreement entered into on March 26, 2020. The Minimum Trailing Twelve Month Consolidated Revenue (as defined in the 2019 Credit Agreement) requirements for the year ending December 31, ~~2020~~2021 are set at the following levels: ~~$235~~$265.6 million for the trailing twelve months ending March 31, ~~2020; $253~~2021; $269.6 million for the trailing twelve months ending June 30, ~~2020; $260~~2021; $306.1 million for the trailing twelve months ending September 30, ~~2020;~~2021; and ~~$262~~$338.3 million for the trailing twelve months ending December 31, ~~2020.~~2021. The Trailing Twelve MonthNon-PuraPly Revenue ~~(as defined in the 2019 Credit Agreement)~~ requirements are set at the following levels: ~~$136.5~~$141.6 million for the trailing twelve months ending March 31, 2021; $147.2 million for the trailing twelve months ending June 30, 2021; $176.6 million for the trailing twelve months ending September 30, ~~2020;~~2021; and ~~$145.0~~$205.4 million for the trailing twelve months ending December ~~31, 2020. The minimum revenue covenant levels for 2021 are to be agreed with the lenders no later than March~~ 31, 2021. We are also required to maintain Minimum Liquidity equal to the greater of (i) 6 months Monthly Burn and (ii) $10.0 million.

As of March 31, ~~2020,~~2021, we were in compliance with the financial covenants under the 2019 Credit Agreement and we had outstanding borrowings under the Revolving Facility and Term Loan Facility of the 2019 Credit Agreement of ~~$33.5~~$10.0 million and $60.0 million, respectively.

~~2017 Credit Agreement~~

In March 2017, we entered into a credit agreement with SVB, which we refer to as the 2017 Credit Agreement. The 2017 Credit Agreement, as amended, provided for a revolving credit facility of up to $30.0 million and a term loan of up to $5.0 million. The term loan was repaid in full in December 2018. Upon entering into the 2019 Credit Agreement, the outstanding amount due under the 2017 Credit Agreement was fully repaid and terminated.

~~Master Lease Agreement~~

In April 2017, we entered into the Master Lease Agreement (the “ML Agreement”) with Eastward Fund Management LLC. In March 2019, upon entering into the 2019 Credit Agreement, we paid an aggregate amount of $17.6 million due under the ML Agreement with proceeds from the 2019 Credit Agreement, and the ML Agreement was terminated. Upon termination of the ML Agreement, we recognized $1.9 million as loss on the extinguishment of the loan.

Contractual Obligations and Commitments

There have been no material changes to our contractual obligations and commitments as of March 31, ~~2020~~2021 from those disclosed in our Annual Report on Form10-K for the year ended December 31, 2019.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, and the disclosure at the date of the financial statements, as well as revenue and expenses recorded during the reporting periods. Management bases its estimates, assumptions and judgments on historical experience and on various other factors that it believes to be reasonable under the circumstances. Different assumptions and judgments would change the estimates used in the preparation of our consolidated financial statements, which, in turn, could materially change our results from those reported. Management evaluates its estimates, assumptions and judgments on an ongoing basis. Historically, our critical accounting estimates have not differed materially from actual results. However, if our assumptions change, especially given the risks and uncertainties related toCOVID-19, we may need to revise our estimates, or take other corrective actions, either of which may also have a material adverse effect on our consolidated statements of operations, liquidity and financial condition. See also our Annual Report on Form10-K for the fiscal year ended December 31, ~~2019~~2020 for information about these accounting policies as well as a description of our other significant accounting policies.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We may take advantage of these exemptions until we are no longer an emerging growth company. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. We have elected to use the extended transition period for complying with new or revised accounting standards (such asASU 2016-02,Leases(Topic 842)) and, as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We may take advantage of these exemptions up until ~~the last day of the fiscal year following October 14,~~December 31, 2021, ~~the fifth anniversary of our IPO,~~ or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenue, we have more than $700.0 million in market value of our stock held bynon-affiliates or we issue more than $1.0 billion ofnon-convertible debt securities over a three-year period.

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, anyoff-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Recently Issued Accounting Pronouncements

We have reviewed all recently issued standards as disclosed in Note “2. Summary of Significant Accounting Policies” to our consolidated financial statements included in this Report onForm 10-Q.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Pursuant to Item 305(e) of RegulationS-K, , the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Material Weaknesses on Internal Control over Financial Reporting

The Company’s management, with the participation of its principal executive officer and principal financial officer, evaluated the effectiveness of its disclosure controls and procedures as of March 31, ~~2020.~~2021. The term “disclosure controls and procedures,” as defined inRules 13a-15(e) and15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms promulgated by the Securities and Exchange Commission (the “SEC”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even effective internal control over financial reporting can only provide reasonable assurance of achieving their control objectives.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, our management has assessed the effectiveness of our internal control over financial reporting based on the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

As previously disclosed under “Item 9A. Controls and Procedures” in our Annual Report on Form10-K for our fiscal year ended December 31, ~~2019,~~2020, we identified the following material weakness that existed as of December 31, ~~2019~~2020 and continued to exist at March 31, ~~2020.~~2021. A material weakness is a control deficiency or a combination of control deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

We did not design and maintain formal accounting, business operations, and Information Technology policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including (i) formalized policies and procedures for reviews over account reconciliations, journal entries, and other accounting analyses and memos and procedures to ensure completeness and accuracy of information used in these review controls and (ii) controls to support the objectives of proper segregation of the initiation of transactions, the recording of transactions, and the custody of assets.

Because of the deficiencies noted above, in consultation with management, our principal executive officer and principal financial officer concluded that we did not maintain effective internal control over financial reporting and our disclosure controls and procedures were not effective as of both December 31, ~~2019~~2020 and March 31, ~~2020,~~2021, based on the criteria in Internal Control—Integrated Framework (2013) issued by COSO.

Plans for Remediation of Material Weakness

Management ~~is currently taking~~has taken actions to remediate the deficiencies in its internal controls over financial reporting and ~~is implementing~~implemented additional processes and controls designed to address the underlying causes associated with the above-mentioned material weakness. Although the Company has made significant progress in remediating the aforementioned deficiencies, management did not perform sufficient control testing to conclude that the ~~material weakness was remediated and therefore some~~controls were operating effectively for a reasonable period of ~~the control deficiencies continued to exist as of March 31, 2020.~~ time.

Management is committed to ~~remediating~~finalizing the remediation of the material weakness ~~described above and commenced remediation efforts~~ during ~~2018 that continued in 2020.~~2021. Management’s internal control remediation efforts include the following:

WeIn 2019, we began the implementation of a new company-wide enterprise resource planning system to provide additional systematic controls and segregation of duties for our accounting processes. We anticipate that the enterprise resource planning system will go live during the second half of ~~2020.~~2021.

We have designed and implemented more effective controls throughout 2019 ~~which continued into 2020 that should remediate these deficiencies once they have been implemented~~ and ~~have had sufficient time for them to operate effectively.~~2020.

We ~~formalized,~~completed the risk assessment activities by evaluating whether the design of our internal controls appropriately addresses changes in the business (including changes to people, processes and ~~provided training on, certain policies, including a procurement and contract management policy.~~systems) that could impact our system of internal controls.

We ~~engaged an outside firm to assist management with:~~designed controls that address the completeness and accuracy of any key reports utilized in the execution of internal controls.

Enhancing the execution of our risk assessment activities by evaluating whether the design of our internal controls appropriately addresses changes in the business (including changes to people, processes and systems) that could impact our system of internal controls;

Reviewing our current processes, procedures and systems to identify opportunities to enhance the design of each process and to include additional control activities that will ensure all transactions are properly recorded;

~~Designing controls that address the completeness and accuracy of any key reports utilized in the execution of internal controls; and~~

Developing a monitoring protocol that will allow the Company to validate the operating effectiveness of certain controls over financial reporting to gain assurance that such controls are present and functioning as designed.

We ~~have~~ reported regularly to the audit committee on the progress and results of ~~the remediation plan, including the identification, status and resolution of internal~~ control ~~deficiencies.~~

~~In addition to implementing and refining the above activities, we engaged in additional activities in 2020, including engaging the same outside firm to assist management with:~~

~~Monitoring the progress of the remediation plan established by management.~~remediation.

~~Performing testing~~We developed and executed upon a monitoring protocol that allows the Company to validate the operating effectiveness of certain controls over financial ~~reporting.~~reporting to gain assurance that such controls are present and functioning as designed.

We will also continue to engage an outside firm in 2021 to assist management with performing sufficient testing throughout the year to validate the operating effectiveness of certain controls over financial reporting

Management believes these actions will be effective in remediating the material weakness described above. As management continues to evaluate and work to improve its internal control over financial reporting, management may determine it is necessary to take additional measures to address the material ~~weakness or determine to modify the remediation plan described above.~~weakness. Until the ~~remediation steps set forth above are fully implemented and~~controls have been operating for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively, the material weakness described above will continue to exist.

Changes in Internal Control Over Financial Reporting

~~Other than in connection with executing upon the implementation of the remediation plan outlined above, there were~~There have been no changes in our internal control over financial reporting that occurred during the ~~period~~quarter ended March 31, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting other than those described above related to remediation efforts. However, as the implementation of the new ERP system continues, we will change our processes and procedures, which in turn, could result in changes to our internal control over financial reporting. As such changes occur, we will evaluate quarterly whether such changes materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material legal proceedings. From time to time, we may become involved in litigation or other legal proceedings relating to claims arising from the ordinary course of business. These matters may include intellectual property, employment and other general claims. With respect to our outstanding legal matters, based on our current knowledge, we believe that the amount or range of reasonably possible loss will not, either individually or in the aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. Our Annual Report on Form10-K for the year ended December 31, ~~2019,~~2020, as amended, includes a detailed discussion of our risk factors under the heading “Part I, Item 1A—Risk Factors.” ~~Except as set forth below, there~~There have been no material changes from such risk factors during the ~~three months~~quarter ended March 31, ~~2020.~~2021. You should consider carefully the risk factors discussed in our Annual Report on Form10-K for the year ended December 31, ~~2019,~~2020, and all other information contained in or incorporated by reference in this

Quarterly Report on Form10-Q before making an investment decision. If any of the risks discussed in the Annual Report on Form10-K for the year ended December 31, 2020 or herein actually occur, they may materially harm our business, financial condition, operating results, cash flows or growth prospects. As a result, the market price of our common stock could decline, and you could lose all or part of your investment. Additional risks and uncertainties that are not yet identified or that we think are immaterial may also materially harm our business, financial condition, operating results, cash flows or growth prospects and could result in a complete loss of your investment.

~~We are dependent on the proper functioning of our and third-party manufacturing facilities, our supply chain and our sales force, all of which could be negatively impacted by the globalCOVID-19~~ ~~pandemic in a manner that could materially adversely affect our business, financial condition or results of operations.~~

~~Our ability to manufacture products may be materially adversely impacted by the coronavirus.~~

~~COVID-19~~ is impacting worldwide economic activity. Estimates for economic growth have been reduced and may have a corresponding effect on our sales activity. The virus continues to spread globally, has been declared a pandemic by the World Health Organization and has spread to over 180 countries, including the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. We, like many employers in the United States, are requiring (with limited exceptions) employees to work from home or not come into their offices or facilities. We manufacture our~~non-amniotic~~ products and use third-party manufacturers for our amniotic products and we use third-party raw material suppliers to support our internal manufacturing processes. Our manufacturing facilities remain operational as “essential” services under applicable regulatory orders. If our manufacturing capabilities or the manufacturing capabilities of our suppliers are impacted as a result of~~COVID-19,~~ it may not be possible for us to timely manufacture relevant products at required levels or at all. A reduction or interruption in any of our manufacturing processes could have a material adverse effect on our business, results of operations, financial condition and cash flows. Further, remote work may disrupt our operations or increase the risk of a cybersecurity incident.

~~We also may be unable to obtain the raw materials necessary to support our internal manufacturing processes due to the additional constraints on suppliers created byCOVID-19.~~ ~~Any delays in the delivery of these raw materials and delay manufacturing of our products may result in the cancellation of orders for our products.~~

In addition, the manufacture of our products is dependent on the availability of sufficient quantities of source tissue, which is the primary component of our products. Source tissue includes donated human tissue, porcine tissue and bovine tissue. We acquire donated human tissue directly through institutional review board approved protocols at multiple hospitals, as well as through tissue procurement firms engaged by us or by our contract manufacturers. Any failure to obtain tissue from our sources, including any failures related to~~COVID-19,~~ will interfere with our ability to effectively meet demand for our products. Any interruption in the supply of source tissue could materially harm our ability to manufacture our products until a new source of supply, if any, could be found. We may be unable to find a sufficient alternative supply channel in a reasonable time period or on commercially reasonable terms, if at all, which would have a material adverse effect on our business, results of operations and financial condition.

~~Our sales may be materially adversely impacted by the coronavirus~~.

Our current Advanced Wound Care portfolio is sold throughout the United States via an experienced direct sales force, which focuses its efforts on outpatient wound care. We use a mix of direct sales representatives and independent agencies to service the Surgical & Sports Medicine market. These sales representatives are supported by teams of professionals focused on sales management, sales operations and effectiveness, ongoing training, analytics and marketing.

~~Our direct sales force functions by meeting in person with physicians and health care providers to discuss our products.COVID-19~~ may negatively affect demand for our products by limiting the ability of our sales personnel to maintain their customary contacts with physicians and health care providers. We may also find that the independent agencies that we use will have to prioritize their workload and may be forced to slow their activities as a result of~~COVID-19.~~ As a result, we cannot assure you that our direct sales representatives or independent agencies will increase or maintain our current sales levels, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. The support for our sales force may also be impacted, thereby reducing the effectiveness of our sales force.

~~We may also experience significant and unpredictable reductions in demand for certain of our products if patients are unable to access certain advanced therapies due tostay-at-home~~ ~~orders or providers prioritizing resources to address theCOVID-19~~ ~~pandemic.~~

The impact of the coronavirus on economic activity, and its effect on our manufacturing facilities, supply chain and sales force is uncertain at this time and could have a material adverse effect on our results, especially to the extent theses effects persist or exacerbate over an extended period of time.

~~Our ability to borrow under our credit agreement and raise capital may be materially adversely impacted byCOVID-19.~~

We have funded our operations and capital spending, in part, through third party debt and proceeds from the sale of our Class A common stock. Our ability to borrow funds under the Revolving Facility included in our 2019 Credit Agreement is subject to our compliance with certain financial covenants that include maintaining Minimum Trailing Twelve Month Consolidated Revenue and~~Non-PuraPly~~ ~~Revenue, tested quarterly. If we are unable to meet these financial covenants due to the economic impact ofCOVID-19~~ ~~or otherwise, it could negatively impact our ability to finance our operations. In addition, any sustained disruption in the capital markets from theCOVID-19~~ ~~pandemic could negatively impact our ability to raise capital from the offering of equity or debt securities.~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

~~None.~~We and each of our executive officers entered into a Change in Control Retention Agreement (the “Change in Control Agreement”) effective May 10, 2021. Pursuant to the Change in Control Agreement, if the executive’s employment is terminated during the twenty-four month period following a “Change in Control” (a) by us without “Cause” or (b) by the executive upon the occurrence of an “Event of Constructive Termination” (as those terms are defined in the Change in Control Agreement), the executive will receive from us: (i) a lump-sum amount equal to one times (two times in the case of Gary S. Gillheeney, Sr.) the executive’s base annual salary and the executive’s annual target bonus, in each case at the highest rate in effect at any time during the 12 months immediately preceding the termination of the executive’s employment with us; (ii) for up to 12 months (24 months in the case of Mr. Gillheeney) following the executive’s termination of employment, payment of the difference between the cost of COBRA continuation coverage for the executive and any dependent who received health insurance coverage prior to such termination, and any premium contribution amount applicable to the executive as of such termination; and (iii) full acceleration of the vesting of any time-based equity awards held by the executive. Our obligation to provide the foregoing benefits is subject to the executive entering into a new noncompetition agreement with us and the effectiveness of a release of claims executed by the executive in favor of us.

We and each of our independent directors entered into a Change in Control Retention Agreement (the “Director Change in Control Agreement”) effective May 10, 2021. Pursuant to the Director Change in Control Agreement, if the director is serving on our board of directors immediately prior to a Change in Control, the director will receive full acceleration of the vesting of any time-based equity awards held by the director.

Copies of the Change in Control Agreement with Mr. Gillheeney, the form of Change in Control Agreement with our executive officers other than Mr. Gillheeney and the form of Director Change in Control Agreement are attached as Exhibit 10.2. Exhibit 10.3 and Exhibit 10.4 to this Report. The foregoing summaries of these Agreements are qualified in their entirety by reference to the actual Agreements.

Item 6. Exhibits


Exhibit number		Description

3.1		Certificate of Incorporation of Organogenesis Holdings Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on FormS-3/A (File No. 333-233621) filed with the SEC on September 16, 2019)

3.2		Bylaws of Organogenesis Holdings Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on FormS-3/A (File No. 333-233621) filed with the SEC on September 16, 2019)

10.1		~~Second Amendment to Credit Agreement entered into on February~~ ~~14, 2020 and dated and effective as of February~~ 13, 2020 among Organogenesis Holdings Inc., Organogenesis Inc. and Prime Merger Sub, LLC, collectively as borrower, and Silicon Valley Bank, in its capacity as the Issuing Lender and Swingline Lender, Silicon Valley Bank, as Administrative Agent, and Silicon Valley Bank and the other lenders listed therein, collectively as lenders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form~~8-K~~ ~~(File No.~~ ~~001-37906)~~ ~~filed with the SEC on February~~ ~~19, 2020)~~

~~10.2~~		~~Third~~Fourth Amendment to Credit Agreement dated March ~~26, 2020~~ 31, 2021 among Organogenesis Holdings Inc., Organogenesis Inc. and Prime Merger Sub, LLC, collectively as borrower, and Silicon Valley Bank, in its capacity as the Issuing Lender and Swingline Lender, Silicon Valley Bank, as Administrative Agent, and Silicon Valley Bank and the other lenders listed therein, collectively as Lenders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8-K (File No. 001-37906) filed with the SEC on ~~March~~ ~~30, 2020)~~April 2, 2021)

10.310.2†		~~Separation Letter~~Change in Control Retention Agreement ~~dated March~~ ~~13, 2020,~~ between Organogenesis Holdings Inc. and ~~Howard P. Walthall, Jr. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8-K~~ ~~(File No.~~ ~~001-37906)~~ ~~filed with the SEC on March~~ ~~16, 2020)~~Gary S. Gillheeney, Sr. effective as of May 10, 2021

~~10.4†~~10.3†		Form of ~~Restricted Stock Unit~~Change in Control Retention Agreement ~~under the 2018 Equity Incentive Plan~~(Non-CEO Executive Officers)

10.4†*		Form of Change in Control Retention Agreement (Independent Directors)

31.1†		Certification of Principal Executive Officer pursuant to Rule13a-14(a) or Rule15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2†		Certification of Principal Financial Officer pursuant to Rule13a-14(a) or Rule15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1†		Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS†		XBRL Instance Document XBRL

101.SCH†		XBRL Taxonomy Extension Schema Document

101.CAL†		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF†		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB†		XBRL Taxonomy Extension Label Linkbase Document

101.PRE†		XBRL Taxonomy Extension Presentation Linkbase Document

†	Filed herewith

*	Management contract or compensatory plan or ~~arrangement.~~arrangement

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.


Dated: May ~~11, 2020~~10, 2021						Organogenesis Holdings Inc.

						(Registrant)

						~~/s/ Timothy M. Cunningham~~

						~~Timothy M. Cunningham~~/s/ David Francisco
						David Francisco
						Chief Financial Officer

						(Principal Financial and Accounting Officer)

3438


	Three Months Ended March 31, 2020
	Redeemable								Additional Paid-in Capital					Total Organogenesis Holdings Inc. Stockholders’ Equity
	Common Stock				Common Stock						Accumulated Deficit
	Shares		Amount		Shares		Amount				Accumulated Deficit
Balance as of December 31, 2019		—	$	—		104,870,886	$	10	$	226,580	$	(171,007	)	$	55,583
Exercise of stock options		—		—		489,129		1		815		—			816
Stock-based compensation expense		—		—		—		—		209		—			209
Net loss		—		—		—		—		—		(16,313	)		(16,313	)

Balance as of March 31, 2020		—	$	—		105,360,015	$	11	$	227,604	$	(187,320	)	$	40,295


	Three Months Ended March 31, 2019
	Redeemable									Additional Paid-in Capital		Accumulated Deficit			Total Organogenesis Holdings Inc. Stockholders’ Equity
	Common Stock					Common Stock
	Shares			Amount		Shares		Amount
Balance as of December 31, 2018		728,548		$	—		91,261,413	$	9	$	177,272	$	(130,240	)	$	47,041
Adoption of ASC 606		—			—		—		—		—		332			332
Exercise of common stock warrants		—			—		54,626		—		628		—			628
Stock-based compensation expense		—			—		—		—		224		—			224
Redemption of redeemable common stock placed into treasury		(728,548	)		—		—		—		—		—			—
Net loss		—			—		—		—		—		(15,666	)		(15,666	)

Balance as of March 31, 2019		—		$	—		91,316,039	$	9	$	178,124	$	(145,574	)	$	32,559


2020 (remaining 9 months)	$	3,594
2021		4,786
2022		4,945
2023		—
2024		9,853

		23,178
Less amount representing interest		(6,234	)

Present value of minimum lease payments		16,944
Less current maturities		(3,189	)

Long-term portion	$	13,755


2020 (remaining 9 months)	$	4,355
2021		5,461
2022		2,887
2023		2,145
2024		1,224
Thereafter		6,899

	$	22,971

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company