☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2021
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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 |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
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Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
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Item 4. | ||||||
Item 1. | ||||||
Item 1A | ||||||
Item 2. | ||||||
Item 3. | ||||||
Item 4. | ||||||
Item 5. | ||||||
Item 6. | ||||||
June 30, 2020 | December 31, 2019 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 40,455 | $ | 60,174 | ||||
Restricted cash | 299 | 196 | ||||||
Accounts receivable, net | 44,024 | 39,359 | ||||||
Inventory | 28,562 | 22,918 | ||||||
Prepaid expenses and other current assets | 4,366 | 2,953 | ||||||
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Total current assets | 117,706 | 125,600 | ||||||
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Property and equipment, net | 53,033 | 47,184 | ||||||
Notes receivable from related parties | 302 | 556 | ||||||
Intangible assets, net | 19,164 | 20,797 | ||||||
Goodwill | 25,539 | 25,539 | ||||||
Deferred tax asset | 15 | 127 | ||||||
Other assets | 728 | 884 | ||||||
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Total assets | $ | 216,487 | $ | 220,687 | ||||
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Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Deferred acquisition consideration | $ | 1,432 | $ | 5,000 | ||||
Current portion of term loan | 6,667 | — | ||||||
Current portion of capital lease obligations | 3,327 | 3,057 | ||||||
Accounts payable | 29,944 | 28,387 | ||||||
Accrued expenses and other current liabilities | 24,688 | 23,450 | ||||||
Total current liabilities | 66,058 | 59,894 | ||||||
Line of credit | 39,353 | 33,484 | ||||||
Term loan, net of current portion | 52,954 | 49,634 | ||||||
Deferred rent | 1,097 | 1,012 | ||||||
Capital lease obligations, net of current portion | 13,011 | 14,431 | ||||||
Other liabilities | 8,264 | 6,649 | ||||||
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Total liabilities | 180,737 | 165,104 | ||||||
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Commitments and contingencies (Note 13) | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.0001 par value; 400,000,000 shares authorized; 106,145,716 and 105,599,434 shares issued; 105,417,168 and 104,870,886 shares outstanding at June 30, 2020 and December 31, 2019, respectively. | 11 | 10 | ||||||
Additional paid-in capital | 228,225 | 226,580 | ||||||
Accumulated deficit | (192,486 | ) | (171,007 | ) | ||||
Total stockholders’ equity | 35,750 | 55,583 | ||||||
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Total liabilities and stockholders’ equity | $ | 216,487 | $ | 220,687 | ||||
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June 30, | December 31, | |||||||
2021 | 2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 89,790 | $ | 84,394 | ||||
Restricted cash | 517 | 412 | ||||||
Accounts receivable, net | 76,767 | 56,804 | ||||||
Inventory | 28,106 | 27,799 | ||||||
Prepaid expenses and other current assets | 6,583 | 4,935 | ||||||
Total current assets | 201,763 | 174,344 | ||||||
Property and equipment, net | 69,739 | 60,068 | ||||||
Intangible assets, net | 28,136 | 30,622 | ||||||
Goodwill | 28,772 | 28,772 | ||||||
Operating lease right-of-use | 26,531 | — | ||||||
Deferred tax asset, net | 18 | 18 | ||||||
Other assets | 605 | 670 | ||||||
Total assets | $ | 355,564 | $ | 294,494 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Deferred acquisition consideration | $ | — | $ | 483 | ||||
Current portion of term loan | 22,500 | 16,666 | ||||||
Current portion of finance lease obligations | 4,134 | 3,619 | ||||||
Current portion of operating lease obligations | 4,504 | — | ||||||
Current portion of deferred rent and lease incentive obligation | — | 95 | ||||||
Accounts payable | 26,789 | 23,381 | ||||||
Accrued expenses and other current liabilities | 26,618 | 23,973 | ||||||
Total current liabilities | 84,545 | 68,217 | ||||||
Line of credit | 10,000 | 10,000 | ||||||
Term loan, net of current portion | 37,290 | 43,044 | ||||||
Deferred acquisition consideration, net of current portion | 1,436 | 1,436 | ||||||
Earnout liability | 927 | 3,985 | ||||||
Deferred rent and lease incentive obligation, net of current portion | — | 2,315 | ||||||
Finance lease obligations, net of current portion | 9,553 | 11,442 | ||||||
Operating lease obligations, net of current portion | 24,224 | — | ||||||
Other liabilities | 8,667 | 7,971 | ||||||
Total liabilities | 176,642 | 148,410 | ||||||
Commitments and contingencies (Note 18) | 0 | 0 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 0ne issued | 0— | 0— | ||||||
Common stock, $0.0001 par value; 400,000,000 shares authorized; 129,011,789 and 128,460,381 shares issued; 128,283,241 and 127,731,833 shares outstanding at June 30, 2021 and December 31, 2020, respectively. | 13 | 13 | ||||||
Additional paid-in capital | 299,038 | 296,830 | ||||||
Accumulated deficit | (120,129 | ) | (150,759 | ) | ||||
Total stockholders’ equity | 178,922 | 146,084 | ||||||
Total liabilities and stockholders’ equity | $ | 355,564 | $ | 294,494 | ||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net revenue | $ | 68,960 | $ | 64,948 | $ | 130,692 | $ | 122,071 | ||||||||
Cost of goods sold | 20,042 | 19,446 | 38,835 | 36,426 | ||||||||||||
Gross profit | 48,918 | 45,502 | 91,857 | 85,645 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 46,502 | 48,957 | 99,115 | 97,850 | ||||||||||||
Research and development | 4,668 | 3,864 | 10,078 | 7,235 | ||||||||||||
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Total operating expenses | 51,170 | 52,821 | 109,193 | 105,085 | ||||||||||||
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Loss from operations | (2,252 | ) | (7,319 | ) | (17,336 | ) | (19,440 | ) | ||||||||
Other expense, net: | ||||||||||||||||
Interest expense, net | (2,912 | ) | (2,187 | ) | (5,422 | ) | (3,965 | ) | ||||||||
Loss on the extinguishment of debt | — | — | — | (1,862 | ) | |||||||||||
Gain on settlement of deferred acquisition consideration | — | — | 1,295 | — | ||||||||||||
Other income (expense), net | 25 | (120 | ) | 46 | 12 | |||||||||||
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Total other expense, net | (2,887 | ) | (2,307 | ) | (4,081 | ) | (5,815 | ) | ||||||||
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Net loss before income taxes | (5,139 | ) | (9,626 | ) | (21,417 | ) | (25,255 | ) | ||||||||
Income tax expense | (27 | ) | (23 | ) | (62 | ) | (60 | ) | ||||||||
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Net loss | $ | (5,166 | ) | $ | (9,649 | ) | $ | (21,479 | ) | $ | (25,315 | ) | ||||
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Net loss per share —basic and diluted | $ | (0.05 | ) | $ | (0.11 | ) | $ | (0.21 | ) | $ | (0.28 | ) | ||||
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Weighted-average common shares outstanding—basic and diluted | 104,714,725 | 90,647,352 | 104,600,825 | 90,625,850 | ||||||||||||
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net revenue | $ | 123,196 | $ | 68,960 | $ | 225,748 | $ | 130,692 | ||||||||
Cost of goods sold | 29,940 | 20,042 | 55,435 | 38,835 | ||||||||||||
Gross profit | 93,256 | 48,918 | 170,313 | 91,857 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 62,349 | 46,502 | 120,581 | 99,115 | ||||||||||||
Research and development | 7,320 | 4,668 | 13,529 | 10,078 | ||||||||||||
Total operating expenses | 69,669 | 51,170 | 134,110 | 109,193 | ||||||||||||
Income (loss) from operations | 23,587 | (2,252 | ) | 36,203 | (17,336 | ) | ||||||||||
Other expense, net: | ||||||||||||||||
Interest expense, net | (2,431 | ) | (2,912 | ) | (4,901 | ) | (5,422 | ) | ||||||||
Gain on settlement of deferred acquisition consideration | — | — | — | 1,295 | ||||||||||||
Other income, net | 18 | 25 | 15 | 46 | ||||||||||||
Total other expense, net | (2,413 | ) | (2,887 | ) | (4,886 | ) | (4,081 | ) | ||||||||
Net income (loss) before income taxes | 21,174 | (5,139 | ) | 31,317 | (21,417 | ) | ||||||||||
Income tax expense | (487 | ) | (27 | ) | (687 | ) | (62 | ) | ||||||||
Net income (loss) | $ | 20,687 | $ | (5,166 | ) | $ | 30,630 | $ | (21,479 | ) | ||||||
Net income (loss), per share: | ||||||||||||||||
Basic | $ | 0.16 | $ | (0.05 | ) | $ | 0.24 | $ | (0.21 | ) | ||||||
Diluted | $ | 0.15 | $ | (0.05 | ) | $ | 0.23 | $ | (0.21 | ) | ||||||
Weighted-average common shares outstanding | ||||||||||||||||
Basic | 128,235,224 | 104,714,725 | 128,053,654 | 104,600,825 | ||||||||||||
Diluted | 133,988,413 | 104,714,725 | 133,721,191 | 104,600,825 | ||||||||||||
Three and Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||||
Redeemable | Additional | Total Organogenesis | ||||||||||||||||||||||||||
Common Stock | Common Stock | Paid-in | Accumulated | Holdings Inc. | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Stockholders’ Equity | ||||||||||||||||||||||
Balance as of March 31, 2020 | — | $ | — | 105,360,015 | $ | 11 | $ | 227,604 | $ | (187,320 | ) | $ | 40,295 | |||||||||||||||
Exercise of stock options | — | — | 57,153 | — | 152 | — | 152 | |||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 469 | — | 469 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (5,166 | ) | (5,166 | ) | |||||||||||||||||||
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Balance as of June 30, 2020 | — | $ | — | 105,417,168 | $ | 11 | $ | 228,225 | $ | (192,486 | ) | $ | 35,750 | |||||||||||||||
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Balance as of December 31, 2019 | — | $ | — | 104,870,886 | $ | 10 | $ | 226,580 | $ | (171,007 | ) | $ | 55,583 | |||||||||||||||
Exercise of stock options | — | — | 546,282 | 1 | 967 | — | 968 | |||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 678 | — | 678 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (21,479 | ) | (21,479 | ) | |||||||||||||||||||
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Balance as of June 30, 2020 | — | $ | — | 105,417,168 | $ | 11 | $ | 228,225 | $ | (192,486 | ) | $ | 35,750 | |||||||||||||||
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Three and Six Months Ended June 30, 2019 | ||||||||||||||||||||||||||||
Redeemable | Additional | Total Organogenesis | ||||||||||||||||||||||||||
Common Stock | Common Stock | Paid-in | Accumulated | Holdings Inc. | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Stockholders’ Equity | ||||||||||||||||||||||
Balance as of March 31, 2019 | — | $ | — | 91,316,039 | $ | 9 | $ | 178,124 | $ | (145,574 | ) | $ | 32,559 | |||||||||||||||
Exercise of stock options | — | — | 26,683 | — | 54 | — | 54 | |||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 234 | — | 234 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (9,649 | ) | (9,649 | ) | |||||||||||||||||||
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Balance as of June 30, 2019 | — | $ | — | 91,342,722 | $ | 9 | $ | 178,412 | $ | (155,223 | ) | $ | 23,198 | |||||||||||||||
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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 | |||||||||||||||||||||
Exercise of stock options | — | — | 26,683 | — | 54 | — | 54 | |||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 458 | — | 458 | |||||||||||||||||||||
Redemption of redeemable common stock placed into treasury | (728,548 | ) | — | — | — | — | — | — | ||||||||||||||||||||
Net loss | — | — | — | — | — | (25,315 | ) | (25,315 | ) | |||||||||||||||||||
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Balance as of June 30, 2019 | — | $ | — | 91,342,722 | $ | 9 | $ | 178,412 | $ | (155,223 | ) | $ | 23,198 | |||||||||||||||
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Three and Six Months Ended June 30, 2021 | |||||||||||||||||||||||
Additional | |||||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Total | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | Stockholders’ Equity | |||||||||||||||||||
Balance as of March 31, 2021 | 128,102,255 | $ | 13 | $ | 298,095 | $ | (140,816 | ) | $ | 157,292 | |||||||||||||
Exercise of stock options | 78,163 | — | 221 | — | 221 | ||||||||||||||||||
Vesting of RSUs, net of shares surrendered to pay taxes | 102,823 | — | (320 | ) | (320 | ) | |||||||||||||||||
Stock-based compensation expense | �� | — | — | 1,042 | — | 1,042 | |||||||||||||||||
Net income | — | — | — | 20,687 | 20,687 | ||||||||||||||||||
Balance as of June 30, 2021 | 128,283,241 | $ | 13 | $ | 299,038 | $ | (120,129 | ) | $ | 178,922 | |||||||||||||
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 | 363,507 | — | 1,205 | — | 1,205 | ||||||||||||||||||
Vesting of RSUs, net of shares surrendered to pay taxes | 187,901 | — | (737 | ) | (737 | ) | |||||||||||||||||
Stock-based compensation expense | — | — | 1,740 | — | 1,740 | ||||||||||||||||||
Net income | — | — | — | 30,630 | 30,630 | ||||||||||||||||||
Balance as of June 30, 2021 | 128,283,241 | $ | 13 | $ | 299,038 | $ | (120,129 | ) | $ | 178,922 | |||||||||||||
Three and Six Months Ended June 30, 2020 | |||||||||||||||||||||||
Additional | |||||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Total | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | Stockholders’ Equity | |||||||||||||||||||
Balance as of March 31, 2020 (as reported) | 105,360,015 | $ | 11 | $ | 227,604 | $ | (187,320 | ) | $ | 40,295 | |||||||||||||
Adjustment due to Private Warrant reclassification | — | — | (2,299 | ) | 2,299 | — | |||||||||||||||||
Balance as of March 31, 2020 (as adjusted) | 105,360,015 | 11 | 225,305 | (185,021 | ) | 40,295 | |||||||||||||||||
Exercise of stock options | 57,153 | — | 152 | — | 152 | ||||||||||||||||||
Stock-based compensation expense | — | — | 469 | — | 469 | ||||||||||||||||||
Net loss | — | — | — | (5,166 | ) | (5,166 | ) | ||||||||||||||||
Balance as of June 30, 2020 (as adjusted) | 105,417,168 | $ | 11 | $ | 225,926 | $ | (190,187 | ) | $ | 35,750 | |||||||||||||
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 | 546,282 | 1 | 967 | — | 968 | ||||||||||||||||||
Stock-based compensation expense | — | — | 678 | — | 678 | ||||||||||||||||||
Net loss | — | — | — | (21,479 | ) | (21,479 | ) | ||||||||||||||||
Balance as of June 30, 2020 (as adjusted) | 105,417,168 | $ | 11 | $ | 225,926 | $ | (190,187 | ) | $ | 35,750 | |||||||||||||
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (21,479 | ) | $ | (25,315 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 1,793 | 1,761 | ||||||
Amortization of intangible assets | 1,633 | 2,997 | ||||||
Non-cash interest expense | 103 | 154 | ||||||
Deferred interest expense | 1,022 | 536 | ||||||
Deferred rent expense | 64 | 326 | ||||||
Gain on settlement of deferred acquisition consideration | (1,295 | ) | — | |||||
Provision recorded for sales returns and doubtful accounts | 970 | 27 | ||||||
Loss on disposal of property and equipment | 201 | — | ||||||
Adjustment for excess and obsolete inventories | 1,709 | 523 | ||||||
Stock-based compensation | 678 | 458 | ||||||
Loss on extinguishment of debt | — | 1,862 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (5,727 | ) | 723 | |||||
Inventory | (7,353 | ) | (6,087 | ) | ||||
Prepaid expenses and other current assets | (1,302 | ) | (785 | ) | ||||
Accounts payable | 235 | 1,473 | ||||||
Accrued expenses and other current liabilities | 1,266 | 122 | ||||||
Other liabilities | 864 | (449 | ) | |||||
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Net cash used in operating activities | (26,618 | ) | (21,674 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (6,411 | ) | (1,251 | ) | ||||
Proceeds from the repayment of notes receivable from related parties | 293 | — | ||||||
Acquisition of intangible asset | — | (250 | ) | |||||
Net cash used in investing activities | (6,118 | ) | (1,501 | ) | ||||
Cash flows from financing activities: | ||||||||
Line of credit borrowings | 5,869 | 7,000 | ||||||
Proceeds from term loan | 10,000 | 40,000 | ||||||
Repayment of notes payable | — | (17,585 | ) | |||||
Proceeds from the exercise of stock options | 968 | 54 | ||||||
Proceeds from the exercise of common stock warrants | — | 628 | ||||||
Redemption of redeemable common stock placed into treasury | — | (6,762 | ) | |||||
Principal repayments of capital lease obligations | (1,149 | ) | (557 | ) | ||||
Payment of deferred acquisition consideration | (2,568 | ) | — | |||||
Payment of debt issuance costs | — | (849 | ) | |||||
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Net cash provided by financing activities | 13,120 | 21,929 | ||||||
Change in cash and restricted cash | (19,616 | ) | (1,246 | ) | ||||
Cash and restricted cash, beginning of period | 60,370 | 21,405 | ||||||
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Cash and restricted cash, end of period | $ | 40,754 | $ | 20,159 | ||||
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Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 4,626 | $ | 3,890 | ||||
Cash paid for income taxes | $ | — | $ | 67 | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Debt issuance costs included in accounts payable | $ | — | $ | 75 | ||||
Purchases of property and equipment included in accounts payable and accrued expenses | $ | 4,692 | $ | 1,638 | ||||
Amounts due related to acquisition of intangible assets included in accrued expenses and other liabilities | $ | — | $ | 500 |
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 30,630 | $ | (21,479 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Depreciation | 2,073 | 1,793 | ||||||
Amortization of intangible assets | 2,486 | 1,633 | ||||||
Amortization of operating lease right-of-use | 2,562 | — | ||||||
Non-cash interest expense | 143 | 103 | ||||||
Deferred interest expense | 1,036 | 1,022 | ||||||
Deferred rent expense | — | 64 | ||||||
Gain on settlement of deferred acquisition consideration | — | (1,295 | ) | |||||
Provision recorded for sales returns and doubtful accounts | 2,158 | 970 | ||||||
Loss on disposal of property and equipment | 239 | 201 | ||||||
Adjustment for excess and obsolete inventories | 4,678 | 1,709 | ||||||
Stock-based compensation | 1,740 | 678 | ||||||
Change in fair value of Earnout liability | (3,058 | ) | — | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (22,122 | ) | (5,727 | ) | ||||
Inventory | (4,984 | ) | (7,353 | ) | ||||
Prepaid expenses and other current assets | (1,649 | ) | (1,302 | ) | ||||
Operating leases | (2,774 | ) | — | |||||
Accounts payable | 716 | 235 | ||||||
Accrued expenses and other current liabilities | 2,646 | 1,266 | ||||||
Other liabilities | (340 | ) | 864 | |||||
Net cash provided by (used in) operating activities | 16,180 | (26,618 | ) | |||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (9,290 | ) | (6,411 | ) | ||||
Proceeds from the repayment of notes receivable from related parties | — | 293 | ||||||
Net cash used in investing activities | (9,290 | ) | (6,118 | ) | ||||
Cash flows from financing activities: | ||||||||
Line of credit borrowings | — | 5,869 | ||||||
Proceeds from term loan | — | 10,000 | ||||||
Payments of withholding taxes in connection with RSUs vesting | (737 | ) | — | |||||
Proceeds from the exercise of stock options | 1,205 | 968 | ||||||
Principal repayments of finance lease obligations | (1,374 | ) | (1,149 | ) | ||||
Payment of deferred acquisition consideration | (483 | ) | (2,568 | ) | ||||
Net cash (used in) provided by financing activities | (1,389 | ) | 13,120 | |||||
Change in cash and restricted cash | 5,501 | (19,616 | ) | |||||
Cash and restricted cash, beginning of period | 84,806 | 60,370 | ||||||
Cash and restricted cash, end of period | $ | 90,307 | $ | 40,754 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 3,836 | $ | 4,626 | ||||
Cash paid for income taxes | $ | 582 | $ | — | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Purchases of property and equipment included in accounts payable and accrued expenses | $ | 4,349 | $ | 4,692 | ||||
Right-of-use | $ | 29,092 | $ | — |
Three Months Ended June 30, 2020
Report, other than as it related to the recently adopted accounting pronouncement disclosed below.
In February 2016, the FASB issued 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 issued ASU 2018-10, Codification Improvements to Topic 842, Leases, which provides narrow amendments to clarify how to apply certain aspects of ASU 2016-02, and ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides adopters an additional transition method by allowing entities to initially apply ASU 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.
Three Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Advanced Wound Care | $ | 59,731 | $ | 55,211 | ||||
Surgical & Sports Medicine | 9,229 | 9,737 | ||||||
|
|
|
| |||||
Total net revenue | $ | 68,960 | $ | 64,948 | ||||
|
|
|
|
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Advanced Wound Care | $ | 111,019 | $ | 103,055 | ||||
Surgical & Sports Medicine | 19,673 | 19,016 | ||||||
|
|
|
| |||||
Total net revenue | $ | 130,692 | $ | 122,071 | ||||
|
|
|
|
For the three months ended June 30, 2020 and 2019, net PuraPly revenue totaled $28,519 and $29,691, respectively. For the six months ended June 30, 2020 and 2019, net PuraPly revenue totaled $61,024 and $55,138, respectively.
Three Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Advanced Wound Care | $ | 111,436 | $ | 59,731 | ||||
Surgical & Sports Medicine | 11,760 | 9,229 | ||||||
Total net revenue | $ | 123,196 | $ | 68,960 | ||||
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Advanced Wound Care | $ | 202,144 | $ | 111,019 | ||||
Surgical & Sports Medicine | 23,604 | 19,673 | ||||||
Total net revenue | $ | 225,748 | $ | 130,692 | ||||
4.
Fair Value Measurements as of June 30, 2021 Using: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Earnout liability | $ | — | $ | — | $ | 927 | $ | 927 | ||||||||
$ | — | $ | — | $ | 927 | $ | 927 | |||||||||
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 | ||||
Balance as of December 31, 2020 | $ | 3,985 | ||
Change in fair value | (3,058 | ) | ||
Balance as of June 30, 2021 | $ | 927 | ||
June 30, | December 31, | |||||||
2020 | 2019 | |||||||
Accounts receivable | $ | 47,952 | $ | 42,408 | ||||
Less — allowance for sales returns and doubtful accounts | (3,928 | ) | (3,049 | ) | ||||
|
|
|
| |||||
$ | 44,024 | $ | 39,359 | |||||
|
|
|
|
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
Accounts receivable | $ | 83,880 | $ | 61,792 | ||||
Less — allowance for sales returns and doubtful accounts | (7,113 | ) | (4,988 | ) | ||||
$ | 76,767 | $ | 56,804 | |||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Balance at beginning of period | $ | 3,204 | $ | 3,292 | $ | 3,049 | $ | 3,420 | ||||||||
Additions (reductions) | 753 | 103 | 970 | 27 | ||||||||||||
Write-offs | (29 | ) | (374 | ) | (91 | ) | (426 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at end of period | $ | 3,928 | $ | 3,021 | $ | 3,928 | $ | 3,021 | ||||||||
|
|
|
|
|
|
|
|
5.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Balance at beginning of period | $ | 6,076 | $ | 3,204 | $ | 4,988 | $ | 3,049 | ||||||||
Additions | 1,056 | 753 | 2,158 | 970 | ||||||||||||
Write-offs | (19 | ) | (29 | ) | (33 | ) | (91 | ) | ||||||||
Balance at end of period | $ | 7,113 | $ | 3,928 | $ | 7,113 | $ | 3,928 | ||||||||
June 30, | December 31, | |||||||
2020 | 2019 | |||||||
Raw materials | $ | 9,591 | $ | 9,178 | ||||
Work in process | 1,559 | 781 | ||||||
Finished goods | 17,412 | 12,959 | ||||||
|
|
|
| |||||
$ | 28,562 | $ | 22,918 | |||||
|
|
|
|
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
Raw materials | $ | 10,144 | $ | 10,075 | ||||
Work in process | 1,732 | 1,305 | ||||||
Finished goods | 16,230 | 16,419 | ||||||
$ | 28,106 | $ | 27,799 | |||||
6.
June 30, 2021 | December 31, 2020 | |||||||
Subscriptions | $ | 2,211 | $ | 2,013 | ||||
Conferences and marketing expenses | 921 | 63 | ||||||
Deposits | 1,796 | 1,438 | ||||||
Reimbursement of offering expenses | 0 | 1,009 | ||||||
Other | 1,655 | 412 | ||||||
$ | 6,583 | $ | 4,935 | |||||
June 30, | December 31, | |||||||
2020 | 2019 | |||||||
Leasehold improvements | $ | 38,807 | $ | 36,344 | ||||
Furniture, computers and equipment | 47,352 | 46,430 | ||||||
|
|
|
| |||||
86,159 | 82,774 | |||||||
Accumulated depreciation and amortization | (67,604 | ) | (65,812 | ) | ||||
Construction in progress | 34,478 | 30,222 | ||||||
|
|
|
| |||||
$ | 53,033 | $ | 47,184 | |||||
|
|
|
|
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
Leasehold improvements | $ | 48,503 | $ | 39,574 | ||||
Furniture, computers and equipment | 50,221 | 48,236 | ||||||
98,724 | 87,810 | |||||||
Accumulated depreciation and amortization | (71,593 | ) | (69,521 | ) | ||||
Construction in progress | 42,608 | 41,779 | ||||||
$ | 69,739 | $ | 60,068 | |||||
7.
In April 2019, the Company purchased $750 of intangibles related to patent and know-how which were recorded within the developed technology category. The Company paid $250 at the time of the transaction. The remaining $500 is being paid over two years after the transaction closed and is recorded in accrued expenses and other current liabilities and other liabilities on the consolidated balance sheets. 2020.
Original | Accumulated | Net Book | ||||||||||
Cost | Amortization | Value | ||||||||||
Developed technology | $ | 30,570 | $ | (12,748 | ) | $ | 17,822 | |||||
Trade names and trademarks | 2,000 | (766 | ) | 1,234 | ||||||||
Non-compete agreements | 260 | (152 | ) | 108 | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 32,830 | $ | (13,666 | ) | $ | 19,164 | |||||
|
|
|
|
|
|
2021:
Original | Accumulated | Net Book | ||||||||||
Cost | Amortization | Value | ||||||||||
Developed technology | $ | 32,620 | $ | (16,020 | ) | $ | 16,600 | |||||
Trade names and trademarks | 2,080 | (1,056 | ) | 1,024 | ||||||||
Customer relationships | 10,690 | (846 | ) | 9,844 | ||||||||
Non-compete agreements | 1,010 | (342 | ) | 668 | ||||||||
Total | $ | 46,400 | $ | (18,264 | ) | $ | 28,136 | |||||
Original | Accumulated | Net Book | ||||||||||
Cost | Amortization | Value | ||||||||||
Developed technology | $ | 30,570 | $ | (11,266 | ) | $ | 19,304 | |||||
Trade names and trademarks | 2,000 | (650 | ) | 1,350 | ||||||||
Non-compete agreements | 260 | (117 | ) | 143 | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 32,830 | $ | (12,033 | ) | $ | 20,797 | |||||
|
|
|
|
|
|
2020:
Original | Accumulated | Net Book | ||||||||||
Cost | Amortization | Value | ||||||||||
Developed technology | $ | 32,620 | $ | (14,330 | ) | $ | 18,290 | |||||
Trade names and trademarks | 2,080 | (906 | ) | 1,174 | ||||||||
Customer relationship | 10,690 | (312 | ) | 10,378 | ||||||||
Non-compete agreements | 1,010 | (230 | ) | 780 | ||||||||
Total | $ | 46,400 | $ | (15,778 | ) | $ | 30,622 | |||||
8.
June 30, | December 31, | |||||||
2020 | 2019 | |||||||
Accrued personnel costs | $ | 19,062 | $ | 17,640 | ||||
Other | 5,626 | 5,810 | ||||||
|
|
|
| |||||
$ | 24,688 | $ | 23,450 | |||||
|
|
|
|
9.
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
Personnel costs | $ | 22,024 | $ | 18,943 | ||||
Royalties | 2,718 | 2,971 | ||||||
Other | 1,876 | 2,059 | ||||||
$ | 26,618 | $ | 23,973 | |||||
Employee | Facility | |||||||
Liability balance as of March 31, 2021 | $ | 1,528 | $ | 17 | ||||
Expenses | 853 | 86 | ||||||
Payments | 0 | (74 | ) | |||||
Liability balance as of June 30, 2021 | $ | 2,381 | $ | 29 | ||||
Employee | Facility | |||||||
Liability balance as of December 31, 2020 | $ | 618 | $ | 0 | ||||
Expenses | 1,763 | 103 | ||||||
Payments | 0 | (74 | ) | |||||
Liability balance as of June 30, 2021 | $ | 2,381 | $ | 29 | ||||
June 30, | December 31, | |||||||
2020 | 2019 | |||||||
Line of credit | $ | 39,353 | $ | 33,484 | ||||
|
|
|
| |||||
Term loan | 60,000 | 50,000 | ||||||
Less debt discount and debt issuance cost | (379 | ) | (366 | ) | ||||
Less current maturities | (6,667 | ) | — | |||||
|
|
|
| |||||
Term loan, net of debt discount, debt issuance cost and current maturities | $ | 52,954 | $ | 49,634 | ||||
|
|
|
|
June 30, 2021 | December 31, 2020 | |||||||
Line of credit | $ | 10,000 | $ | 10,000 | ||||
Term loan | 60,000 | 60,000 | ||||||
Less debt discount and debt issuance cost | (210 | ) | (290 | ) | ||||
Less current maturities | (22,500 | ) | (16,666 | ) | ||||
Term loan, net of debt discount, debt issuance cost and current maturities | $ | 37,290 | $ | 43,044 | ||||
As of June 30, 2020,2021, the Company had outstanding borrowings of $60,000 under the Term Loan Facility and $39,353$10,000 under the Revolving Facility with $0up 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 $1,225$2,416 and $681$1,858 as of June 30, 20202021 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.
2020 | $ | — | ||
2021 | 16,667 | |||
2022 | 20,000 | |||
2023 | 20,000 | |||
2024 | 42,686 | |||
|
| |||
Total | $ | 99,353 | ||
|
|
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
2021 | $ | 11,250 | ||
2022 | 22,500 | |||
2023 | 22,500 | |||
2024 | 13,750 | |||
Total | $ | 70,000 | ||
10.
As of June 30, 20202021 and December 31, 2019,2020, the Company reserved the following shares of Class A common stock for future issuance:
June 30, | December 31, | |||||||
2020 | 2019 | |||||||
Shares reserved for issuance for outstanding options | 7,161,316 | 6,503,646 | ||||||
Shares reserved for issuance for outstanding restricted stock units | 858,095 | — | ||||||
Shares reserved for issuance for future grants | 6,612,178 | 9,008,996 | ||||||
|
|
|
| |||||
Total shares of authorized common stock reserved for future issuance | 14,631,589 | 15,512,642 | ||||||
|
|
|
|
11.
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
Shares reserved for issuance for outstanding options | 7,070,008 | 6,425,040 | ||||||
Shares reserved for issuance for outstanding restricted stock units | 787,023 | 806,048 | ||||||
Shares reserved for issuance for future grants | 5,642,864 | 6,832,649 | ||||||
Total shares of authorized common stock reserved for future issuance | 13,499,895 | 14,063,737 | ||||||
Following the closing of the Avista Merger, the 2003 Plan is administered by the Company’s Board of Directors.
(RSUs)
Number of Shares | Weighted Average Grant Date Fair Value | |||||||
Unvested at December 31, 2019 | — | $ | — | |||||
Granted | 873,595 | 3.81 | ||||||
Vested | — | — | ||||||
Canceled/Forfeited | (15,500 | ) | 4.04 | |||||
|
|
|
| |||||
Unvested at June 30, 2020 | 858,095 | $ | 3.81 | |||||
|
|
|
|
Number of Shares | Weighted Average Grant Date Fair Value | |||||||
Unvested at December 31, 2020 | 806,048 | $ | 3.82 | |||||
Granted | 290,027 | 14.45 | ||||||
Vested | (252,743 | ) | 4.20 | |||||
Canceled/Forfeited | (56,309 | ) | 8.29 | |||||
Unvested at June 30, 2021 | 787,023 | $ | 7.30 | |||||
June 30, 2021 | June 30, 2020 | |||||||
Risk-free interest rate | 0.82 | % | 0.46 | % | ||||
Expected term (in years) | 6.21 | 6.22 | ||||||
Expected volatility | 39.30 | % | 37.41 | % | ||||
Expected dividend yield | 0.0 | % | 0.0 | % | ||||
Exercise price | $ | 13.54 | $ | 4.04 | ||||
Underlying stock price | $ | 13.54 | $ | 3.36 |
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 | 1,538,723 | 4.04 | ||||||||||||||
Exercised | (546,282 | ) | 1.77 | 1,552 | ||||||||||||
Canceled / forfeited | (334,771 | ) | 3.48 | |||||||||||||
|
| |||||||||||||||
Outstanding as of June 30, 2020 | 7,837,306 | 2.34 | 5.90 | 12,933 | ||||||||||||
|
| |||||||||||||||
Options exercisable as of June 30, 2020 | 5,492,502 | 1.59 | 4.44 | 12,694 | ||||||||||||
|
| |||||||||||||||
Options vested or expected to vest as of June 30, 2020 | 7,326,832 | $ | 2.21 | 5.65 | $ | 12,904 | ||||||||||
|
|
2020:
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||||||
Outstanding as of December 31, 2020 | 6,620,318 | $ | 2.33 | 5.22 | $ | 34,458 | ||||||||||
Granted | 1,037,099 | 13.54 | ||||||||||||||
Exercised | (558,785 | ) | 2.15 | 5,526 | ||||||||||||
Canceled / forfeited | (28,624 | ) | 9.54 | |||||||||||||
Outstanding as of June 30, 2021 | 7,070,008 | 3.95 | 5.56 | 89,543 | ||||||||||||
Options exercisable as of June 30, 2021 | 4,709,080 | 1.83 | 3.91 | 69,665 | ||||||||||||
Options vested or expected to vest as of June 30, 2021 | 6,557,753 | $ | 3.57 | 5.28 | $ | 85,578 | ||||||||||
As of June 30, 2020, there were
12.
The Company’s (EPS)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Numerator: | ||||||||||||||||
Net Income (loss) | $ | 20,687 | $ | (5,166 | ) | $ | 30,630 | $ | (21,479 | ) | ||||||
Denominator: | ||||||||||||||||
Weighted average common shares outstanding—basic | 128,235,224 | 104,714,725 | 128,053,654 | 104,600,825 | ||||||||||||
Dilutive effect of restricted stock units | 508,015 | — | 517,837 | — | ||||||||||||
Dilutive effect of options | 5,245,174 | — | 5,149,700 | — | ||||||||||||
Weighted-average common shares outstanding—diluted | 133,988,413 | 104,714,725 | 133,721,191 | 104,600,825 | ||||||||||||
Earnings (loss) per share—basic | $ | 0.16 | $ | (0.05 | ) | $ | 0.24 | $ | (0.21 | ) | ||||||
Earnings (loss) per share—diluted | $ | 0.15 | $ | (0.05 | ) | $ | 0.23 | $ | (0.21 | ) | ||||||
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Options to purchase common stock | 7,837,306 | 7,328,352 | ||||||
Restricted stock units | 858,095 | — | ||||||
Warrants to purchase common stock | — | 17,678,074 | ||||||
|
|
|
| |||||
8,695,401 | 25,006,426 | |||||||
|
|
|
|
13. Commitments and Contingencies
Capitalized Leases
lease termination date on December 31, 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.
In addition to the capital leases with affiliates discussed above, the Company also has certain insignificant capital leases with non-affiliates. Future obligations under capital leases in the aggregate and for the next five years are
2020 (remaining 6 months) | $ | 2,396 | ||
2021 | 4,786 | |||
2022 | 4,945 | |||
2023 | — | |||
2024 | 9,839 | |||
|
| |||
21,966 | ||||
Less amount representing interest | (5,628 | ) | ||
|
| |||
Present value of minimum lease payments | 16,338 | |||
Less current maturities | (3,327 | ) | ||
|
| |||
Long-term portion | $ | 13,011 | ||
|
|
Operating Leases
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.
In March 2014, in conjunction with the acquisition
Classification | Three Ended June 30, | Six Months Ended June 30, 2021 | ||||||||
Finance lease | ||||||||||
Amortization of right-of-use | COGS and SG&A | $ | 304 | $ | 603 | |||||
Interest on lease liabilities | Interest Expense | 312 | 661 | |||||||
Total Finance lease cost | 616 | 1,264 | ||||||||
Operating lease cost | COGS, R&D, SG&A | 1,735 | 3,015 | |||||||
Short-term lease cost | COGS, R&D, SG&A | 699 | 1,414 | |||||||
Variable lease cost | COGS, R&D, SG&A | 1,086 | 2,449 | |||||||
Total lease cost | $ | 4,136 | $ | 8,142 | ||||||
June 30, 2021 | January 1, 2021 | |||||||
Property and equipment, gross | $ | 22,989 | $ | 22,989 | ||||
Accumulated depreciation | (15,578 | ) | (14,974 | ) | ||||
Property and equipment, net | $ | 7,411 | $ | 8,015 | ||||
Current portion of finance lease obligations | $ | 4,134 | $ | 3,619 | ||||
Finance lease long-term obligations | 9,553 | 11,442 | ||||||
Total finance lease liabilities | $ | 13,687 | $ | 15,061 | ||||
Six Months Ended June 30, 2021 | ||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows for operating leases | 3,228 | |||
Operating cash flows for finance leases | 1,022 | |||
Financing cash flows for finance leases | 1,374 | |||
Right-of-use | ||||
Operating leases | 13,525 | |||
Finance leases | — | |||
Right-of-use | ||||
Operating leases | 15,567 | |||
Finance leases | — |
June 30, 2021 | ||||
Weighted-average remaining lease term | ||||
Finance leases | 1.49 | |||
Operating leases | 8.27 | |||
June 30, 2021 | ||||
Weighted-average discount rate | ||||
Finance leases | 19.69 | % | ||
Operating leases | 4.19 | % |
Operating | Finance leases | |||||||
2021 (remaining 6 months) | $ | 3,319 | $ | 2,390 | ||||
2022 | 4,507 | 4,945 | ||||||
2023 | 3,845 | 0 | ||||||
2024 | 3,177 | 9,782 | ||||||
2025 | 3,164 | 0 | ||||||
Thereafter | 16,341 | 0 | ||||||
Total lease payments | 34,353 | 17,117 | ||||||
Less: interest | (5,625 | ) | (3,430 | ) | ||||
Total lease liabilities | $ | 28,728 | $ | 13,687 | ||||
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 $1,837 and $1,603ASC 840, for the three months ended June 30, 2020 and 2019, respectively and were $3,351 and $2,925 for the six months ended June 30, 2020, the Company recorded lease expense of $1,837 and 2019, respectively.
Future minimum lease payments due under noncancelable$3,351, respectively for operating lease agreements as of June 30, 2020 are as follows:
2020 (remaining 6 months) | $ | 2,884 | ||
2021 | 5,627 | |||
2022 | 3,094 | |||
2023 | 2,361 | |||
2024 | 1,224 | |||
Thereafter | 6,899 | |||
|
| |||
$ | 22,089 | |||
|
|
14.operations.
Capital
As of June 30, 2020 and December 31, 2019,2020, 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 principal$100 and part of the interest receivable under the Employer Loans were fully reserved with net interest receivable of $302 and $556 as of June 30, 2020 and December 31, 2019, respectively, included in the notes receivable from related parties balance in the consolidated balance sheets. The decrease in the interest receivable is due to a partial payment in June 2020 by one of the former executives. Interest income related to these notes was $20 and $20 for$334, respectively. During the three months ended March 31, 2021, this former executive paid off the outstanding principal balance of his Employer Loans and the related interest receivable. As a result, the Company recorded $179 as a recovery of the previously reserved related party receivables within selling, general and administrative expenses on the consolidated statement of operations for the six months ended June 30, 20202021. The $334 of the repaid principal balance of the Option Loans was recorded to eq
15.
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.
force other than ReNu and NuCel which we stopped marketing after May 31, 2021. Refer to further discussion in section “End of Enforcement Grace Period for ReNu and NuCel” below.
On March 11, 2020,
While the COVID-19 pandemic has not materially adversely affected our financial results and business operations through the second quarter ended June 30, 2020, the pandemic may pose significant risks to our business that we are not able to fully evaluate or even to foresee at this time. It is too early to quantify the impact COVID-19 will have on our 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 continue to manufacture certain of our products, (v) the reliability of our supply chain and (vi) our ability to achieve the financial covenants required under the 2019 Credit Agreement. Accordingly, management continues to evaluate the Company’s liquidity position, communicate with and monitor the actions of our customers and suppliers, and review our near-term financial performance as we manage the Company through this period of uncertainty. Please see “Item 1A. Risk Factors”
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.
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 effectivefrom October 1, 2018.2018 through September 30, 2020. As a result, effective October 1, 2018,during this period, 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 retainWith the expiration of pass-through reimbursement status until September 30, 2020. Afteron September 30, 2020, we expectanticipated that our net revenue from PuraPly and PuraPly AM tomight decrease as they transitiontransitioned to the bundled payment structure. WhileAs of June 30, 2021, we expect our net revenue from Non-PuraPly products will continue to increase, we cannot be certain that anyhave not observed such revenue increase will fully offset the revenuea decrease from PuraPly products. We are not able to estimate the extent of the changes in revenueprimarily due to the uncertainties related to the impact from the COVID-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.
We expect our cost of goods sold to increase due primarily to increased sales volumes.
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 six months ended June 30, 2019.
statements by applying
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net revenue | $ | 68,960 | $ | 64,948 | $ | 130,692 | $ | 122,071 | ||||||||
Cost of goods sold | 20,042 | 19,446 | 38,835 | 36,426 | ||||||||||||
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|
|
| |||||||||
Gross profit | 48,918 | 45,502 | 91,857 | 85,645 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 46,502 | 48,957 | 99,115 | 97,850 | ||||||||||||
Research and development | 4,668 | 3,864 | 10,078 | 7,235 | ||||||||||||
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|
| |||||||||
Total operating expenses | 51,170 | 52,821 | 109,193 | 105,085 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Loss from operations | (2,252 | ) | (7,319 | ) | (17,336 | ) | (19,440 | ) | ||||||||
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|
|
|
|
|
| |||||||||
Other expense, net: | ||||||||||||||||
Interest expense, net | (2,912 | ) | (2,187 | ) | (5,422 | ) | (3,965 | ) | ||||||||
Loss on the extinguishment of debt | — | — | — | (1,862 | ) | |||||||||||
Gain on settlement of deferred acquisition consideration | — | — | 1,295 | — | ||||||||||||
Other income (expense), net | 25 | (120 | ) | 46 | 12 | |||||||||||
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|
|
|
|
|
|
| |||||||||
Total other expense, net | (2,887 | ) | (2,307 | ) | (4,081 | ) | (5,815 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net loss before income taxes | (5,139 | ) | (9,626 | ) | (21,417 | ) | (25,255 | ) | ||||||||
Income tax expense | (27 | ) | (23 | ) | (62 | ) | (60 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net loss | $ | (5,166 | ) | $ | (9,649 | ) | $ | (21,479 | ) | $ | (25,315 | ) | ||||
|
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|
|
|
|
|
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net revenue | $ | 123,196 | $ | 68,960 | $ | 225,748 | $ | 130,692 | ||||||||
Cost of goods sold | 29,940 | 20,042 | 55,435 | 38,835 | ||||||||||||
Gross profit | 93,256 | 48,918 | 170,313 | 91,857 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 62,349 | 46,502 | 120,581 | 99,115 | ||||||||||||
Research and development | 7,320 | 4,668 | 13,529 | 10,078 | ||||||||||||
Total operating expenses | 69,669 | 51,170 | 134,110 | 109,193 | ||||||||||||
Income (loss) from operations | 23,587 | (2,252 | ) | 36,203 | (17,336 | ) | ||||||||||
Other expense, net: | ||||||||||||||||
Interest expense, net | (2,431 | ) | (2,912 | ) | (4,901 | ) | (5,422 | ) | ||||||||
Gain on settlement of deferred acquisition consideration | — | — | — | 1,295 | ||||||||||||
Other income, net | 18 | 25 | 15 | 46 | ||||||||||||
Total other expense, net | (2,413 | ) | (2,887 | ) | (4,886 | ) | (4,081 | ) | ||||||||
Net income (loss) before income taxes | 21,174 | (5,139 | ) | 31,317 | (21,417 | ) | ||||||||||
Income tax expense | (487 | ) | (27 | ) | (687 | ) | (62 | ) | ||||||||
Net income (loss) | $ | 20,687 | $ | (5,166 | ) | $ | 30,630 | $ | (21,479 | ) | ||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Net loss | $ | (5,166 | ) | $ | (9,649 | ) | $ | (21,479 | ) | $ | (25,315 | ) | ||||
Interest expense, net | 2,912 | 2,187 | 5,422 | 3,965 | ||||||||||||
Income tax expense | 27 | 23 | 62 | 60 | ||||||||||||
Depreciation | 891 | 859 | 1,793 | 1,761 | ||||||||||||
Amortization | 816 | 1,499 | 1,633 | 2,997 | ||||||||||||
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|
|
|
|
|
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| |||||||||
EBITDA | (520 | ) | (5,081 | ) | (12,569 | ) | (16,532 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Stock-based compensation expense | 469 | 234 | 678 | 458 | ||||||||||||
Gain on settlement of deferred acquisition consideration (1) | — | — | (1,295 | ) | — | |||||||||||
Loss on extinguishment of debt (2) | — | — | — | 1,862 | ||||||||||||
Other costs and expenses (3) | 325 | — | 568 | — | ||||||||||||
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|
|
|
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| |||||||||
Adjusted EBITDA | $ | 274 | $ | (4,847 | ) | $ | (12,618 | ) | $ | (14,212 | ) | |||||
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|
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Net income (loss) | $ | 20,687 | $ | (5,166 | ) | $ | 30,630 | $ | (21,479 | ) | ||||||
Interest expense, net | 2,431 | 2,912 | 4,901 | 5,422 | ||||||||||||
Income tax expense | 487 | 27 | 687 | 62 | ||||||||||||
Depreciation | 1,063 | 891 | 2,073 | 1,793 | ||||||||||||
Amortization | 1,243 | 816 | 2,486 | 1,633 | ||||||||||||
EBITDA | 25,911 | (520 | ) | 40,777 | (12,569 | ) | ||||||||||
Stock-based compensation expense | 1,042 | 469 | 1,740 | 678 | ||||||||||||
Gain on settlement of deferred acquisition consideration (1) | — | — | — | (1,295 | ) | |||||||||||
Recovery of certain notes receivable from related parties (2) | — | — | (179 | ) | — | |||||||||||
Change in fair value of Earnout (3) | (2,762 | ) | — | (3,058 | ) | — | ||||||||||
Restructuring charge (4) | 939 | — | 1,866 | — | ||||||||||||
Transaction cost (5) | — | 325 | — | 568 | ||||||||||||
Cancellation fee (6) | — | — | — | 1,950 | ||||||||||||
Adjusted EBITDA | $ | 25,130 | $ | 274 | $ | 41,146 | $ | (10,668 | ) | |||||||
(1) |
Amount reflects the gain recognized related to the settlement of the deferred acquisition consideration dispute with the sellers of NuTech |
(2) |
Amount reflects the |
(3) |
Amounts reflect |
(4) | Amounts reflect employee retention and |
(5) | Amounts reflect the legal, advisory and other professional fees incurred 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”. |
2020
Three Months Ended June 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Advanced Wound Care | $ | 59,731 | $ | 55,211 | $ | 4,520 | 8 | % | ||||||||
Surgical & Sports Medicine | 9,229 | 9,737 | (508 | ) | -5 | % | ||||||||||
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| |||||||||
Net revenue | $ | 68,960 | $ | 64,948 | $ | 4,012 | 6 | % | ||||||||
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|
Six Months Ended June 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Advanced Wound Care | $ | 111,019 | $ | 103,055 | $ | 7,964 | 8 | % | ||||||||
Surgical & Sports Medicine | 19,673 | 19,016 | 657 | 3 | % | |||||||||||
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| |||||||||
Net revenue | $ | 130,692 | $ | 122,071 | $ | 8,621 | 7 | % | ||||||||
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|
Three Months Ended June 30, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Advanced Wound Care | $ | 111,436 | $ | 59,731 | $ | 51,705 | 87 | % | ||||||||
Surgical & Sports Medicine | 11,760 | 9,229 | 2,531 | 27 | % | |||||||||||
Net revenue | $ | 123,196 | $ | 68,960 | $ | 54,236 | 79 | % | ||||||||
Six Months Ended June 30, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Advanced Wound Care | $ | 202,144 | $ | 111,019 | $ | 91,125 | 82 | % | ||||||||
Surgical & Sports Medicine | 23,604 | 19,673 | 3,931 | 20 | % | |||||||||||
Net revenue | $ | 225,748 | $ | 130,692 | $ | 95,056 | 73 | % | ||||||||
Net revenue fromcustomers and increased adoption of our Surgical & Sports Medicine products decreased by $0.5 million, or 5%, to $9.2 million in the three months ended June 30, 2020 from $9.7 million in the three months ended June 30, 2019. amniotic product portfolio, including our Affinity product.
accounts.
customers, and increased adoption of our recently launched line extensions.
Three Months Ended June 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Cost of goods sold | $ | 20,042 | $ | 19,446 | $ | 596 | 3 | % | ||||||||
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|
|
|
|
|
|
| |||||||||
Gross profit | $ | 48,918 | $ | 45,502 | $ | 3,416 | 8 | % | ||||||||
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|
|
|
|
|
| |||||||||
Gross profit% | 71 | % | 70 | % |
Six Months Ended June 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Cost of goods sold | $ | 38,835 | $ | 36,426 | $ | 2,409 | 7 | % | ||||||||
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|
|
|
|
| |||||||||
Gross profit | $ | 91,857 | $ | 85,645 | $ | 6,212 | 7 | % | ||||||||
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|
|
|
|
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| |||||||||
Gross profit% | 70 | % | 70 | % |
Three Months Ended June 30, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Cost of goods sold | $ | 29,940 | $ | 20,042 | $ | 9,898 | 49 | % | ||||||||
Gross profit | $ | 93,256 | $ | 48,918 | $ | 44,338 | 91 | % | ||||||||
Gross profit% | 76 | % | 71 | % | ||||||||||||
Six Months Ended June 30, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Cost of goods sold | $ | 55,435 | $ | 38,835 | $ | 16,600 | 43 | % | ||||||||
Gross profit | $ | 170,313 | $ | 91,857 | $ | 78,456 | 85 | % | ||||||||
Gross profit% | 75 | % | 70 | % |
headcount.
Three Months Ended June 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Research and development | $ | 4,668 | $ | 3,864 | $ | 804 | 21 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Research and development as a percentage of net revenue | 7 | % | 6 | % |
Six Months Ended June 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Research and development | $ | 10,078 | $ | 7,235 | $ | 2,843 | 39 | % | ||||||||
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|
|
|
|
|
|
| |||||||||
Research and development as a percentage of net revenue | 8 | % | 6 | % |
Three Months Ended June 30, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Research and development | $ | 7,320 | $ | 4,668 | $ | 2,652 | 57 | % | ||||||||
Research and development as a percentage of net revenue | 6 | % | 7 | % |
Six Months Ended June 30, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Research and development | $ | 13,529 | $ | 10,078 | $ | 3,451 | 34 | % | ||||||||
Research and development as a percentage of net revenue | 6 | % | 8 | % |
an increase in process development costs associated with a new contract manufacturer, increased headcount associated with our existing Advanced WorldWound 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 theseek regulatory pathway (e.g., seek BLA approval).
approvals for certain of our products.
Three Months Ended June 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Selling, general and administrative | $ | 46,502 | $ | 48,957 | $ | (2,455 | ) | -5 | % | |||||||
|
|
|
|
|
|
|
| |||||||||
Selling, general and administrative as a percentage of net revenue | 67 | % | 75 | % |
Six Months Ended June 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Selling, general and administrative | $ | 99,115 | $ | 97,850 | $ | 1,265 | 1 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Selling, general and administrative as a percentage of net revenue | 76 | % | 80 | % |
Three Months Ended June 30, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Selling, general and administrative | $ | 62,349 | $ | 46,502 | $ | 15,847 | 34 | % | ||||||||
Selling, general and administrative as a percentage of net revenue | 51 | % | 67 | % | ||||||||||||
Six Months Ended June 30, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Selling, general and administrative | $ | 120,581 | $ | 99,115 | $ | 21,466 | 22 | % | ||||||||
Selling, general and administrative as a percentage of net revenue | 53 | % | 76 | % |
decrease resulting from the CPN Earnout fair value adjustment.
cancellation fee incurred in the three months ended March 31, 2020 to cancel certain product development and consulting agreements.
Three Months Ended June 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Interest expense, net | $ | (2,912 | ) | $ | (2,187 | ) | $ | (725 | ) | 33 | % | |||||
Other income (expense), net | 25 | (120 | ) | 145 | (121 | %) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other expense, net | $ | (2,887 | ) | $ | (2,307 | ) | $ | (580 | ) | 25 | % | |||||
|
|
|
|
|
|
|
|
Six Months Ended June 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Interest expense, net | $ | (5,422 | ) | $ | (3,965 | ) | $ | (1,457 | ) | 37 | % | |||||
Loss on the extinguishment of debt | — | (1,862 | ) | 1,862 | ** | |||||||||||
Gain on settlement of deferred acquisition consideration | 1,295 | — | 1,295 | ** | ||||||||||||
Other income, net | 46 | 12 | 34 | ** | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other expense, net | $ | (4,081 | ) | $ | (5,815 | ) | $ | 1,734 | (30 | %) | ||||||
|
|
|
|
|
|
|
|
|
Other
Three Months Ended June 30, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Interest expense, net | $ | (2,431 | ) | $ | (2,912 | ) | $ | 481 | (17 | %) | ||||||
Other income (expense), net | 18 | 25 | (7 | ) | (28 | %) | ||||||||||
Total other expense, net | $ | (2,413 | ) | $ | (2,887 | ) | $ | 474 | (16 | %) | ||||||
Six Months Ended June 30, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Interest expense, net | $ | (4,901 | ) | $ | (5,422 | ) | $ | 521 | (10 | %) | ||||||
Gain on settlement of deferred acquisition consideration | — | 1,295 | (1,295 | ) | (100 | %) | ||||||||||
Other income, net | 15 | 46 | (31 | ) | (67 | %) | ||||||||||
Total other expense, net | $ | (4,886 | ) | $ | (4,081 | ) | $ | (805 | ) | 20 | % | |||||
Other
Net cash used in operating activities Net cash used in investing activities Net cash provided by financing activities Net change in cash and restricted cash capital expenditures. common stock options. Six Months Ended
June 30, 2020 2019 (in thousands) $ (26,618 ) $ (21,674 ) (6,118 ) (1,501 ) 13,120 21,929 $ (19,616 ) $ (1,246 ) $ 16,180 $ (26,618 ) (9,290 ) (6,118 ) (1,389 ) 13,120 $ 5,501 $ (19,616 ) 2019, net2021, we used $9.3 million of cash used in operatinginvesting activities was $21.7 million, resulting from our net losssolely consisting of $25.3 million and net cash used in connection with changes in our operating assets and liabilities of $5.0 million, partially offset by non-cash charges of $8.6 million. Net cash used in changes in our operating assets and liabilities included an increase in inventory of $6.1 million, an increase in prepaid expenses and other current assets of $0.8 million and a decrease in other liabilities of $0.4 million, all of which were offset by a decrease in accounts receivable of $0.7 million and an increase in accounts payable and accrued expenses and other current liabilities of $1.6 million.Investing Activities2019, we2021, net cash used $1.5in financing activities was $1.4 million. This consisted primarily of the payment of finance lease obligations of $1.4 million, the payment of $0.5 million related to the NuTech Medical deferred acquisition consideration, and the payments of $0.7 million withholding taxes in connection with stock-based awards. The net cash used by financing activities was partially offset by the $1.2 million in investing activities consistingproceeds from the exercise of capital expenditures and an intangible asset purchase.Financing Activitiescapitalfinance lease obligations of $1.1 million and the payment of $2.6 million related to the NuTech Medical deferred acquisition consideration.During the six months ended June 30, 2019, net cash provided by financing activities was $21.9 million. This consisted primarily of $47.0 million in proceeds from our and $0.6 million in proceeds from the exercise of common stock warrants. 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 the Master Lease Agreement of $17.6 million, payment of capital lease obligations of $0.6 million and the payment of $0.8 million of debt issuance costs related to the 2019 Credit Agreement.Indebtedness2019 Credit Agreement
2017 Credit Agreement
In March 2017,
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 fromterminated 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.
entered into a new credit agreement. Please refer to Note “21. Subsequent Events” for more information.
2020.
Accordingly, even effective internal control over financial reporting can only provide reasonable assurance of achieving their control objectives.
As previously disclosed under “Item 9A. Controls and Procedures” in our Annual Report on Form2019,2020, we identified the following material weakness that existed as of December 31, 20192020 and continued to exist at June 30, 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
We engaged an outside firm to assist management with:
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We have reported regularly to the audit committee on the progress and results of control remediation.
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.
Performing testingCompany to validate the operating effectiveness of certain controls over financial reporting to gain assurance that such controls are present and functioning as designed.
Other than in connection with executing upon the implementation of the remediation plan outlined above, there were
As such changes occur, we will evaluate quarterly whether such changes materially affect our internal control over financial reporting.
We
Our ability to manufacture products may be materially adversely impacted by the coronavirus.
COVID-19 is continuing to impact worldwide economic activity. Estimates for economic growth have been reduced and may have a corresponding effect on our sales activity. The virus has been declared a pandemic by the World Health Organization and has spread globally 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, have required (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 have, thus far, remained 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 by COVID-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 to stay-at-home orders or providers prioritizing resources to address the COVID-19 pandemic.
The impact of COVID-19 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 comply with financial covenants under our credit agreement and raise capital may be materially adversely impacted by COVID-19.
We have funded our operations and capital spending, in part, through third party debt and proceeds from the saleshares of our Class A common stock. Our 2019 Credit Agreement requiresstock to its members, we ceased to be a controlled company within the meaning of the Nasdaq rules. The Nasdaq rules exempt controlled companies from certain governance requirements including (i) the requirement that wea majority of the board of directors consist of independent directors, (ii) the requirement to have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities or independent director involvement in the selection of director nominees, by having director nominees selected or recommended by a majority of its independent directors meeting in executive session and (iii) the requirement to have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
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* | Management contract or compensatory plan or arrangement |
Dated: August | Organogenesis Holdings Inc. | |||||
(Registrant) | ||||||
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/s/ David Francisco | ||||||
David Francisco | ||||||
Chief Financial Officer | ||||||
(Principal Financial and Accounting Officer) |
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