☒ | 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 | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
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Item 3. | 36 | |||||
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Item 1A | ||||||
Item 2. | ||||||
Item 3. | ||||||
Item 4. | ||||||
Item 5. | ||||||
Item 6. | ||||||
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 36,512 | $ | 60,174 | ||||
Restricted cash | 374 | 196 | ||||||
Accounts receivable, net | 56,915 | 39,359 | ||||||
Inventory | 29,882 | 22,918 | ||||||
Prepaid expenses and other current assets | 5,327 | 2,953 | ||||||
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Total current assets | 129,010 | 125,600 | ||||||
Property and equipment, net | 55,937 | 47,184 | ||||||
Notes receivable from related parties | — | 556 | ||||||
Intangible assets, net | 31,849 | 20,797 | ||||||
Goodwill | 28,916 | 25,539 | ||||||
Deferred tax asset, net | 16 | 127 | ||||||
Other assets | 700 | 884 | ||||||
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Total assets | $ | 246,428 | $ | 220,687 | ||||
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Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Deferred acquisition consideration | $ | 966 | $ | 5,000 | ||||
Current portion of term loan | 11,667 | — | ||||||
Current portion of capital lease obligations | 3,473 | 3,057 | ||||||
Accounts payable | 24,007 | 28,387 | ||||||
Accrued expenses and other current liabilities | 26,132 | 23,450 | ||||||
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Total current liabilities | 66,245 | 59,894 | ||||||
Line of credit | 39,353 | 33,484 | ||||||
Term loan, net of current portion | 47,999 | 49,634 | ||||||
Deferred acquisition consideration, net of current portion | 1,436 | — | ||||||
Earnout liability | 3,782 | — | ||||||
Deferred rent | 1,098 | 1,012 | ||||||
Capital lease obligations, net of current portion | 12,239 | 14,431 | ||||||
Other liabilities | 8,802 | 6,649 | ||||||
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Total liabilities | 180,954 | 165,104 | ||||||
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Commitments and contingencies (Note 13) | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.0001 par value; 400,000,000 shares authorized; 108,185,702 and 105,599,434 shares issued; 107,457,154 and 104,870,886 shares outstanding at September 30, 2020 and December 31, 2019, respectively. | 11 | 10 | ||||||
Additional paid-in capital | 237,015 | 226,580 | ||||||
Accumulated deficit | (171,552 | ) | (171,007 | ) | ||||
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Total stockholders’ equity | 65,474 | 55,583 | ||||||
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Total liabilities and stockholders’ equity | $ | 246,428 | $ | 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 September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net revenue | $ | 100,799 | $ | 64,265 | $ | 231,491 | $ | 186,336 | ||||||||
Cost of goods sold | 22,964 | 19,131 | 61,799 | 55,557 | ||||||||||||
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Gross profit | 77,835 | 45,134 | 169,692 | 130,779 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 51,146 | 49,475 | 150,261 | 147,325 | ||||||||||||
Research and development | 3,709 | 3,924 | 13,787 | 11,159 | ||||||||||||
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Total operating expenses | 54,855 | 53,399 | 164,048 | 158,484 | ||||||||||||
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Income (loss) from operations | 22,980 | (8,265 | ) | 5,644 | (27,705 | ) | ||||||||||
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Other expense, net: | ||||||||||||||||
Interest expense, net | (2,969 | ) | (2,427 | ) | (8,391 | ) | (6,392 | ) | ||||||||
Loss on the extinguishment of debt | — | — | — | (1,862 | ) | |||||||||||
Gain on settlement of deferred acquisition consideration | 951 | — | 2,246 | — | ||||||||||||
Other income (expense), net | 44 | (1 | ) | 90 | 11 | |||||||||||
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Total other expense, net | (1,974 | ) | (2,428 | ) | (6,055 | ) | (8,243 | ) | ||||||||
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Net income (loss) before income taxes | 21,006 | (10,693 | ) | (411 | ) | (35,948 | ) | |||||||||
Income tax expense | (72 | ) | (48 | ) | (134 | ) | (108 | ) | ||||||||
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Net income (loss) | 20,934 | (10,741 | ) | (545 | ) | (36,056 | ) | |||||||||
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Non-cash deemed dividend to warrant holders | — | (645 | ) | — | (645 | ) | ||||||||||
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Net income (loss) attributed to common shareholders | $ | 20,934 | $ | (11,386 | ) | $ | (545 | ) | $ | (36,701 | ) | |||||
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Net income (loss) attributed to common shareholders, per share: | ||||||||||||||||
Basic | $ | 0.20 | $ | (0.12 | ) | $ | (0.01 | ) | $ | (0.40 | ) | |||||
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Diluted | $ | 0.19 | $ | (0.12 | ) | $ | (0.01 | ) | $ | (0.40 | ) | |||||
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Weighted-average common shares outstanding—basic and diluted | ||||||||||||||||
Basic | 105,040,035 | 92,276,858 | 104,748,297 | 91,182,233 | ||||||||||||
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Diluted | 108,489,768 | 92,276,858 | 104,748,297 | 91,182,233 | ||||||||||||
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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 Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||
Redeemable | Additional | |||||||||||||||||||||||||||
Common Stock | Common Stock | Paid-in | Accumulated | Total | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Stockholders’ Equity | ||||||||||||||||||||||
Balance as of June 30, 2020 | — | $ | — | 105,417,168 | $ | 11 | $ | 228,225 | $ | (192,486 | ) | $ | 35,750 | |||||||||||||||
Exercise of stock options | — | — | 92,033 | — | 318 | — | 318 | |||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 486 | — | 486 | |||||||||||||||||||||
Issuance of common stock associated with business acquisition | — | — | 1,947,953 | — | 7,986 | 7,986 | ||||||||||||||||||||||
Net income | — | — | — | — | — | 20,934 | 20,934 | |||||||||||||||||||||
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Balance as of September 30, 2020 | — | $ | — | 107,457,154 | $ | 11 | $ | 237,015 | $ | (171,552 | ) | $ | 65,474 | |||||||||||||||
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Balance as of December 31, 2019 | — | $ | — | 104,870,886 | $ | 10 | $ | 226,580 | $ | (171,007 | ) | $ | 55,583 | |||||||||||||||
Exercise of stock options | — | — | 638,315 | 1 | 1,285 | — | 1,286 | |||||||||||||||||||||
Issuance of common stock associated with business acquisition | 1,947,953 | — | 7,986 | 7,986 | ||||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 1,164 | — | 1,164 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (545 | ) | (545 | ) | |||||||||||||||||||
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Balance as of September 30, 2020 | — | $ | — | 107,457,154 | $ | 11 | $ | 237,015 | $ | (171,552 | ) | $ | 65,474 | |||||||||||||||
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Three and Nine Months Ended September 30, 2019 | ||||||||||||||||||||||||||||
Redeemable | Additional | |||||||||||||||||||||||||||
Common Stock | Common Stock | Paid-in | Accumulated | Total | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Stockholders’ Equity | ||||||||||||||||||||||
Balance as of June 30, 2019 | — | $ | — | 91,342,722 | $ | 9 | $ | 178,412 | $ | (155,223 | ) | $ | 23,198 | |||||||||||||||
Exercise of stock options | — | — | 64,362 | — | 109 | — | 109 | |||||||||||||||||||||
Exercise of common stock warrants | — | — | 19,426 | — | — | — | — | |||||||||||||||||||||
Common stock issued in warrant exchange | — | — | 3,315,232 | — | 645 | (645 | ) | — | ||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 242 | — | 242 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (10,741 | ) | (10,741 | ) | |||||||||||||||||||
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Balance as of September 30, 2019 | — | $ | — | 94,741,742 | $ | 9 | $ | 179,408 | $ | (166,609 | ) | $ | 12,808 | |||||||||||||||
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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 | — | — | 74,052 | — | 628 | — | 628 | |||||||||||||||||||||
Exercise of stock options | — | — | 91,045 | — | 163 | — | 163 | |||||||||||||||||||||
Common stock issued in warrant exchange | — | — | 3,315,232 | — | 645 | (645 | ) | — | ||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 700 | — | 700 | |||||||||||||||||||||
Redemption of redeemable common stock placed into treasury | (728,548 | ) | — | — | — | — | — | — | ||||||||||||||||||||
Net loss | — | — | — | — | — | (36,056 | ) | (36,056 | ) | |||||||||||||||||||
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Balance as of September 30, 2019 | — | $ | — | 94,741,742 | $ | 9 | $ | 179,408 | $ | (166,609 | ) | $ | 12,808 | |||||||||||||||
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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 | |||||||||||||
Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (545 | ) | $ | (36,056 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 2,749 | 2,553 | ||||||
Amortization of intangible assets | 2,518 | 4,526 | ||||||
Non-cash interest expense | 160 | 196 | ||||||
Deferred interest expense | 1,577 | 974 | ||||||
Deferred rent expense | 33 | 606 | ||||||
Gain on settlement of deferred acquisition consideration | (2,246 | ) | — | |||||
Recovery of certain notes receivable from related parties | (1,111 | ) | — | |||||
Provision (benefit) recorded for sales returns and doubtful accounts | 2,559 | (29 | ) | |||||
Loss on disposal of property and equipment | 201 | — | ||||||
Adjustment for excess and obsolete inventories | 2,024 | 809 | ||||||
Stock-based compensation | 1,164 | 700 | ||||||
Loss on extinguishment of debt | — | 1,862 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (19,160 | ) | 553 | |||||
Inventory | (7,757 | ) | (7,840 | ) | ||||
Prepaid expenses and other current assets | (2,262 | ) | (699 | ) | ||||
Accounts payable | (3,778 | ) | 5,348 | |||||
Accrued expenses and other current liabilities | 3,521 | 85 | ||||||
Other liabilities | 878 | (715 | ) | |||||
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Net cash used in operating activities | (19,475 | ) | (27,127 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (12,260 | ) | (2,526 | ) | ||||
Proceeds from the repayment of notes receivable from related parties | 1,726 | — | ||||||
Cash paid for business acquisition | (5,820 | ) | ||||||
Acquisition of intangible asset | — | (250 | ) | |||||
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Net cash used in investing activities | (16,354 | ) | (2,776 | ) | ||||
Cash flows from financing activities: | ||||||||
Line of credit borrowings | 5,869 | 7,000 | ||||||
Proceeds from term loan | 10,000 | 50,000 | ||||||
Repayment of notes payable | — | (17,585 | ) | |||||
Proceeds from the exercise of stock options | 1,286 | 163 | ||||||
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 | (1,776 | ) | (863 | ) | ||||
Payment of deferred acquisition consideration | (3,034 | ) | — | |||||
Payment of debt issuance costs | — | (924 | ) | |||||
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Net cash provided by financing activities | 12,345 | 31,657 | ||||||
Change in cash and restricted cash | (23,484 | ) | 1,754 | |||||
Cash and restricted cash, beginning of period | 60,370 | 21,405 | ||||||
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Cash and restricted cash, end of period | $ | 36,886 | $ | 23,159 | ||||
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Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 7,130 | $ | 5,922 | ||||
Cash paid for income taxes | $ | — | $ | 110 | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Fair value of shares issued for business acquisition | $ | 7,986 | $ | — | ||||
Deferred acquisition consideration and earnout liability recorded for business acquisition | $ | 5,218 | $ | — | ||||
Debt and equity issuance costs included in accounts payable | $ | — | $ | 91 | ||||
Purchases of property and equipment included in accounts payable and accrued expenses | $ | 2,628 | $ | 3,698 | ||||
Amounts due related to acquisition of intangible assets included in accrued expenses and other liabilities | $ | — | $ | 500 | ||||
Non-cash deemed dividend related to warrant exchange | $ | — | $ | 645 | ||||
Equipment acquired under capital lease | $ | — | $ | 973 |
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 | $ | — |
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.
The aggregate consideration amounted to $19,024 as of the Acquisition Date, subject to post-closing adjustments for working capital. 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” or “Earnout Liability”) with a 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.
This transaction was accounted for as a business combination using the acquisition methodliability is settled (see Note “5. Fair Value Measurement of accounting in accordance with ASC Topic 805, Business CombinationsFinancial Instruments”). 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 multiperiod 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 a preliminary valuation, the total purchase price allocation was as follows:
Assets acquired: | ||||
Accounts receivable | $ | 1,048 | ||
Inventory | 1,230 | |||
Prepaid expenses and other current assets | 1 | |||
Property and equipment | 85 | |||
Intangible assets | 13,570 | |||
Other assets | 4 | |||
|
| |||
Total assets acquired | 15,938 | |||
Liabilities assumed: | ||||
Accounts payable | 51 | |||
Accrued expenses and other current liabilities | 240 | |||
|
| |||
Total liabilities assumed | 291 | |||
Total identifiable assets acquired, net | 15,647 | |||
Total purchase price | 19,024 | |||
|
| |||
Goodwill | $ | 3,377 | ||
|
|
The preliminary fair values recorded were based on a preliminary valuation and the estimates and assumptions used in such valuation are subject to change, which could be significant, within the measurement period (up to one year from the acquisition date). The Company is continuing to obtain information to determine the acquired assets and liabilities, including tax assets, liabilities and other attributes.
The preliminary purchase price allocation resulted in goodwill of $3,377, 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. Revenue and expenses of CPN since the Acquisition Date were not material. The acquisition of CPN does not result in any changes to the Company’s operating or reportable segment structure.
Three Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
Advanced Wound Care | $ | 89,990 | $ | 54,310 | ||||
Surgical & Sports Medicine | 10,809 | 9,955 | ||||||
|
|
|
| |||||
Total net revenue | $ | 100,799 | $ | 64,265 | ||||
|
|
|
|
Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
Advanced Wound Care | $ | 201,009 | $ | 157,365 | ||||
Surgical & Sports Medicine | 30,482 | 28,971 | ||||||
|
|
|
| |||||
Total net revenue | $ | 231,491 | $ | 186,336 | ||||
|
|
|
|
For the three months ended September 30, 2020 and 2019, net PuraPly revenue totaled $40,945 and $31,755, respectively. For the nine months ended September 30, 2020 and 2019, net PuraPly revenue totaled $101,969 and $86,893, 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 | ||||
Fair Value Measurements | ||||||||||||||||
as of September 30, 2020 Using: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Earnout Liability | $ | — | $ | — | $ | 3,782 | $ | 3,782 | ||||||||
|
|
|
|
|
|
|
| |||||||||
$ | — | $ | — | $ | 3,782 | $ | 3,782 | |||||||||
|
|
|
|
|
|
|
|
2020.
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 | |||||||||
As of June 30, 2021, the Earnout liability decreased to $927 as a result of the Company’s updated assessment of the near-term market for the CPN product portfolio. 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 | (3,058 | ) | ||
Balance as of June 30, 2021 | $ | 927 | ||
2020.
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
Accounts receivable | $ | 62,040 | $ | 42,408 | ||||
Less — allowance for sales returns and doubtful accounts | (5,125 | ) | (3,049 | ) | ||||
|
|
|
| |||||
$ | 56,915 | $ | 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 September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Balance at beginning of period | $ | 3,928 | $ | 3,021 | $ | 3,049 | $ | 3,420 | ||||||||
Additions (reductions) | 1,589 | (56 | ) | 2,559 | (29 | ) | ||||||||||
Write-offs | (392 | ) | (30 | ) | (483 | ) | (456 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at end of period | $ | 5,125 | $ | 2,935 | $ | 5,125 | $ | 2,935 | ||||||||
|
|
|
|
|
|
|
|
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 | ||||||||
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
Raw materials | $ | 9,676 | $ | 9,178 | ||||
Work in process | 1,499 | 781 | ||||||
Finished goods | 18,707 | 12,959 | ||||||
|
|
|
| |||||
$ | 29,882 | $ | 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 | |||||
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 | |||||
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
Leasehold improvements | $ | 39,169 | $ | 36,344 | ||||
Furniture, computers and equipment | 47,798 | 46,430 | ||||||
|
|
|
| |||||
86,967 | 82,774 | |||||||
Accumulated depreciation and amortization | (68,559 | ) | (65,812 | ) | ||||
Construction in progress | 37,529 | 30,222 | ||||||
|
|
|
| |||||
$ | 55,937 | $ | 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 | |||||
9.
On September 17, 2020, the Company acquired certain assets and assumed certain liabilities of CPN. This transaction was accounted for as a business combination in accordance with ASC Topic 805 Business Combinations. The Company recorded $3,377 of goodwill and $13,570 of intangible assets associated with this acquisition. Refer to Note “3. Acquisition” for detail.
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 with the remaining purchase price being paid over two years after the transaction closed. As of September 30, 2020, $250 was remaining and was recorded in accrued expenses and other current liabilities on the consolidated balance sheets.
Original Cost | Accumulated Amortization | Net Book Value | ||||||||||
Developed technology | $ | 32,620 | $ | (13,503 | ) | $ | 19,117 | |||||
Trade names and trademarks | 2,080 | (828 | ) | 1,252 | ||||||||
Customer relationships | 10,690 | (45 | ) | 10,645 | ||||||||
Non-compete agreements | 1,010 | (175 | ) | 835 | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 46,400 | $ | (14,551 | ) | $ | 31,849 | |||||
|
|
|
|
|
|
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 Cost | Accumulated Amortization | Net Book 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 | |||||
10.
September 30, 2020 | December 31, 2019 | |||||||
Accrued personnel costs | $ | 21,158 | $ | 17,640 | ||||
Other | 4,974 | 5,810 | ||||||
|
|
|
| |||||
$ | 26,132 | $ | 23,450 | |||||
|
|
|
|
11.
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 | ||||
September 30, 2020 | December 31, 2019 | |||||||
Line of credit | $ | 39,353 | $ | 33,484 | ||||
|
|
|
| |||||
Term loan | 60,000 | 50,000 | ||||||
Less debt discount and debt issuance cost | (334 | ) | (366 | ) | ||||
Less current maturities | (11,667 | ) | — | |||||
|
|
|
| |||||
Term loan, net of debt discount, debt issuance cost and current maturities | $ | 47,999 | $ | 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 | ||||
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 achievement of certain financial metrics; and (iii) the third tranche of $10,000 was made available to the Company and fully funded in March 2020 upon achievement of 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 as of SeptemberJune 30, 20202021 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 FebruaryJune 2021. Thereafter, each term loan advance will beis repaid inthirty-six
As of September 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 $1,541$2,416 and $681$1,858 as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively, was included in other liabilities on 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 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 | ||
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.
12. Stockholders’ Equity
Common Stock
As of September 30, 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. 108,185,702129,011,789 shares of Class A common stock were issued and 128,283,241 shares were outstanding as of SeptemberJune 30, 2020, which included 728,5482021. NaNshares of preferred stock were outstanding as of June 30, 2021. The issued shares of treasury stock. TheseClass A common stock include 728,548 treasury shares that were initially issuedreacquired in connection with the acquisitionredemption 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 SeptemberJune 30, 20202021 and December 31, 2019,2020, the Company reserved the following shares of Class A common stock for future issuance:
September 30, 2020 | December 31, 2019 | |||||||
Shares reserved for issuance for outstanding options | 6,788,655 | 6,503,646 | ||||||
Shares reserved for issuance for outstanding restricted stock units | 819,248 | — | ||||||
Shares reserved for issuance for future grants | 6,819,449 | 9,008,996 | ||||||
|
|
|
| |||||
Total shares of authorized common stock reserved for future issuance | 14,427,352 | 15,512,642 | ||||||
|
|
|
|
Warrant Exchange and Warrant Exercise
In the third quarter of 2019, the Company executed a series of transactions related to its then outstanding 30,890,748 public warrants and 4,100,000 private placement warrants. The Company issued an aggregate of 2,845,280 shares of Class A common stock for 29,950,150 public warrants at an exchange rate of 0.095. The Company issued an aggregate of 80,451 shares of Class A common stock for the remaining public warrants at an exchange rate of 0.0855. The Company issued an aggregate of 389,501 shares of Class A common stock for the private placement warrants at an exchange rate of 0.095.
On August 13, 2019, Massachusetts Capital Resource Company and Life Insurance Community Investment Initiative, LLC net exercised outstanding warrants to purchase an aggregate of 182,700 shares of the Company’s Class A common stock at an exercise price of $3.95 per share. The Company issued an aggregate of 19,426 shares of common stock in connection with this transaction.
As a result of these transactions, the Company issued an aggregate of 3,334,658 shares of common stock, representing approximately 3% of the total Class A common stock outstanding after such issuances. No warrants were outstanding after these transactions.
As the fair value of the warrants exchanged in the warrant exchange transactions immediately prior to the exchanges was less than the fair value of the common stock issued, the Company recorded a non-cash deemed dividend of $0.6 million for the incremental fair value provided to the warrant holders in the three months ended September 30, 2019.
13.
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.
Number of Shares | Weighted Average Grant Date Fair Value | |||||||
Unvested at December 31, 2019 | — | $ | — | |||||
Granted | 873,595 | 3.81 | ||||||
Vested | — | — | ||||||
Canceled/Forfeited | (54,347 | ) | 3.69 | |||||
|
|
|
| |||||
Unvested at September 30, 2020 | 819,248 | $ | 3.82 | |||||
|
|
|
|
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 | |||||
Risk-free interest rate Expected term (in years) Expected volatility Expected dividend yield Exercise price Underlying stock price Outstanding as of December 31, 2019 Granted Exercised Canceled / forfeited Outstanding as of September 30, 2020 Options exercisable as of September 30, 2020 Options vested or expected to vest as of September 30, 2020 2020:ninesix months ended SeptemberJune 30, 2021 and 2020 were 1,037,099 and 2019 were 1,553,723 and 100,0001,538,723 respectively. The assumptions that the Company used to determine the grant-date fair value of stock options granted during these periods were as follows, presented on a weighted-average basis: September 30,
2020 September 30,
2019 0.46 % 2.24 % 6.22 6.50 37.42 % 42.7 % 0.0 % 0.0 % $ 4.04 $ 7.08 $ 3.37 $ 7.08 0.82 % 0.46 % 6.21 6.22 39.30 % 37.41 % 0.0 % 0.0 % $ 13.54 $ 4.04 $ 13.54 $ 3.36 ninesix months ended SeptemberJune 30, 2021 and 2020 of $5.31 and 2019 of $1.05 and $3.24,$1.04, respectively.2019: Weighted Average Weighted Remaining Average Contractual Aggregate Number of Exercise Term Intrinsic Shares Price (in years) Value 7,179,636 $ 1.98 5.06 $ 20,799 1,553,723 4.04 (638,315 ) 2.02 1,623 (630,399 ) 3.64 7,464,645 2.27 5.53 12,855 5,512,393 1.60 4.20 12,701 7,062,928 $ 2.16 5.30 $ 12,835 6,620,318 $ 2.33 5.22 $ 34,458 1,037,099 13.54 (558,785 ) 2.15 5,526 (28,624 ) 9.54 7,070,008 3.95 5.56 89,543 4,709,080 1.83 3.91 69,665 6,557,753 $ 3.57 5.28 $ 85,578 ninesix months ended SeptemberJune 30, 2021 and 2020 was $586 and 2019 was $387 and $538,$209, respectively.SeptemberJune 30, 2020,2021, the total unrecognized stock compensation expense related to unvested stock options expected to vest was $1,598$4,676 and was expected to be recognized over a weighted-average period of 2.903.27 years.As of September 30, 2020,were outstanding totaling $635. These notes were taken by a former executive$635 to exercise his 675,990 shares of stock options between 2011 and 2013 and theoptions. The notes were initially secured with the 675,990these shares held by the former executive. When the loans were outstanding, the options were not considered exercised and were included within the options outstanding for accounting purposes. As of December 31, 2020, $334 of the principal balance of the partial recourse notes are stillwas outstanding the options are not considered exercised and are included within the options outstanding. Accordingly, the 675,990195,278 shares arewere not considered outstanding for accounting purposes and the additional paid-in capital associated with these shares were deducted from equity in prior periods.purposes. In the three months ended September 30, 2020,March 31, 2021, the former executive sold 25,096repaid 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 consolidated statement of stockholders’ equity. As ofpay back a portion of his nonrecourse notes. see Note “16. Related Parties Transactions”.14.secure the notes were considered outstanding for accounting purposes.RSUs and optionsequity awards using the treasury stock method. The calculation of the dilutive effect of outstanding equity awards under the treasury stock method which includes consideration of unrecognized compensation expenses as additional proceeds.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
Calculation of Basic and Diluted EPS | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Weighted-average common shares outstanding—basic | 105,040,035 | 92,276,858 | 104,748,297 | 91,182,233 | ||||||||||||
Dilutive effect of restricted stock units | 134,759 | — | — | — | ||||||||||||
Dilutive effect of options | 3,314,974 | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted-average common shares outstanding—diluted | 108,489,768 | 92,276,858 | 104,748,297 | 91,182,233 | ||||||||||||
Earnings (loss) per share—basic | $ | 0.20 | $ | (0.12 | ) | $ | (0.01 | ) | $ | (0.40 | ) | |||||
Earnings (loss) per share—diluted | $ | 0.19 | $ | (0.12 | ) | $ | (0.01 | ) | $ | (0.40 | ) |
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 | ) | ||||||
15. Commitments and Contingencies
Capitalized Leases
facility at NuTech Medical’s headquarters in Birmingham, Alabama. Under the lease, the Company is required to make monthly rent payments of approximately $22 through the 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 3 months) | $ | 1,198 | ||
2021 | 4,786 | |||
2022 | 4,945 | |||
2023 | — | |||
2024 | 9,825 | |||
|
| |||
20,754 | ||||
Less amount representing interest | (5,042 | ) | ||
|
| |||
Present value of minimum lease payments | 15,712 | |||
Less current maturities | (3,473 | ) | ||
|
| |||
Long-term portion | $ | 12,239 | ||
|
|
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 was 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 $1,620 and $1,766ASC 840, for the three and six months ended SeptemberJune 30, 2020, the Company recorded lease expense of $1,837 and 2019,$3,351, respectively for operating leases.
Future minimum lease payments due under noncancelable operating lease agreements as of September 30, 2020 are as follows:
2020 (remaining 3 months) | $ | 1,250 | ||
2021 | 5,974 | |||
2022 | 3,471 | |||
2023 | 2,804 | |||
2024 | 1,224 | |||
Thereafter | 6,899 | |||
|
| |||
$ | 21,622 | |||
|
|
Contingencies
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 is investigating the incident, together with legal counsel and other incident response professionals. The Company does not believe it has experienced a material loss related to the ransomware attack, and substantially all costs incurred to date are expected to be reimbursed by insurance.
16.
Capital
As of September 30,December 31, 2020, Liquidity Loans and Option Loans to one former executive were outstanding with an aggregate principal balance of $297$100 and $635, respectively As of 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 principal and part of the interest receivable under the Employer Loans were fully reserved with net interest receivable of $0 and $556 as of September 30, 2020 and December 31, 2019, respectively, included in the notes receivable from related parties balance in the consolidated balance sheets. In$334, respectively. During the three months ended September 30, 2020, one of theMarch 31, 2021, this former executivesexecutive paid $1,000 ofoff the outstanding principal balance of his liquidity loansEmployer Loans and the related interest receivable. The Company forgave $1,000 of the remaining outstanding principal balance of his liquidity loans. The other former executive paid $53 of the outstanding principal balance of his liquidity loans and $58 of the related accrued interest. As a result, the Company recorded $1,111$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 threesix months ended SeptemberJune 30, 2021. The $334 of the repaid principal balance of the Option Loans was recorded to eq
17. The Company’s wholly owned Swiss subsidiary, Organogenesis 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.
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 third quarter ended September 30, 2020, the pandemic may pose significant risks to our business. We cannot currently quantify the impact the continuing COVID-19 pandemic may 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” in this Quarterly Report on Form 10-Q for an additional discussion of risks and potential risks of the COVID-19 pandemic on our business, financial condition and results of operations.
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 nine months ended September 30, 2019.
December 31, 2020, respectively.
deemed more-likely-than-not to
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net revenue | $ | 100,799 | $ | 64,265 | $ | 231,491 | $ | 186,336 | ||||||||
Cost of goods sold | 22,964 | 19,131 | 61,799 | 55,557 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | 77,835 | 45,134 | 169,692 | 130,779 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 51,146 | 49,475 | 150,261 | 147,325 | ||||||||||||
Research and development | 3,709 | 3,924 | 13,787 | 11,159 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total operating expenses | 54,855 | 53,399 | 164,048 | 158,484 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income (loss) from operations | 22,980 | (8,265 | ) | 5,644 | (27,705 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Other expense, net: | ||||||||||||||||
Interest expense, net | (2,969 | ) | (2,427 | ) | (8,391 | ) | (6,392 | ) | ||||||||
Loss on the extinguishment of debt | — | — | — | (1,862 | ) | |||||||||||
Gain on settlement of deferred acquisition consideration | 951 | — | 2,246 | — | ||||||||||||
Other income (expense), net | 44 | (1 | ) | 90 | 11 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total other expense, net | (1,974 | ) | (2,428 | ) | (6,055 | ) | (8,243 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) before income taxes | 21,006 | (10,693 | ) | (411 | ) | (35,948 | ) | |||||||||
Income tax expense | (72 | ) | (48 | ) | (134 | ) | (108 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income (loss) | $ | 20,934 | $ | (10,741 | ) | $ | (545 | ) | $ | (36,056 | ) | |||||
|
|
|
|
|
|
|
|
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 September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Net income (loss) | $ | 20,934 | $ | (10,741 | ) | $ | (545 | ) | $ | (36,056 | ) | |||||
Interest expense, net | 2,969 | 2,427 | 8,391 | 6,392 | ||||||||||||
Income tax expense | 72 | 48 | 134 | 108 | ||||||||||||
Depreciation | 956 | 792 | 2,749 | 2,553 | ||||||||||||
Amortization | 885 | 1,529 | 2,518 | 4,526 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
EBITDA | 25,816 | (5,945 | ) | 13,247 | (22,477 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Stock-based compensation expense | 486 | 242 | 1,164 | 700 | ||||||||||||
Gain on settlement of deferred acquisition consideration (1) | (951 | ) | — | (2,246 | ) | — | ||||||||||
Loss on extinguishment of debt (2) | — | — | — | 1,862 | ||||||||||||
Exchange offer transaction costs (3) | — | 916 | — | 916 | ||||||||||||
Recovery of certain notes receivable from related parties (4) | (1,111 | ) | — | (1,111 | ) | — | ||||||||||
Other costs and expenses (5) | 361 | — | 929 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Adjusted EBITDA | $ | 24,601 | $ | (4,787 | ) | $ | 11,983 | $ | (18,999 | ) | ||||||
|
|
|
|
|
|
|
|
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 Medical in February |
(2) |
|
|
Amount reflects the collection of certain notes receivable from related parties previously reserved. See Note |
(3) | Amounts reflect the change in the fair value of the Earnout liability in connection with the CPN acquisition. See Note “3. Acquisition”. |
(4) | Amounts reflect employee retention and benefits as well as the facility-related cost associated with the Company’s restructuring activities. See Note “12. Restructuring”. |
(5) |
Amounts reflect the legal, advisory and other professional fees incurred |
(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 September 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Advanced Wound Care | $ | 89,990 | $ | 54,310 | $ | 35,680 | 66 | % | ||||||||
Surgical & Sports Medicine | 10,809 | 9,955 | 854 | 9 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net revenue | $ | 100,799 | $ | 64,265 | $ | 36,534 | 57 | % | ||||||||
|
|
|
|
|
|
|
|
Nine Months Ended September 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Advanced Wound Care | $ | 201,009 | $ | 157,365 | $ | 43,644 | 28 | % | ||||||||
Surgical & Sports Medicine | 30,482 | 28,971 | 1,511 | 5 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net revenue | $ | 231,491 | $ | 186,336 | $ | 45,155 | 24 | % | ||||||||
|
|
|
|
|
|
|
|
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 | % | ||||||||
accounts.
customers, and increased adoption of our recently launched line extensions.
Three Months Ended September 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Cost of goods sold | $ | 22,964 | $ | 19,131 | $ | 3,833 | 20 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | $ | 77,835 | $ | 45,134 | $ | 32,701 | 72 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit% | 77 | % | 70 | % |
Nine Months Ended September 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Cost of goods sold | $ | 61,799 | $ | 55,557 | $ | 6,242 | 11 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | $ | 169,692 | $ | 130,779 | $ | 38,913 | 30 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit% | 73 | % | 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 | % |
Three Months Ended September 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Research and development | $ | 3,709 | $ | 3,924 | $ | (215 | ) | (5% | ) | |||||||
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Research and development as a percentage of net revenue | 4 | % | 6 | % |
Nine Months Ended September 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Research and development | $ | 13,787 | $ | 11,159 | $ | 2,628 | 24 | % | ||||||||
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Research and development as a percentage of net revenue | 6 | % | 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 | % |
approvals for certain of our products.
Three Months Ended September 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Selling, general and administrative | $ | 51,146 | $ | 49,475 | $ | 1,671 | 3 | % | ||||||||
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Selling, general and administrative as a percentage of net revenue | 51 | % | 77 | % |
Nine Months Ended September 30, | Change | |||||||||||||||
2020 | 2019 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Selling, general and administrative | $ | 150,261 | $ | 147,325 | $ | 2,936 | 2 | % | ||||||||
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Selling, general and administrative as a percentage of net revenue | 65 | % | 79 | % |
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 | % |
CPN Earnout fair value adjustment.
Three Months Ended September 30, Interest expense, net Gain on settlement of deferred acquisition consideration Other income (expense), net Total other expense, net Nine Months Ended September 30, Interest expense, net Loss on the extinguishment of debt Gain on settlement of deferred acquisition consideration Other income, net Total other expense, net Change 2020 2019 $ % (in thousands, except for percentages) $ (2,969 ) $ (2,427 ) $ (542 ) 22 % 951 — 951 100 % 44 (1 ) 45 * * $ (1,974 ) $ (2,428 ) $ 454 (19 %) Change 2020 2019 $ % (in thousands, except for percentages) $ (8,391 ) $ (6,392 ) $ (1,999 ) 31 % — (1,862 ) 1,862 (100 %) 2,246 — 2,246 100 % 90 11 79 * * $ (6,055 ) $ (8,243 ) $ 2,188 (27 %) **not meaningfulOther $ (2,431 ) $ (2,912 ) $ 481 (17 %) 18 25 (7 ) (28 %) $ (2,413 ) $ (2,887 ) $ 474 (16 %) $ (4,901 ) $ (5,422 ) $ 521 (10 %) — 1,295 (1,295 ) (100 %) 15 46 (31 ) (67 %) $ (4,886 ) $ (4,081 ) $ (805 ) 20 % 19%16%, to $2.0 million in the three months ended September 30, 2020 from $2.4 million in the three months ended SeptemberJune 30, 2019.2021 from $2.9 million in the three months ended June 30, 2020. The decrease is primarily due to a $1.0 million decrease in legal accruals related to the settlement of the assumed legacy lawsuit from the sellers of NuTech Medical in October 2020. We assumed the legacy lawsuit as part of the resolution of the deferred acquisition consideration dispute with the sellers of NuTech Medical in February 2020. The decrease was partially offset by a $0.5 million or 22% increase in interest expense resulting from the increasedreduced borrowings under the 2019 Credit Agreement.Other$2.2$0.5 million or 27% to $6.1 million in the nine months ended September 30, 2020 from $8.2 million in the nine months ended September 30, 2019. Interest expense, net, increased by $2.0 million or 31%10% primarily due to the increasedreduced borrowings under the 2019 Credit Agreement. The lossgain of $1.3 million on the extinguishmentsettlement of debt of $1.9 milliondeferred acquisition consideration for the ninesix months ended September 30, 2019 reflected the write-off of unamortized debt discount upon repayment of the Master Lease Agreement as well as early payment penalties in March 2019. The gain of $2.2 million for the nine months ended SeptemberJune 30, 2020 was related to the settlement of the deferred acquisition consideration dispute with the sellers of NuTech Medical in February 2020 as well as the decrease in legal accruals related to the settlement of a legacy lawsuit in October 2020. We assumed the legacy lawsuit from the sellers of NuTech Medical as part of the resolution of the aforementioned dispute.SeptemberJune 30, 2020,2021, we had $36.5 million in cash and $62.8$117.2 million in working capital.capital which included $89.8 million in cash. We 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”). We expect that our cash on hand and other components of working capital as of SeptemberJune 30, 2020,2021, availability under the 2019 Credit Agreement, 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 continue to closely monitor ongoing developments in connection with the20202021 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 Form 10-Q for an additional discussion of risks and potential risks of the COVID-19 pandemic on our business, financial condition and results of operations.expendituresexpenditure 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 from period-to-periodperiod 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.all, particularly in light of the adverse impacts of the COVID-19 pandemic on the capital markets.all. Any failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations, and financial condition. Our current borrowings under the 2019 Credit Agreement are subject to compliance with certain financial covenants regarding Minimum Trailing Twelve Month Consolidated Revenue and Non-PuraPly revenue. If we are not able to comply with these covenants, due to the impacts
Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Net cash used in operating activities | $ | (19,475 | ) | $ | (27,127 | ) | ||
Net cash used in investing activities | (16,354 | ) | (2,776 | ) | ||||
Net cash provided by financing activities | 12,345 | 31,657 | ||||||
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Net change in cash and restricted cash | $ | (23,484 | ) | $ | 1,754 | |||
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Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Net cash provided by (used in) operating activities | $ | 16,180 | $ | (26,618 | ) | |||
Net cash used in investing activities | (9,290 | ) | (6,118 | ) | ||||
Net cash used in (provided by) financing activities | (1,389 | ) | 13,120 | |||||
Net change in cash and restricted cash | $ | 5,501 | $ | (19,616 | ) | |||
Financing Activities
common stock options.
During the nine months ended September 30, 2019, net cash provided by financing activities was $31.7 million. This consisted primarily of $56.1 million in net proceeds from the
Indebtedness
2019 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.
2020.
Accordingly, even effective internal control over financial reporting can only provide reasonable assurance of achieving their control objectives.
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.
Significant disruptions of our information technology systems or breaches of information security could adversely affect our business, results of operations and financial condition.
We rely
Interruptions in the supply of our products or inventory loss may adversely affect our business, results of operations and financial condition.
Our products are manufactured using technically complex processes requiring specialized facilities, highly specific raw materials and other production constraints. The complexity of these processes, as well as strict company and government standards for the manufacture and storage of our products, subjects us to production risks. In addition to ongoing production risks, process deviations or unanticipated effects of approved process changes may result in non-compliance with regulatory requirements including stability requirements or specifications. Most of our products must be stored and transported within a specified temperature range. For example, if environmental conditions deviate from that range, our products’ remaining shelf-lives could be impaired or their safety and efficacy could be adversely affected, making them unsuitable for use. These deviations may go undetected. The occurrence of actual or suspected production and distribution problems can lead to lost inventories, and in some cases recalls, with consequential reputational damage and the risk of product liability. The investigation and remediation of any identified problems can cause production delays and result in substantial additional expenses. Production of our Affinity product, for example, was suspended in the first quarter of 2019 due to production issues at one of our suppliers. Although our supplier has implemented certain corrective measures, we have determined that the current process does not meet our production standards. Asdirectors and a result, we identified an alternate supplier, and were only able to resume commercial-scale production in the second quartersignificant stockholder, of 2020. This disruption in supply resulted in reduced Affinity revenue. Although we were able to partially offset the lost Affinity revenue by increasing production of our other products, there can be no assurance that we will be able to do so in the event of any future suspensions or failures in the storage or manufacturing of Affinity, Dermagraft (including in connection with the expected suspension of manufacturing of Dermagraft in the fourth quarter of 2021) or our other products. Any future failure in the storage or manufacture of our products or loss in supply could result in a loss of our market share and negatively affect our revenues and operations.
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 global COVID-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 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 the 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: | 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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