Washington, D.C.
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Number Number:nameName of registrantRegistrant as specifiedSpecified in its charter) other jurisdictionOther Jurisdiction ofincorporation or organization)
85 Dan Road
Canton, MA 02021
(Address of principal executive offices) (Zip Code)
(781) 575-0775
(Registrant’s telephone number, including area code)
85 Dan Road Canton, MA |
02021 | |||
(Address of principal executive offices) |
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(Zip Code) |
Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A Common Stock, $0.0001 par value | ORGO | Nasdaq Capital Market |
Large accelerated filer | Accelerated filer | ☐ | ||||
Non-accelerated filer | Smaller reporting company | |||||
Emerging growth company |
As
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Item 4. | 31 | |||||
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Item 1A | 33 | |||||
Item 2. | 33 | |||||
Item 3. | 33 | |||||
Item 4. | 33 | |||||
Item 5. | 33 | |||||
Item 6. | 34 | |||||
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March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 77,458 | $ | 84,394 | ||||
Restricted cash | 500 | 412 | ||||||
Accounts receivable, net | 72,003 | 56,804 | ||||||
Inventory | 29,721 | 27,799 | ||||||
Prepaid expenses and other current assets | 5,557 | 4,935 | ||||||
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Total current assets | 185,239 | 174,344 | ||||||
Property and equipment, net | 62,431 | 60,068 | ||||||
Intangible assets, net | 29,379 | 30,622 | ||||||
Goodwill | 28,772 | 28,772 | ||||||
Operating lease right-of-use assets, net | 12,706 | — | ||||||
Deferred tax asset, net | 18 | 18 | ||||||
Other assets | 636 | 670 | ||||||
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Total assets | $ | 319,181 | $ | 294,494 | ||||
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Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Deferred acquisition consideration | $ | — | $ | 483 | ||||
Current portion of term loan | 16,875 | 16,666 | ||||||
Current portion of finance lease obligations | 3,870 | 3,619 | ||||||
Current portion of operating lease obligations | 4,004 | — | ||||||
Current portion of deferred rent and lease incentive obligation | — | 95 | ||||||
Accounts payable | 23,877 | 23,381 | ||||||
Accrued expenses and other current liabilities | 25,383 | 23,973 | ||||||
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Total current liabilities | 74,009 | 68,217 | ||||||
Line of credit | 10,000 | 10,000 | ||||||
Term loan, net of current portion | 42,876 | 43,044 | ||||||
Deferred acquisition consideration, net of current portion | 1,436 | 1,436 | ||||||
Earnout liability | 3,689 | 3,985 | ||||||
Deferred rent and lease incentive obligation, net of current portion | — | 2,315 | ||||||
Finance lease obligations, net of current portion | 10,516 | 11,442 | ||||||
Operating lease obligations, net of current portion | 11,031 | — | ||||||
Other liabilities | 8,332 | 7,971 | ||||||
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Total liabilities | 161,889 | 148,410 | ||||||
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Commitments and contingencies (Note 18) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued | — | — | ||||||
Common stock, $0.0001 par value; 400,000,000 shares authorized; 128,830,803 and 128,460,381 shares issued; 128,102,255 and 127,731,833 shares outstanding at March 31, 2021 and December 31, 2020, respectively. | 13 | 13 | ||||||
Additional paid-in capital | 298,095 | 296,830 | ||||||
Accumulated deficit | (140,816 | ) | (150,759 | ) | ||||
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Total stockholders’ equity | 157,292 | 146,084 | ||||||
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Total liabilities and stockholders’ equity | $ | 319,181 | $ | 294,494 | ||||
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March 31, | December 31, | |||||||
2022 | 2021 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 107,897 | $ | 113,929 | ||||
Restricted cash | 605 | 599 | ||||||
Accounts receivable, net | 79,477 | 82,460 | ||||||
Inventory , net | 22,737 | 25,022 | ||||||
Prepaid expenses and other current assets | 7,135 | 4,969 | ||||||
Total current assets | 217,851 | 226,979 | ||||||
Property and equipment, net | 84,268 | 79,160 | ||||||
Intangible assets, net | 24,452 | 25,673 | ||||||
Goodwill | 28,772 | 28,772 | ||||||
Operating lease right-of-use | 47,468 | 49,144 | ||||||
Deferred tax asset, net | 31,994 | 31,994 | ||||||
Other assets | 1,467 | 1,537 | ||||||
Total assets | $ | 436,272 | $ | 443,259 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
D eferred acquisition consideration | $ | 1,436 | $ | 1,436 | ||||
Current portion of term loan | 3,126 | 2,656 | ||||||
F inance lease obligations | 101 | 200 | ||||||
Current portion of operating lease obligations | 11,775 | 11,785 | ||||||
Accounts payable | 27,935 | 29,339 | ||||||
Accrued expenses and other current liabilities | 32,419 | 36,589 | ||||||
Total current liabilities | 76,792 | 82,005 | ||||||
Term loan, net of current portion | 69,869 | 70,769 | ||||||
Operating lease obligations, net of current portion | 45,323 | 46,893 | ||||||
Other liabilities | 1,060 | 1,557 | ||||||
Total liabilities | 193,044 | 201,224 | ||||||
Commitments and contingencies (Note 18) | 0 | 0 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaN issued | 0— | 0— | ||||||
Common stock, $0.0001 par value; 400,000,000 shares authorized; 129,615,732 and 129,408,740 shares issued; 128,887,184 and 128,680,192 shares outstanding at March 31, 2022 and December 31, 2021, respectively. | 13 | 13 | ||||||
Additional paid-in capital | 303,261 | 302,155 | ||||||
Accumulated deficit | (60,046 | ) | (60,133 | ) | ||||
Total stockholders’ equity | 243,228 | 242,035 | ||||||
Total liabilities and stockholders’ equity | $ | 436,272 | $ | 443,259 | ||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Net revenue | $ | 102,552 | $ | 61,732 | ||||
Cost of goods sold | 25,495 | 18,793 | ||||||
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Gross profit | 77,057 | 42,939 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative | 58,232 | 52,613 | ||||||
Research and development | 6,209 | 5,410 | ||||||
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Total operating expenses | 64,441 | 58,023 | ||||||
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Income (loss) from operations | 12,616 | (15,084 | ) | |||||
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Other expense, net: | ||||||||
Interest expense, net | (2,470 | ) | (2,510 | ) | ||||
Gain on settlement of deferred acquisition consideration | — | 1,295 | ||||||
Other income (expense), net | (3 | ) | 21 | |||||
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Total other expense, net | (2,473 | ) | (1,194 | ) | ||||
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Net income (loss) before income taxes | 10,143 | (16,278 | ) | |||||
Income tax expense | (200 | ) | (35 | ) | ||||
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Net income (loss) | $ | 9,943 | $ | (16,313 | ) | |||
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Net income (loss), per share: | ||||||||
Basic | $ | 0.08 | $ | (0.16 | ) | |||
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Diluted | $ | 0.07 | $ | (0.16 | ) | |||
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Weighted-average common shares outstanding | ||||||||
Basic | 127,870,065 | 104,486,924 | ||||||
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Diluted | 133,451,950 | 104,486,924 | ||||||
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Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Net revenue | $ | 98,117 | $ | 102,552 | ||||
Cost of goods sold | 25,080 | 25,495 | ||||||
Gross profit | 73,037 | 77,057 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative | 63,578 | 58,232 | ||||||
Research and development | 8,587 | 6,209 | ||||||
Total operating expenses | 72,165 | 64,441 | ||||||
Income from operations | 872 | 12,616 | ||||||
Other expense, net: | ||||||||
Interest expense | (737 | ) | (2,470 | ) | ||||
Other expense, net | (3 | ) | (3 | ) | ||||
Total other expense, net | (740 | ) | (2,473 | ) | ||||
Net income before income taxes | 132 | 10,143 | ||||||
Income tax expense | (45 | ) | (200 | ) | ||||
Net income | $ | 87 | $ | 9,943 | ||||
Net income, per share: | ||||||||
Basic | $ | 0.00 | $ | 0.08 | ||||
Diluted | $ | 0.00 | $ | 0.07 | ||||
Weighted-average common shares outstanding | ||||||||
Basic | 128,788,721 | 127,870,065 | ||||||
Diluted | 132,805,154 | 133,451,950 | ||||||
Three Months Ended March 31, 2021 | ||||||||||||||||||||
Additional | ||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Total | |||||||||||||||||
Shares | Amount | Capital | Deficit | Stockholders’ Equity | ||||||||||||||||
Balance as of December 31, 2020 (as reported) | 127,731,833 | $ | 13 | $ | 299,129 | $ | (153,058 | ) | $ | 146,084 | ||||||||||
Adjustment due to Private Warrant reclassification | — | — | (2,299 | ) | 2,299 | — | ||||||||||||||
Balance as of December 31, 2020 (as adjusted) | 127,731,833 | 13 | 296,830 | (150,759 | ) | 146,084 | ||||||||||||||
Exercise of stock options | 285,344 | — | 984 | — | 984 | |||||||||||||||
Vesting of RSUs, net of shares surrendered to pay taxes | 85,078 | — | (417 | ) | — | (417 | ) | |||||||||||||
Stock-based compensation expense | — | — | 698 | — | 698 | |||||||||||||||
Net income | — | — | — | 9,943 | 9,943 | |||||||||||||||
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Balance as of March 31, 2021 | 128,102,255 | $ | 13 | $ | 298,095 | $ | (140,816 | ) | $ | 157,292 | ||||||||||
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Three Months Ended March 31, 2020 | ||||||||||||||||||||
Additional | ||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Total | |||||||||||||||||
Shares | Amount | Capital | Deficit | Stockholders’ Equity | ||||||||||||||||
Balance as of December 31, 2019 (as reported) | 104,870,886 | $ | 10 | $ | 226,580 | $ | (171,007 | ) | $ | 55,583 | ||||||||||
Adjustment due to Private Warrant reclassification | — | — | (2,299 | ) | 2,299 | — | ||||||||||||||
Balance as of December 31, 2019 (as adjusted) | 104,870,886 | 10 | 224,281 | (168,708 | ) | 55,583 | ||||||||||||||
Exercise of stock options | 489,129 | 1 | 815 | — | 816 | |||||||||||||||
Stock-based compensation expense | — | — | 209 | — | 209 | |||||||||||||||
Net loss | — | — | — | (16,313 | ) | (16,313 | ) | |||||||||||||
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Balance as of March 31, 2020 (as adjusted) | 105,360,015 | $ | 11 | $ | 225,305 | $ | (185,021 | ) | $ | 40,295 | ||||||||||
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Three Months Ended March 31, 2022 | ||||||||||||||||||||
Additional | ||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Total | |||||||||||||||||
Shares | Amount | Capital | Deficit | Stockholders’ Equity | ||||||||||||||||
Balance as of December 31, 2021 | 128,680,192 | $ | 13 | $ | 302,155 | $ | (60,133 | ) | $ | 242,035 | ||||||||||
Exercise of stock options | 86,121 | — | 291 | — | 291 | |||||||||||||||
Vesting of RSUs, net of shares surrendered to pay taxes | 120,871 | — | (488 | ) | — | (488 | ) | |||||||||||||
Stock-based compensation expense | — | — | 1,303 | — | 1,303 | |||||||||||||||
Net income | — | — | — | 87 | 87 | |||||||||||||||
Balance as of March 31, 2022 | 128,887,184 | 13 | 303,261 | (60,046 | ) | 243,228 | ||||||||||||||
Three Months Ended March 31, 2021 | ||||||||||||||||||||
Additional | ||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Total | |||||||||||||||||
Shares | Amount | Capital | Deficit | Stockholders’ Equity | ||||||||||||||||
Balance as of December 31, 2020 | 127,731,833 | 13 | 296,830 | (155,035 | ) | 141,808 | ||||||||||||||
Exercise of stock options | 285,344 | — | 984 | — | 984 | |||||||||||||||
Vesting of RSUs, net of shares surrendered to pay taxes | 85,078 | — | (417 | ) | — | (417 | ) | |||||||||||||
Stock-based compensation expense | — | — | 698 | — | 698 | |||||||||||||||
Net income | — | — | — | 9,943 | 9,943 | |||||||||||||||
Balance as of March 31, 2021 | 128,102,255 | $ | 13 | $ | 298,095 | $ | (145,092 | ) | $ | 153,016 | ||||||||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 9,943 | $ | (16,313 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Depreciation | 1,010 | 902 | ||||||
Amortization of intangible assets | 1,243 | 817 | ||||||
Amortization of operating lease right-of-use assets | 1,129 | — | ||||||
Non-cash interest expense | 72 | 46 | ||||||
Deferred interest expense | 525 | 470 | ||||||
Deferred rent expense and lease incentive obligation | — | 92 | ||||||
Gain on settlement of deferred acquisition consideration | — | (1,295 | ) | |||||
Recovery of certain notes receivable from related parties | (179 | ) | — | |||||
Provision recorded for sales returns and doubtful accounts | 1,103 | 217 | ||||||
Loss on disposal of property and equipment | 239 | 201 | ||||||
Adjustment for excess and obsolete inventories | 2,290 | 769 | ||||||
Stock-based compensation | 698 | 209 | ||||||
Change in fair value of Earnout liability | (296 | ) | — | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (16,301 | ) | 6,325 | |||||
Inventory | (4,212 | ) | (4,287 | ) | ||||
Prepaid expenses and other current assets | (622 | ) | (2,099 | ) | ||||
Operating leases | (1,210 | ) | — | |||||
Accounts payable | 1,842 | (1,910 | ) | |||||
Accrued expenses and other current liabilities | 1,411 | (1,274 | ) | |||||
Other liabilities | (164 | ) | (153 | ) | ||||
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Net cash used in operating activities | (1,479 | ) | (17,283 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (4,957 | ) | (4,243 | ) | ||||
Proceeds from the repayment of notes receivable from related parties | 179 | — | ||||||
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Net cash used in investing activities | (4,778 | ) | (4,243 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from term loan | — | 10,000 | ||||||
Payments of withholding taxes in connection with RSUs vesting | (417 | ) | — | |||||
Proceeds from the exercise of stock options | 984 | 816 | ||||||
Principal repayments of finance lease obligations | (675 | ) | (544 | ) | ||||
Payment of deferred acquisition consideration | (483 | ) | (2,042 | ) | ||||
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Net cash (used in) provided by financing activities | (591 | ) | 8,230 | |||||
Change in cash and restricted cash | (6,848 | ) | (13,296 | ) | ||||
Cash and restricted cash, beginning of period | 84,806 | 60,370 | ||||||
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Cash and restricted cash, end of period | $ | 77,958 | $ | 47,074 | ||||
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Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 1,937 | $ | 2,244 | ||||
Cash paid for income taxes | $ | — | $ | — | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Purchases of property and equipment included in accounts payable and accrued expenses | $ | 306 | $ | 2,942 | ||||
Right-of-use assets obtained through operating lease obligations | $ | 310 | $ | — |
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 87 | $ | 9,943 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation | 1,347 | 1,010 | ||||||
Amortization of intangible assets | 1,221 | 1,243 | ||||||
Amortization of operating lease right-of-use | 1,847 | 1,129 | ||||||
Non-cash interest expense | 108 | 72 | ||||||
Deferred interest expense | 151 | 525 | ||||||
Provision recorded for doubtful accounts | 40 | 921 | ||||||
Loss on disposal of property and equipment | 0 | 239 | ||||||
Adjustment for excess and obsolete inventories | 2,205 | 2,290 | ||||||
Stock-based compensation | 1,303 | 698 | ||||||
Change in fair value of Earnout liability | 0 | (296 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 2,942 | (16,119 | ) | |||||
Inventory | 80 | (4,212 | ) | |||||
Prepaid expenses and other current assets | (2,165 | ) | (622 | ) | ||||
Operating leases | (1,751 | ) | (1,210 | ) | ||||
Accounts payable | (1,186 | ) | 1,842 | |||||
Accrued expenses and other current liabilities | (4,828 | ) | 1,411 | |||||
Other liabilities | 10 | (164 | ) | |||||
Net cash provided by (used in) operating activities | 1,411 | (1,300 | ) | |||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (6,672 | ) | (4,957 | ) | ||||
Net cash used in investing activities | (6,672 | ) | (4,957 | ) | ||||
Cash flows from financing activities: | ||||||||
Payments of term loan | (469 | ) | 0 | |||||
Payments of withholding taxes in connection with RSUs vesting | (488 | ) | (417 | ) | ||||
Proceeds from the exercise of stock options | 291 | 984 | ||||||
Principal repayments of finance lease obligations | (99 | ) | (675 | ) | ||||
Payment of deferred acquisition consideration | 0 | (483 | ) | |||||
Net cash used in financing activities | (765 | ) | (591 | ) | ||||
Change in cash , cash equivalents, and restricted cash | (6,026 | ) | (6,848 | ) | ||||
Cash , cash equivalents, and restricted cash, beginning of period | 114,528 | 84,806 | ||||||
Cash , cash equivalents, and restricted cash, end of period | $ | 108,502 | $ | 77,958 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 627 | $ | 1,937 | ||||
Cash paid for income taxes | $ | 4 | $ | 0 | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Purchases of property and equipment included in accounts payable and accrued expenses | $ | 1,869 | $ | 306 | ||||
Right-of-use | $ | 171 | $ | 310 |
Merger with Avista Healthcare Public Acquisition Corp
On December 10, 2018, Avista Healthcare Public Acquisition Corp., our predecessor company (“AHPAC”), consummated the previously announced merger (the “Avista Merger”) pursuant to an Agreement and Plan of Merger, dated as of August 17, 2018 (as amended, the “Avista Merger Agreement”), by and among AHPAC, Avista Healthcare Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of AHPAC (“Avista Merger Sub”) and Organogenesis Inc., a Delaware corporation (“Organogenesis Inc.”). As a result of the Avista Merger and the other transactions contemplated by the Avista Merger Agreement, Avista Merger Sub merged with and into Organogenesis Inc., with Organogenesis Inc. surviving the Avista Merger and becoming a wholly-owned subsidiary of AHPAC. AHPAC changed its name to Organogenesis Holdings Inc. (ORGO).
The Avista Merger was accounted for as a reverse merger in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Under this method of accounting, AHPAC was treated as the “acquired” company for accounting purposes. This determination was primarily based on Organogenesis Inc.’s equity holders having a majority of the voting power of the combined company, Organogenesis Inc. comprising the ongoing operations of the combined entity, Organogenesis Inc. comprising a majority of the governing body of the combined company, and Organogenesis Inc.’s senior management comprising the senior management of the combined company. Accordingly, for accounting purposes, the Avista Merger was treated as the equivalent of Organogenesis Inc. issuing stock for the net assets of AHPAC, accompanied by a recapitalization. The net assets of AHPAC were recorded at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Avista Merger are those of Organogenesis Inc.
Liquidity and Financial Conditions
In accordance with ASC 205-40, Going Concern (“ASC 205-40”), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Since its inception, the Company has funded its operations primarily with cash flow from product sales, proceeds from loans from affiliates and entities controlled by its affiliates, sales of its Class A common stock and third-party debt. As of March 31, 2021, the Company had an accumulated deficit of $140,816 and working capital of $111,230. The Company also had up to $30,000 available (subject to Borrowing Base) for future revolving borrowings under our Revolving Facility (see Note “13. Long-Term Debt Obligations”). For the three months ended March 31, 2021, the Company has generated net income of $9,943 and used $1,479 of cash from operations. The Company expects that its cash of $77,458 and other components of working capital of $33,772 as of March 31, 2021, plus net cash flows from product sales and availability under the 2019 Credit Agreement, will be sufficient to fund its operating expenses, capital expenditure requirements and debt service payments for at least 12 months beyond the filing date of this quarterly report.
The Company expects to continue investing in product development, sales and marketing, and customer support for its products. The Company may seek to raise additional funding through public and/or private equity financings, debt financings, or other strategic transactions. There can be no assurance that the Company will be able to obtain additional debt or equity financing on terms acceptable to the Company, on a timely basis or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations, and financial condition.
Report.
Summaryestimates and assumptions.
financial statements.February 2016,December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting StandardsStandard Update (“ASU”)2016-02 (“ASU 2016-02”), Leases (Topic 842), as further amended (“ASC 842”),2019-12,increase transparencysimplify and comparability among organizations by requiringreduce the recognitioncost of ataccounting for income taxes. The new guidance removes certain exceptions for recognizing deferred taxes for foreign investments, the lease commencementincremental approach to performing intraperiod allocation, and calculating income taxes in interim periods for year to date losses that exceed anticipated full year losses. The standard also adds guidance to reduce complexity in certain areas, including accounting for franchise taxes that are partially based on income, transactions with a lease liability for the obligation to make lease payments, andgovernment that result with a right-of-use (“ROU”) asset for the right to use the underlying asset, on the balance sheet. Although the Company remains an emerging growth company until December 31, 2021, it elected to early adopt ASC 842 on January 1, 2021. ASC 842 requires a modified retrospective transition method that could either be applied at the earliest comparative periodstep up in the tax basis of goodwill, changes in tax law enacted during interim periods, and allocating taxes to members of a consolidated group which are not subject to tax. For public business entities, the amendments in ASUor in the period of adoption.have not yet been issued, including interim periods. The Company elected to use the period of adoption (January 1, 2021) transition method and therefore did not recast prior periods. Results for reporting periods beginning on January 1, 2021 are presented under ASC 842, while prior period amounts continue to be reported and disclosed in accordance with the Company’s historical accounting treatment under Accounting Standards Codification 840, Leases (“ASC 840”). In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company: (1) to carry forward the historical lease classification; (2) not to reassess whether expired or existing contracts are or contain leases; and, (3) not to reassess the treatment of initial direct costs for existing leases. The Company made an accounting policy election under ASC 842 not to recognize ROU assets and lease liabilities for leases with a term of 12 months or less. The Company also elected to account for lease components and the associated non-lease components in the contracts as a single lease component for most of the leased assets. Upon the adoption ofadopted this standard on January 1, 2021 and noted no impact to the Company recognized an operating lease liability of $15,935, representing the present value of the minimum lease payments remaining as of the adoption date, and a right-of-use asset in the amount of $13,525. The right-of-use asset reflects adjustments for de-recognition of deferred lease liabilities and lease incentives. The Company’s accounting for finance leases (previously classified as capital leases under ASC 840) remained substantially unchanged. See Note “17. Leases” for further disclosures.TheAs the Company iswas a smaller reporting company and followswhen the private company adoption timelines andstandard was issued, the Company took advantage of the extended transition period and will adopt this standard and the related improvements on January 1, 2023 by recognizing a cumulative-effect adjustment to retained earnings for any impact. The Company is currently assessing the adoption of
This transaction was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations.
Based upon the valuation, the total purchase price allocation was as follows:
Total purchase price | $ | 19,024 | ||||||
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Assets acquired: | ||||||||
Accounts receivable | 1,155 | |||||||
Inventory | 1,230 | |||||||
Prepaid expenses and other current assets | 5 | |||||||
Property and equipment | 85 | |||||||
Intangible assets | 13,570 | |||||||
Other assets | 4 | |||||||
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Total assets acquired | 16,049 | |||||||
Liabilities assumed: | ||||||||
Accounts payable | 27 | |||||||
Accrued expenses and other current liabilities | 231 | |||||||
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Total liabilities assumed | 258 | |||||||
Total identifiable assets acquired, net | 15,791 | |||||||
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Goodwill | $ | 3,233 | ||||||
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The purchase price allocation resulted in goodwill of $3,233, which will be deductible for income tax purposes. The resulting amount of goodwill is primarily attributed to expected synergies from cross-sale opportunities and future growth. Intangible assets of $13,570 include customer relationships of $10,690, developed technologies of $2,050, non-competition agreements of $750, and trademarks of $80, which are being amortized on a straight-line basis, over weighted-average useful lives of 10 years, 6 years, 5 years and 1 year, respectively.
At the time of the acquisition, CPN had approximately 30 employees. The results of operations of CPN have been included in the Company’s consolidated financial statements beginning on the Acquisition Date.
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Advanced Wound Care | $ | 90,708 | $ | 51,288 | ||||
Surgical & Sports Medicine | 11,844 | 10,444 | ||||||
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Total net revenue | $ | 102,552 | $ | 61,732 | ||||
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Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Advanced Wound Care | $ | 90,950 | $ | 90,708 | ||||
Surgical & Sports Medicine | 7,167 | 11,844 | ||||||
Total net revenue | $ | 98,117 | $ | 102,552 | ||||
The following table presents information about
Fair Value Measurements | ||||||||||||||||
as of March 31, 2021 Using: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Earnout liability | $ | — | $ | — | $ | 3,689 | $ | 3,689 | ||||||||
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$ | — | $ | — | $ | 3,689 | $ | 3,689 | |||||||||
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Fair Value Measurements | ||||||||||||||||
as of December 31, 2020 Using: | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Liabilities: | ||||||||||||||||
Earnout liability | $ | — | $ | — | $ | 3,985 | $ | 3,985 | ||||||||
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$ | — | $ | — | $ | 3,985 | $ | 3,985 | |||||||||
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Earnout liability | ||||
Balance as of December 31, 2020 | $ | 3,985 | ||
Change in fair value | (296 | ) | ||
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Balance as of March 31, 2021 | $ | 3,689 | ||
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Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Beginning balance | $ | 0 | $ | 3,985 | ||||
Change in fair value | 0 | (296 | ) | |||||
Ending balance | $ | 0 | $ | 3,689 | ||||
2021.
March 31 | December 31, | |||||||
2021 | 2020 | |||||||
Accounts receivable | $ | 78,079 | $ | 61,792 | ||||
Less — allowance for sales returns and doubtful accounts | (6,076 | ) | (4,988 | ) | ||||
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$ | 72,003 | $ | 56,804 | |||||
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March 31 | December 31, | |||||||
2022 | 2021 | |||||||
Accounts receivable | $ | 84,604 | $ | 87,613 | ||||
Less — allowance for doubtful accounts | (5,127 | ) | (5,153 | ) | ||||
$ | 79,477 | $ | 82,460 | |||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Balance at beginning of period | $ | 4,988 | $ | 3,049 | ||||
Additions (reductions) | 1,103 | 217 | ||||||
Write-offs | (15 | ) | (62 | ) | ||||
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Balance at end of period | $ | 6,076 | $ | 3,204 | ||||
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Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Balance at beginning of period | $ | 5,153 | $ | 2,669 | ||||
Additions | 40 | 921 | ||||||
Write-offs | (66 | ) | (14 | ) | ||||
Balance at end of period | $ | 5,127 | $ | 3,576 | ||||
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Raw materials | $ | 11,436 | $ | 10,075 | ||||
Work in process | 764 | 1,305 | ||||||
Finished goods | 17,521 | 16,419 | ||||||
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$ | 29,721 | $ | 27,799 | |||||
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March 31, | December 31, | |||||||
2022 | 2021 | |||||||
Raw materials | $ | 9,524 | $ | 9,023 | ||||
Work in process | 995 | 991 | ||||||
Finished goods | 12,218 | 15,008 | ||||||
$ | 22,737 | $ | 25,022 | |||||
March 31, 2021 | December 31, 2020 | |||||||
Prepaid subscriptions | $ | 2,529 | $ | 2,013 | ||||
Prepaid conferences and marketing expenses | 240 | 63 | ||||||
Prepaid deposits | 1,586 | 1,438 | ||||||
Reimbursement of offering expenses | — | 1,009 | ||||||
Other | 1,202 | 412 | ||||||
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$ | 5,557 | $ | 4,935 | |||||
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Prepaid deposits
March 31, 2022 | December 31, 2021 | |||||||
Subscriptions | $ | 2,685 | $ | 2,745 | ||||
Conferences and marketing expenses | 2,060 | 538 | ||||||
Deposits | 1,344 | 1,216 | ||||||
Insurance | 1,001 | 358 | ||||||
Other | 45 | 112 | ||||||
$ | 7,135 | $ | 4,969 | |||||
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Leasehold improvements | $ | 39,977 | $ | 39,574 | ||||
Furniture, computers and equipment | 48,792 | 48,236 | ||||||
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88,769 | 87,810 | |||||||
Accumulated depreciation and amortization | (70,525 | ) | (69,521 | ) | ||||
Construction in progress | 44,187 | 41,779 | ||||||
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$ | 62,431 | $ | 60,068 | |||||
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March 31, 2022 | December 31, 2021 | |||||||
Leasehold improvements | $ | 33,973 | $ | 30,531 | ||||
Buildings | 4,943 | 4,943 | ||||||
Furniture, computers and equipment | 54,822 | 53,959 | ||||||
93,738 | 89,433 | |||||||
Accumulated depreciation and amortization | (59,075 | ) | (57,729 | ) | ||||
Construction in progress | 49,605 | 47,456 | ||||||
$ | 84,268 | $ | 79,160 | |||||
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 March 31, 2021, $250 was remaining and was recorded in accrued expenses and other current liabilities on the consolidated balance sheets.
2021.
Original | Accumulated | Net Book | ||||||||||
Cost | Amortization | Value | ||||||||||
Developed technology | $ | 32,620 | $ | (15,175 | ) | $ | 17,445 | |||||
Trade names and trademarks | 2,080 | (981 | ) | 1,099 | ||||||||
Customer relationships | 10,690 | (579 | ) | 10,111 | ||||||||
Non-compete agreements | 1,010 | (286 | ) | 724 | ||||||||
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Total | $ | 46,400 | $ | (17,021 | ) | $ | 29,379 | |||||
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Original Cost | Accumulated Amortization | Net Book Value | ||||||||||
Developed technology | $ | 32,620 | $ | (18,573 | ) | $ | 14,047 | |||||
Trade names and trademarks | 2,080 | (1,236 | ) | 844 | ||||||||
Customer relationships | 10,690 | (1,648 | ) | 9,042 | ||||||||
Independent sales agency network | 4,500 | (4,500 | ) | — | ||||||||
Patent | 7,623 | (7,623 | ) | — | ||||||||
Non-compete agreements | 1,010 | (491 | ) | 519 | ||||||||
Total | $ | 58,523 | $ | (34,071 | ) | $ | 24,452 | |||||
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 | ||||||||
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Total | $ | 46,400 | $ | (15,778 | ) | $ | 30,622 | |||||
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2021:
Original Cost | Accumulated Amortization | Net Book Value | ||||||||||
Developed technology | $ | 32,620 | $ | (17,709 | ) | $ | 14,911 | |||||
Trade names and trademarks | 2,080 | (1,183 | ) | 897 | ||||||||
Customer relationship | 10,690 | (1,381 | ) | 9,309 | ||||||||
Independent sales agency network | 4,500 | (4,500 | ) | — | ||||||||
Patent | 7,623 | (7,623 | ) | — | ||||||||
Non-compete agreements | 1,010 | (454 | ) | 556 | ||||||||
Total | $ | 58,523 | $ | (32,850 | ) | $ | 25,673 | |||||
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Accrued personnel costs | $ | 20,374 | $ | 18,943 | ||||
Accrued royalties | 2,851 | 2,971 | ||||||
Other | 2,158 | 2,059 | ||||||
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$ | 25,383 | $ | 23,973 | |||||
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March 31, 2022 | December 31, 2021 | |||||||
Personnel costs | $ | 23,060 | $ | 26,865 | ||||
Royalties | 3,190 | 3,458 | ||||||
Accrued but unpaid lease obligations and interest | 3,981 | 3,963 | ||||||
Other | 2,188 | 2,303 | ||||||
$ | 32,419 | $ | 36,589 | |||||
Employee | Facility | |||||||
Liability balance as of December 31, 2020 | $ | 618 | $ | — | ||||
Expenses | 910 | 17 | ||||||
Payments | — | — | ||||||
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Liability balance as of March 31, 2021 | $ | 1,528 | $ | 17 | ||||
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Employee | Other | Total | ||||||||||
Liability balance as of December 31, 2021 | $ | 2,517 | $ | 651 | $ | |||||||
Expenses | 115 | 149 | 264 | |||||||||
Payments | (2,517 | ) | (783 | ) | (3,300 | ) | ||||||
Liability balance as of March 31, 2022 | $ | 115 | $ | 17 | $ | 132 | ||||||
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Line of credit | $ | 10,000 | $ | 10,000 | ||||
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Term loan | 60,000 | 60,000 | ||||||
Less debt discount and debt issuance cost | (249 | ) | (290 | ) | ||||
Less current maturities | (16,875 | ) | (16,666 | ) | ||||
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Term loan, net of debt discount, debt issuance cost and current maturities | $ | 42,876 | $ | 43,044 | ||||
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2019
March 31, 2022 | December 31, 2021 | |||||||
Line of credit | $ | 0 | $ | 0 | ||||
Term loan | 73,593 | 74,062 | ||||||
Less debt discount and debt issuance cost | (598 | ) | (637 | ) | ||||
Term loan, net of debt discount, debt issuance cost | $ | 72,995 | $ | 73,425 | ||||
The Term Loan Facility is structured in three tranches, as follows: (i)
The Company’s final payment on the Term Loan Facility, due on the Term Loan Maturity Date, will include all outstanding principal and accrued and unpaid interest under the Term Loan Facility, plus a final payment (the “Final Payment”) equal to the original aggregate principal amount of the Term Loan Facility multiplied by 6.5%., $1,875. The Company may prepay the Term Loan Facility, subjectprovided that any Term Loans prepaid prior to paying the Prepayment Premium (described below) and the Final Payment. The Prepayment Premium isAugust 6, 2022 must be accompanied by a prepayment premium equal to 1.50%1.00% of the outstanding principalaggregate amount of the Term Loan Facility if the prepayment occurs after the two year anniversary but prior to the three year anniversary of the closing, and 0.50% thereafter.Loans prepaid. Once repaid, amounts borrowed under the Term Loan Facility may not
Total Net Leverage Ratio. The Company may elect to reduce or terminate the Revolving Facility in its entirety at any time by repaying all outstanding principal, unpaid accrued interest and, awith respect to any such reduction or termination fee equalof the Revolving Commitments made prior to 2.00%August 6, 2022, 1.00% of the aggregate amount of the Revolving Commitments so reduced or terminated ifterminated.
The Company is required to achievecomply with certain financial covenants underincluding the 2019 Credit Agreement, including Minimum Trailing Twelve Month Consolidated RevenueFixed Charge Coverage Ratio and Non-PuraPly Revenue,Consolidated Total Net Leverage Ratio, tested quarterly. In addition, the Company is also required to maintain Minimum Liquidity equal tomake representations and warranties and comply with certain
As of March 31, 2021, theThe Company had outstanding borrowings of $60,000$73,593 and $74,062 under the Term Loan Facility and $10,000$0 under the Revolving Facility with up to $30,000$125,000 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 $2,144 and $1,858borrowings as of March 31, 20212022 and December 31, 2020, respectively, was included in other liabilities on the consolidated balance sheets.2021, respectively. The Company incurredrecorded additional debt issuance costs and related fees of $554$604 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 incurredrecorded debt issuance costs and related fees of $370,$1,223, which are recorded as other assets. Both of these costs are being amortized to interest expense through the maturity date of the facilities.
2021 | $ | 11,250 | ||
2022 | 22,500 | |||
2023 | 22,500 | |||
2024 | 13,750 | |||
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Total | $ | 70,000 | ||
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2022 | $ | 2,343 | ||
2023 | 4,687 | |||
2024 | 5,625 | |||
2025 | 6,563 | |||
2026 | 54,375 | |||
Total | $ | 73,593 | ||
March 31 | December 31, | |||||||
2021 | 2020 | |||||||
Shares reserved for issuance for outstanding options | 7,171,415 | 6,425,040 | ||||||
Shares reserved for issuance for outstanding restricted stock units | 933,214 | 806,048 | ||||||
Shares reserved for issuance for future grants | 5,578,422 | 6,832,649 | ||||||
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Total shares of authorized common stock reserved for future issuance | 13,683,051 | 14,063,737 | ||||||
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March 31 2022 | December 31, 2021 | |||||||
Shares reserved for issuance for outstanding options | 7,924,792 | 6,596,969 | ||||||
Shares reserved for issuance for outstanding restricted stock units | 1,496,853 | 764,871 | ||||||
Shares reserved for issuance for future grants | 3,373,334 | 5,644,691 | ||||||
Total shares of authorized common stock reserved for future issuance | 12,794,979 | 13,006,531 | ||||||
As of March 31, 2021, a
There has been no change to the total authorized shares since the adoption of the 2018 Plan.
In the three months ended March 31, 2021, the
Number of Shares | Weighted Average Grant Date Fair Value | |||||||
Unvested at December 31, 2020 | 806,048 | $ | 3.82 | |||||
Granted | 284,708 | 14.33 | ||||||
Vested | (133,811 | ) | 4.04 | |||||
Canceled/Forfeited | (23,731 | ) | 5.95 | |||||
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Unvested at March 31, 2021 | 933,214 | $ | 6.94 | |||||
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Number of Shares | Weighted Average Grant Date Fair Value | |||||||
Unvested at December 31, 2021 | 764,871 | $ | 7.52 | |||||
Granted | 931,431 | 7.59 | ||||||
Vested | (179,714 | ) | 7.81 | |||||
Canceled/Forfeited | (19,735 | ) | 6.83 | |||||
Unvested at March 31, 2022 | 1,496,853 | $ | 7.54 | |||||
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Risk-free interest rate | 1.92 | % | 0.82 | % | ||||
Expected term (in years) | 6.25 | 6.21 | ||||||
Expected volatility | 50.66 | % | 39.30 | % | ||||
Expected dividend yield | 0.0 | % | 0.0 | % | ||||
Exercise price | $ | 8.03 | $ | 13.54 | ||||
Underlying stock price | $ | 7.87 | $ | 13.54 |
March 31, | ||||
2021 | ||||
Risk-free interest rate | 0.82 | % | ||
Expected term (in years) | 6.21 | |||
Expected volatility | 39.30 | % | ||
Expected dividend yield | 0.0 | % | ||
Exercise price | $ | 13.54 | ||
Underlying stock price | $ | 13.54 |
$3.94 and $5.31, respectively.
Weighted | ||||||||||||||||
Average | ||||||||||||||||
Weighted | Remaining | |||||||||||||||
Average | Contractual | Aggregate | ||||||||||||||
Number of | Exercise | Term | Intrinsic | |||||||||||||
Shares | Price | (in years) | Value | |||||||||||||
Outstanding as of December 31, 2020 | 6,620,318 | $ | 2.33 | 5.22 | $ | 34,458 | ||||||||||
Granted | 1,037,099 | 13.54 | ||||||||||||||
Exercised | (480,622 | ) | 2.04 | 4,283 | ||||||||||||
Canceled / forfeited | (5,380 | ) | 4.10 | |||||||||||||
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Outstanding as of March 31, 2021 | 7,171,415 | 3.96 | 5.80 | 102,239 | ||||||||||||
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Options exercisable as of March 31, 2021 | 4,418,977 | 1.64 | 3.76 | 73,271 | ||||||||||||
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Options vested or expected to vest as of March 31, 2021 | 6,588,701 | $ | 3.54 | 5.50 | $ | 96,754 | ||||||||||
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2021:
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||||||
Outstanding as of December 31, 2021 | 6,596,969 | $ | 4.10 | 5.20 | $ | 38,524 | ||||||||||
Granted | 1,418,224 | 8.03 | ||||||||||||||
Exercised | (86,121 | ) | 3.38 | 441 | ||||||||||||
Canceled / forfeited | (4,280 | ) | 2.69 | |||||||||||||
Outstanding as of March 31, 2022 | 7,924,792 | 4.82 | 5.83 | 29,053 | ||||||||||||
Options exercisable as of March 31, 2022 | 4,600,567 | 2.52 | 3.57 | 25,113 | ||||||||||||
Options vested or expected to vest as of March 31, 2022 | 7,215,073 | $ | 4.44 | 5.50 | $ | 28,567 | ||||||||||
As of December 31, 2019, there were partial recourse notes outstanding totaling $635. These notes were taken by a former executive to exercise his 675,990 shares of stock options and the notes were secured with these 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 was outstanding and 195,278 shares were not considered outstanding for accounting purposes. In the three months ended March 31, 2021, the former executive repaid the remaining principal balance of the notes (see Note “19. Related Parties Transactions”). The repayments were treated as the exercise price for 195,278 shares of the options and were included in the consolidated statement of stockholders’ equity. As of March 31, 2021, $0 of the principal balance of the partial recourse notes was outstanding and all of the 675,990 shares used to secure the notes were considered outstanding for accounting purposes.
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Numerator: | ||||||||
Net Income (loss) | $ | 9,943 | $ | (16,313 | ) | |||
Denominator: | ||||||||
Weighted average common shares outstanding —basic | 127,870,065 | 104,486,924 | ||||||
Dilutive effect of restricted stock units | 527,658 | — | ||||||
Dilutive effect of options | 5,054,227 | — | ||||||
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Weighted-average common shares outstanding—diluted | 133,451,950 | 104,486,924 | ||||||
Earnings (loss) per share—basic | $ | 0.08 | $ | (0.16 | ) | |||
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Earnings (loss) per share—diluted | $ | 0.07 | $ | (0.16 | ) | |||
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Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Numerator: | ||||||||
Net Income | $ | 87 | $ | 9,943 | ||||
Denominator: | ||||||||
Weighted average common shares outstanding —basic | 128,788,721 | 127,870,065 | ||||||
Dilutive effect of restricted stock units | 264,075 | 527,658 | ||||||
Dilutive effect of options | 3,752,358 | 5,054,227 | ||||||
Weighted-average common shares outstanding—diluted | 132,805,154 | 133,451,950 | ||||||
Earnings per share—basic | $ | 0.00 | $ | 0.08 | ||||
Earnings per share—diluted | $ | 0.00 | $ | 0.07 | ||||
In August 2020, the Company entered into a lease for approximately 23,000 square feet in San Diego, California for office and laboratory use. The lease commences on April 1, 2021. The initial lease term is ten years from the lease commencement date, with an option to extend the term for a period of five years. Annual lease payments during the first year are $1,562 with 3% increase each year during the lease term. A security deposit of $237 is required throughout the term of the lease.
In conjunction with the acquisition of NuTech Medical in March 2017, the Company entered into an operating lease with Oxmoor Holdings, LLC, an entity that is affiliated with the former sole shareholder of NuTech Medical, related to the 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.
December 31, 2021.
Effective April 1, 2019, the Company agreed to accrue interest on the accrued but unpaid lease obligations at an interest rate equal to the rate charged in the 2019 Credit Agreement. These accrued but unpaid lease obligations as well as the accrued interest on these obligations were subordinated to the 2019 Credit Agreement. With the termination of the 2019 Credit Agreement and the execution of the 2021 Credit Agreement (see Note “13. Long-Term Debt Obligations”). The accrued interest is also in August 2021, these obligations are no longer subordinated to the 2019 Credit AgreementCompany’s existing loans.
March 31 | December 31, | |||||||
2022 | 2021 | |||||||
Principal portion of rent in arrears | 7,246 | 7,246 | ||||||
Unpaid operating and common area maintenance costs | 52 | 558 | ||||||
Total accrued but unpaid lease obligations | 7,298 | 7,804 | ||||||
Accrued interest on accrued but unpaid lease obligations | 1,956 | 1,938 |
common area maintenance costs, and the accrued interest on the accrued but unpaid lease obligations were included in accrued expenses and other current liabilities on the consolidated balance sheets as of March 31, 2022 and December 31, 2021
Classification | Three Months Ended March 31, 2021 | |||||||
Finance lease | ||||||||
Amortization of right-of-use assets | COGS and SG&A | $ | 299 | |||||
Interest on lease liabilities | Interest Expense | 349 | ||||||
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Total Finance lease cost | 648 | |||||||
Operating lease cost | COGS, R&D, SG&A | 1,280 | ||||||
Short-term lease cost | COGS, R&D, SG&A | 715 | ||||||
Variable lease cost | COGS, R&D, SG&A | 1,363 | ||||||
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Total lease cost | $ | 4,006 | ||||||
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Three Months Ended March 31, | ||||||||||
Classification | 2022 | 2021 | ||||||||
Finance lease | ||||||||||
Amortization of right-of-use | COGS and SG&A | $ | 107 | $ | 299 | |||||
Interest on lease liabilities | Interest Expense | 5 | 349 | |||||||
Total Finance lease cost | 112 | 648 | ||||||||
Operating lease cost | COGS, R&D, SG&A | 2,434 | 1,280 | |||||||
Short-term lease cost | COGS, R&D, SG&A | 669 | 715 | |||||||
Variable lease cost | COGS, R&D, SG&A | 918 | 1,363 | |||||||
Total lease cost | $ | 4,133 | $ | 4,006 | ||||||
March 31, 2021 | January 1, 2021 | |||||||
Property and equipment, gross | $ | 22,989 | $ | 22,989 | ||||
Accumulated depreciation | (15,274 | ) | (14,974 | ) | ||||
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Property and equipment, net | $ | 7,715 | $ | 8,015 | ||||
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Current portion of finance lease obligations | $ | 3,870 | $ | 3,619 | ||||
Finance lease long-term obligations | 10,516 | 11,442 | ||||||
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Total finance lease liabilities | $ | 14,386 | $ | 15,061 | ||||
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March 31, 2022 | December 31, 2021 | |||||||
Property and equipment, gross | $ | 1,174 | $ | 1,174 | ||||
Accumulated depreciation | (1,067 | ) | (961 | ) | ||||
Property and equipment, net | $ | 107 | $ | 213 | ||||
Finance lease obligations | $ | 101 | $ | 200 | ||||
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Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
Operating cash flows for operating leases | $ | 2,337 | $ | 1,362 | ||||
Operating cash flows for finance leases | $ | 5 | $ | 523 | ||||
Financing cash flows for finance leases | $ | 99 | $ | 675 | ||||
Right-of-use | ||||||||
Operating leases | $ | 171 | $ | 310 | ||||
Finance leases | $ | — | $ | — |
March 31, 2022 | December 31, 2021 | |||||||
Weighted-average remaining lease term | ||||||||
Finance leases | 0.21 | 0.45 | ||||||
Operating leases | 8.04 | 8.22 | ||||||
March 31, 2022 | December 31, 2021 | |||||||
Weighted-average discount rate | ||||||||
Finance leases | 11.30 | % | 11.30 | % | ||||
Operating leases | 4.53 | % | 4.51 | % |
Operating leases | Finance leases | |||||||
2021 (remaining 9 months) | $ | 3,785 | $ | 3,588 | ||||
2022 | 2,831 | 4,945 | ||||||
2023 | 2,159 | — | ||||||
2024 | 1,443 | 9,796 | ||||||
2025 | 1,383 | — | ||||||
Thereafter | 5,631 | — | ||||||
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Total lease payments | 17,232 | 18,329 | ||||||
Less: interest | (2,197 | ) | (3,943 | ) | ||||
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Total lease liabilities | $ | 15,035 | $ | 14,386 | ||||
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Under ASC 840, as of December 31, 2020, the Company had total capital lease assets of $22,989 and accumulated depreciation of $14,974, which were included within property and equipment, net, on the unaudited consolidated balance sheet. The related capital lease obligations totaled $15,061 as of December 31, 2020. For the three months ended March 31, 2020, the Company recorded lease expense of $1,514 for operating leases.
Operating leases | Finance leases | |||||||
2022 | $ | 11,873 | $ | 103 | ||||
2023 | 8,104 | 0 | ||||||
2024 | 7,315 | 0 | ||||||
2025 | 7,526 | 0 | ||||||
2026 | 7,435 | 0 | ||||||
Thereafter | 25,966 | 0 | ||||||
Total lease payments | 68,219 | 103 | ||||||
Less: interest | (11,121 | ) | (2 | ) | ||||
Total lease liabilities | $ | 57,098 | $ | 101 | ||||
Royalty Commitments
In October 2017, the Company entered into a license agreement with a third party. Under the license agreement, the Company is required to pay royalties based on a percentage of net sales of the licensed product that occur, after December 31, 2017, through the expiration of the underlying patent in October 2026, subject to minimum royalty payment provisions. The Company recorded royalty expense of $1,220$1,601 and $979$1,220 during the three months ended March 31, 20212022 and 2020,2021, respectively, within selling, general and administrative expenses on the consolidated statementstatements of operations.
As part
Matters
The Company accrued $150 as of March 31, 20212022 and December 31, 20202021 in relation to certain pending lawsuits.
The purchase price for NuTech Medical acquired in 2017 included $7,500 deferred acquisition consideration of which the Company paid $2,500 in 2017. The remaining $5,000 of deferred acquisition consideration plus accrued interest owed to the sellers of NuTech Medical was previously in dispute. The Company asserted certain claims for indemnification that would offset in whole or in part its payment obligation and the sellers of NuTech Medical filed a lawsuit alleging breach of contract and seeking specific performance of the alleged payment obligation and attorneys’ fees. In February 2020, the Company entered into a settlement agreement with the sellers of NuTech Medical and settled the dispute for $4,000, of which, $2,000 was paid immediately on February 24, 2020 and the remaining $2,000 was paid in four quarterly installments of $500 each. As of March 31, 2021, the entire settlement was paid off. In addition, the Company assumed from the sellers of NuTech Medical the payment responsibilities related to a legacy lawsuit existing at the acquisition date of NuTech Medical. The assumed legacy lawsuit was settled in October 2020. In connection with the settlement of the deferred acquisition consideration dispute and the legacy lawsuit, the Company recorded a gain of $1,295 and $951 for the three months ended March 31, 2020 and September 30, 2020, respectively. The gain was included as a component of other expense, net, on the consolidated statement of operations.
Finance lease
On a quarterly basis, the Company reassesses the need for a valuation allowance on deferred income tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets. After assessing both the positive and negative evidence, including net operating loss utilization, cumulative profits, and forecasted taxable income, the Company determined that it is more likely than not the U.S. deferred assets will be realized in full. As such, the Company has not recorded a valuation allowance against its U.S. deferred tax
On December 10, 2018, Avista Healthcare Public Acquisition Corp., our predecessor company (“AHPAC”), consummated the previously announced business combination pursuant to that certain Agreement and Plan
CPN Acquisition
On September 17, 2020, we acquired certain assets and assumed certain liabilities of CPN Biosciences, LLC (“CPN”) pursuant to an asset purchase agreement dated July 24, 2020. This transaction was accounted for as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. The aggregated consideration amounted to $19.0 million as of the acquisition date which consisted of $6.4 million in cash, 2,151,438 shares of our common stock with a fair value of $8.8 million, and a contingent consideration (the “Earnout”) with a fair value of $3.8 million. At the closing, we paid $5.8 million in cash and issued 1,947,953 shares of our Class A common stock. The remaining consideration was held back and will be paid or issued, as applicable, eighteen months after the closing date, subject to any offsetting indemnification claims against CPN. The results of operations 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.
Application for the treatment of knee osteoarthritis and, based on favorable feasibility studies, we believe ReNu has potential as a treatment for additional osteoarthritis and tissue regeneration applications. Accordingly, we have decided to focus on clinical development of ReNu and we discontinued clinical development of NuCel.
Included within our product revenue is our PuraPly and PuraPly AM products. We launched PuraPly in mid-2015, and introduced PuraPly AM in 2016. In order to encourage the development of innovative medical devices, drugs and biologics, CMS can grant new products an additional
“pass-through payment” in addition to the bundled payment amount for a limited period of no more than three years. Our PuraPly and PuraPly AM products were granted pass-through status from launch through December 31, 2017, which created an economic incentive for practitioners to use PuraPly and PuraPly AM over other skin substitutes. As a result, we saw increases in revenue related to these products in 2017. Beginning January 1, 2018, PuraPly AM and PuraPly transitioned to the bundled payment structure for skin substitutes, which provides for a two-tiered payment system in the hospital outpatient and ASC setting. The two-tiered Medicare payment system bundles payment for our Advanced Wound Care products (and all skin substitutes) into the payment for the procedure for applying the skin substitute, resulting in a single payment to the provider that includes reimbursement for both the procedure and the product itself. As a result of the transition to the bundled payment structure, total Medicare reimbursement for procedures using our PuraPly AM and PuraPly products decreased substantially. This reduction in reimbursement resulted in a substantial decrease in revenue from our PuraPly AM and PuraPly products during the first nine months of 2018 and had a negative effect on our business, results of operations and financial condition. On March 23, 2018, Congress passed, and the President signed into law, the Consolidated Appropriations Act of 2018, or the Act. The Act restored the pass-through status of PuraPly and PuraPly AM effective October 1, 2018. As a result, effective October 1, 2018, Medicare resumed making pass-through payments to hospitals using PuraPly and PuraPly AM in the outpatient hospital setting and in ASCs. PuraPly and PuraPly AM had pass-through reimbursement status through September 30, 2020. With the expiration of the pass-through reimbursement status, our net revenue from PuraPly and PuraPly AM may decrease as they transition to the bundled payment structure. As of March 31, 2021, we have not observed such decrease primarily due to our recently launched PuraPly line extensions.
gross profit and gross profit margin
profit.
Gain on settlement of deferred acquisition consideration—In February 2020, we settled the dispute on the $5.0 million deferred purchase acquisition consideration with the sellers of NuTech Medical for $4.0 million and assumed from the sellers of NuTech Medical the responsibilities related to a legacy lawsuit of NuTech Medical, which was settled in October 2020. In connection with the settlement of this dispute and the legacy lawsuit, we recorded a gain of $1.3 million and $1.0 million for the three months ended March 31, 2020 and December 31, 2020, respectively.
Our U.S. provision for income taxes relates to current tax expense associated with taxable income that couldassets do not be offset by state net operating losses. We will utilize net operating losses to offset allrequire a valuation allowance as of the projected 2021 federal taxable income, but have exhausted net operating lossesMarch 31, 2022 and are subject to limitations in the net operating loss utilization in certain states. The Company has also recorded a foreign provision for income taxes related to its wholly owned Swiss subsidiary.
December 31, 2021.
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Net revenue | $ | 102,552 | $ | 61,732 | ||||
Cost of goods sold | 25,495 | 18,793 | ||||||
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Gross profit | 77,057 | 42,939 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative | 58,232 | 52,613 | ||||||
Research and development | 6,209 | 5,410 | ||||||
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Total operating expenses | 64,441 | 58,023 | ||||||
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Income (loss) from operations | 12,616 | (15,084 | ) | |||||
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Other expense, net: | ||||||||
Interest expense, net | (2,470 | ) | (2,510 | ) | ||||
Gain on settlement of deferred acquisition consideration | — | 1,295 | ||||||
Other income (expense), net | (3 | ) | 21 | |||||
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Total other expense, net | (2,473 | ) | (1,194 | ) | ||||
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Net income (loss) before income taxes | 10,143 | (16,278 | ) | |||||
Income tax expense | (200 | ) | (35 | ) | ||||
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Net income (loss) | $ | 9,943 | $ | (16,313 | ) | |||
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Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Net revenue | $ | 98,117 | $ | 102,552 | ||||
Cost of goods sold | 25,080 | 25,495 | ||||||
Gross profit | 73,037 | 77,057 | ||||||
Operating expenses: | ||||||||
Selling, general and administrative | 63,578 | 58,232 | ||||||
Research and development | 8,587 | 6,209 | ||||||
Total operating expenses | 72,165 | 64,441 | ||||||
Income from operations | 872 | 12,616 | ||||||
Other expense, net: | ||||||||
Interest expense | (737 | ) | (2,470 | ) | ||||
Other expense, net | (3 | ) | (3 | ) | ||||
Total other expense, net | (740 | ) | (2,473 | ) | ||||
Net income before income taxes | 132 | 10,143 | ||||||
Income tax expense | (45 | ) | (200 | ) | ||||
Net income | $ | 87 | $ | 9,943 | ||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Net income (loss) | $ | 9,943 | $ | (16,313 | ) | |||
Interest expense, net | 2,470 | 2,510 | ||||||
Income tax expense | 200 | 35 | ||||||
Depreciation | 1,010 | 902 | ||||||
Amortization | 1,243 | 817 | ||||||
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EBITDA | 14,866 | (12,049 | ) | |||||
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Stock-based compensation expense | 698 | 209 | ||||||
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) | (296 | ) | — | |||||
Restructuring charge (4) | 927 | — | ||||||
Transaction cost (5) | — | 243 | ||||||
Cancellation fee (6) | — | 1,950 | ||||||
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Adjusted EBITDA | $ | 16,016 | $ | (10,942 | ) | |||
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Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Net income | $ | 87 | $ | 9,943 | ||||
Interest expense | 737 | 2,470 | ||||||
Income tax expense | 45 | 200 | ||||||
Depreciation | 1,347 | 1,010 | ||||||
Amortization | 1,221 | 1,243 | ||||||
EBITDA | 3,437 | 14,866 | ||||||
Stock-based compensation expense | 1,303 | 698 | ||||||
Recovery of certain notes receivable from related parties (1) | — | (179 | ) | |||||
Change in fair value of Earnout (2) | — | (296 | ) | |||||
Restructuring charge (3) | 264 | 927 | ||||||
Adjusted EBITDA | $ | 5,004 | $ | 16,016 | ||||
(1) |
|
Amount reflects the collection of certain notes receivable from related parties previously reserved. See Note “19. Related Party Transactions”. |
Amount reflects the change in the fair value of the Earnout liability in connection with the CPN acquisition. See Note “3. Acquisition” and “5. Fair Value Measurement of Financial Assets and Liabilities”. |
Amount reflects employee retention and |
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2021
Three Months Ended March 31, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Advanced Wound Care | $ | 90,708 | $ | 51,288 | $ | 39,420 | 77 | % | ||||||||
Surgical & Sports Medicine | 11,844 | 10,444 | 1,400 | 13 | % | |||||||||||
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Net revenue | $ | 102,552 | $ | 61,732 | $ | 40,820 | 66 | % | ||||||||
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Three Months Ended March 31, | Change | |||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Advanced Wound Care | $ | 90,950 | $ | 90,708 | $ | 242 | 0 | % | ||||||||
Surgical & Sports Medicine | 7,167 | 11,844 | (4,677 | ) | (39 | %) | ||||||||||
Net revenue | $ | 98,117 | $ | 102,552 | $ | (4,435 | ) | (4 | %) | |||||||
2021.
Three Months Ended March 31, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Cost of goods sold | $ | 25,495 | $ | 18,793 | $ | 6,702 | 36 | % | ||||||||
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Gross profit | $ | 77,057 | $ | 42,939 | $ | 34,118 | 79 | % | ||||||||
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Gross profit% | 75 | % | 70 | % |
Three Months Ended March 31, | Change | |||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Cost of goods sold | $ | 25,080 | $ | 25,495 | $ | (415 | ) | (2 | %) | |||||||
Gross profit | $ | 73,037 | $ | 77,057 | $ | (4,020 | ) | (5 | %) | |||||||
in Surgical & Sports Medicine products.
increased manufacturing-related costs.
Three Months Ended March 31, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Research and development | $ | 6,209 | $ | 5,410 | $ | 799 | 15 | % | ||||||||
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Research and development as a percentage of net revenue | 6 | % | 9 | % |
Three Months Ended March 31, | Change | |||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Research and development | $ | 8,587 | $ | 6,209 | $ | 2,378 | 38 | % | ||||||||
Three Months Ended March 31, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
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(in thousands, except for percentages) | ||||||||||||||||
Selling, general and administrative | $ | 58,232 | $ | 52,613 | $ | 5,619 | 11 | % | ||||||||
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Selling, general and administrative as a percentage of net revenue | 57 | % | 85 | % |
Three Months Ended March 31, | Change | |||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Selling, general and administrative | $ | 63,578 | $ | 58,232 | $ | 5,346 | 9 | % | ||||||||
Three Months Ended March 31, | Change | |||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Interest expense, net | $ | (737 | ) | $ | (2,470 | ) | $ | 1,733 | (70 | %) | ||||||
Other expense, net | (3 | ) | (3 | ) | — | ** | ||||||||||
Total other expense, net | $ | (740 | ) | $ | (2,473 | ) | $ | 1,733 | (70 | %) | ||||||
** | not meaningful |
Other Expense, net
Three Months Ended March 31, | Change | |||||||||||||||
2021 | 2020 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Interest expense, net | $ | (2,470 | ) | $ | (2,510 | ) | $ | 40 | (2 | %) | ||||||
Gain on settlement of deferred acquisition consideration | — | 1,295 | (1,295 | ) | 100 | % | ||||||||||
Other income (expense), net | (3 | ) | 21 | (24 | ) | * | * | |||||||||
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Total other expense, net | $ | (2,473 | ) | $ | (1,194 | ) | $ | (1,279 | ) | 107 | % | |||||
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Other expense, net, increased by $1.3 million, or 107%, to2022 from $2.5 million in the three months ended March 31, 2021. Interest expense decreased due to the reduced interest rate for borrowings under the 2021 from $1.2Credit Agreement.
Three Months Ended March 31, | Change | |||||||||||||||
2022 | 2021 | $ | % | |||||||||||||
(in thousands, except for percentages) | ||||||||||||||||
Income tax expense | $ | (45 | ) | $ | (200 | ) | $ | 155 | (78 | %) | ||||||
three months ended December 31, 2021.
Net cash used in operating activities Net cash used in investing activities Net cash (used in) provided by financing activities Net change in cash and restricted cash capital expenditures. expenditures. connection with the stock awards activities. The Three Months Ended
March 31, 2021 2020 (in thousands) $ (1,479 ) $ (17,283 ) (4,778 ) (4,243 ) (591 ) 8,230 $ (6,848 ) $ (13,296 ) $ 1,411 $ (1,300 ) (6,672 ) (4,957 ) (765 ) (591 ) $ (6,026 ) $ (6,848 ) $1.5$1.3 million, resulting from our net cash used in connection with changes in our operating assets and liabilities of $19.3$19.1 million, partially offset by net income of $9.9 million$16.3$16.1 million, an increase in inventory of $4.2 million, an increase in prepaid expenses and other current assets of $0.6 million, and a decrease in operating leases and other liabilities of $1.4 million, all of which were partially offset by an increase in accounts payable of $1.8 million, and an increase of accrued expenses and other current liabilities of $1.4 million.2020, net2022, we used $6.7 million of cash used in operatinginvesting activities was $17.3 million, resulting from our net lossconsisting exclusively of $16.3 million and net cash used in connection with changes in our operating assets and liabilities of $3.4 million, partially offset by non-cash charges of $2.4 million. Net cash used in changes in our operating assets and liabilities included an increase in inventory of $4.3 million, an increase in prepaid expenses and other current assets of $2.1 million, a decrease in accounts payable of $1.9 million, and a decrease in accrued expenses and other liabilities of $1.4 million, all of which were partially offset by a decrease in accounts receivable of $6.3 million.Investing Activities$4.8$5.0 million of cash in investing activities consisting exclusively of capital expenditures of $5.0 million partially offset by notes receivable repayment of $0.2 million from our former executives.2020, we2022, net cash used $4.2by financing activities was $0.8 million. This consisted primarily of the payment of term loan and finance lease obligations of $0.6 million, and net payment of cash$0.2 million in investing activities solely consisting of capital expenditures.Financing Activitiesand the paymentspartially offset by net proceeds of $0.4$0.6 million withholding taxes in connection with stock-based awards. The net cash used by financing activities was partially offset by the $1.0 million in proceeds from the exercise of common stock options.During the three months ended March 31, 2020, net cash provided by financing activities was $8.2 million. This consisted primarily of $10.0 million in proceeds from the Term Loan under the 2019award activities. and $0.8 million in proceeds from the exercise of common stock options. The net cash provided by financing activities was partially offset by the payment of finance lease obligations of $0.5 million and the payment of $2.0 million related to the NuTech Medical deferred acquisition consideration.Indebtedness2019 Credit AgreementOn March 14, 2019,20192021 Credit Agreement. Capitalized terms used herein and not otherwise defined are defined as set forth in the 2019 Credit Agreement.20192021 Credit Agreement as amended, provides for a term loan facility not to exceed $75,000 (the “Term Loan Facility”) and a revolving credit facility not to exceed $125,000 (the “Revolving Facility”).
WeRevolving Commitments so reduced or terminated.
acquisitions.
Contractual Obligations and Commitments
There have been no material changes to our contractual obligations and commitments as loss on the extinguishment of March 31, 2021 from those disclosed in our Annual Report on Form 10-Kthe loan for the year ended December 31, 2019.
2021.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We may take advantage of these exemptions until we are no longer an emerging growth company. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. We have elected to use the extended transition period for complying with new or revised accounting standards (such as ASU 2016-02,Leases(Topic 842)) and, as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. We may take advantage of these exemptions up until December 31, 2021, or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenue, we have more than $700.0 million in market value of our stock held by non-affiliates or we issue more than $1.0 billion of non-convertible debt securities over a three-year period.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, our management has
in 2013. As previouslya result of this assessment, management concluded that, as of March 31, 2022, our internal control over financial reporting was not effective based on those criteria.
Wereporting: we did not design and maintain formal accounting, business operations, and Information Technologyinformation technology policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including (i) formalized policies and procedures for reviews over account reconciliations, journal entries, and other accounting analyses, and memos and procedures to ensure completeness and accuracy of information used in these review controls and (ii) controls to support the objectives of proper segregation of the initiation of transactions, the recording of transactions, and the custody of assets.
Because
past year.
Management is committed to finalizing the remediation of the material weakness during 2021.2022. Management’s internal control remediation efforts include the following:
In 2019, we began
how to best support the Company if personnel turnover issues within their departments occur. We completed the risk assessment activities by evaluating whether the design ofhave also supplemented our internal controls appropriately addresses changes in the business (including changes to people, processes and systems) that could impact our system of internal controls.
We reported regularly to the audit committee on the progress and results of control remediation.
We developed and executed upon a monitoring protocol that allows the Company to validate the operating effectiveness of certain controls over financial reporting to gain assurance that such controls are present and functioning as designed.
We will also continuehave continued to engage an outside firm in 2021 to assist management with performing sufficientcontrol operating effectiveness testing throughout the yearyear.
Management believescontrol remediation. Through these actions, will be effective in remediating the material weakness described above. we have continued to strengthen our internal policies, processes, and reviews.
† | Filed herewith |
†† |
Furnished herewith |
* | Management contract or compensatory plan or arrangement |
Dated: May 10, | Organogenesis Holdings Inc. | |||||
(Registrant) | ||||||
/s/ David Francisco | ||||||
David Francisco | ||||||
Chief Financial Officer | ||||||
(Principal Financial and Accounting Officer) |
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