Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Accounting Policies [Abstract] | ' |
Use of Estimates | ' |
Use of Estimates |
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported consolidated statements of operations during the reporting period. Actual results could differ from those estimates. |
Principles of Consolidation | ' |
Principles of Consolidation |
The accompanying financial statements include the accounts of MiMedx Group, Inc. and its wholly-owned subsidiaries MiMedx, Inc., SpineMedica, LLC, and MiMedx Tissue Services, LLC, formerly known as Surgical Biologics, LLC. All significant inter-company balances and transactions have been eliminated. |
Reclassifications | ' |
Reclassifications |
Certain amounts in the prior year financial statements have been reclassified to conform to the current year financial statement presentation. |
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Segment Reporting | ' |
Segment Reporting |
ASC 280, “Segment Reporting” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company determined it has one operating segment. Disaggregation of the Company’s operating results is impracticable, because the Company’s research and development activities and its assets overlap, and management reviews its business as a single operating segment. Thus, discrete financial information is not available for more than one operating segment. |
Market Concentrations and Credit Risk | ' |
Market Concentrations and Credit Risk |
The Company places its cash and cash equivalents on deposit with financial institutions in the United States. In July 2010, the Federal Deposit Insurance Corporation (“FDIC”) increased coverage to $250,000 for substantially all depository accounts. As of December 31, 2013, the Company had cash and cash equivalents of approximately $43,600,000 in excess of the insured amounts. |
The Company’s principal market concentration of risk is related to its limited distribution channels. The Company's revenues include the distribution efforts of several independent companies as well as the Company's internal sales force. Significant revenues are derived from its relationships with two of its distributors, AvKARE, Inc. which sells our products to the Federal government and another distributor that sells our products in certain defined Territories. For the years ended December 31, 2013, 2012 and 2011, AvKARE revenue was 56%, 40%, and 0% of total revenue, respectively. Related receivables for the same time periods were 55%, 53%, and 0%, of total accounts receivable, respectively. For the years ended December 31, 2013, 2012 and 2011, the other distributor's revenue was 10%, 21%, and 19% of total revenue, respectively. Related receivables for the same time periods were 12%, 25%, and 33% of total accounts receivable, respectively. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less. |
Accounts Receivable | ' |
Accounts Receivable |
Accounts receivable represent amounts due from customers for which revenue has been recognized. Generally, the Company does not require collateral or any other security to support its receivables. |
Inventories | ' |
Inventories |
Inventories are valued at the lower of cost or market, using the first–in, first-out (FIFO) method. Inventory is tracked through Raw Material, WIP, and Finished Good stages as the product progresses through various production steps and stocking locations. Labor and overhead costs are absorbed through the various production processes upon work order closes. Historical yields and normal capacities are utilized in the calculation of production overhead rates. Reserves for inventory obsolescence are utilized to account for slow-moving inventory as well as inventory no longer needed due to diminished market demand. |
Goodwill and Purchased Intangible Assets | ' |
Goodwill and Purchased Intangible Assets |
Goodwill and purchased intangible assets with indefinite useful lives are not amortized but are tested for impairment at least annually. The Company reviews goodwill and purchased intangible assets with indefinite lives for impairment annually at the beginning of its fourth fiscal quarter and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. For goodwill, the Company performs a two-step impairment test. In the first step, the Company compares the fair value of the Company to its carrying value. The Company determines the fair value utilizing the market approach. Under the market approach, the Company uses its market capitalization which is calculated by taking the Company’s share price times the number of outstanding shares. If the fair value of the Company exceeds the carrying value of the net assets, goodwill is not impaired, and no further testing is required. If the fair value of the Company is less than the carrying value, the Company must perform the second step of the impairment test to measure the amount of impairment loss, if any. In the second step, the Company’s value is allocated to all of the assets and liabilities, including any unrecognized intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the Company was being acquired in a business combination. If the implied fair value of the reporting unit's goodwill is less than the carrying value, the difference is recorded as an impairment loss. |
Impairment of Intangible Assets with Finite Lives | ' |
Impairment of Intangible Assets with Finite Lives |
The Company reviews purchased intangible assets with finite lives for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable using a two-step impairment test. In step one, we determine the sum of the undiscounted future cash flows of the assets based on management's estimates and compare it to the carrying value of the assets. If the carrying amount is greater than the sum of the undiscounted cash flows, then the asset is impaired and step two is required. In step two, the impairment loss is calculated as the difference between the fair value of the assets and the carrying value of the assets. |
Our impairment reviews are based on an estimated future cash flow approach that requires significant judgment with respect to future revenue and expense growth rates, selection of appropriate discount rate, asset groupings, and other assumptions and estimates. We use estimates that are consistent with our business plans and a market participant view of the assets being evaluated. Actual results may differ from our estimates. |
During the fourth quarter we chose to discontinue the HydroFix® product line. This action resulted in an impairment charge of approximately $368,000 related to the Licenses for SaluMedica LLC, Spine Repair and Polyvinyl Alcohol Cryogel. This item is included in our Statement of Operations as of for the year ended December 31, 2013. An impairment charge of approximately $1,800,000 had previously been booked in 2012. |
Property and Equipment | ' |
Property and Equipment |
Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives, principally five to seven years. Leasehold improvements are depreciated on a straight-line basis over the lesser of the estimated useful lives or the life of the lease. The Company is party to various lease arrangements for its facility space and equipment. These arrangements include interest, scheduled rent increases and rent holidays which are included in the determination of minimum lease payments when assessing lease classification, and are included in rent expense on a straight line basis over the lease term. See Notes 5 and 15 for further information regarding capital leases, operating leases and rent expense. |
Impairment of Long-lived Assets | ' |
Impairment of Long-lived Assets |
The Company evaluates the recoverability of its long-lived assets (property and equipment) whenever adverse events or changes in business climate indicate that the expected undiscounted future cash flows from the related assets may be less than previously anticipated. If the net book value of the related assets exceeds the expected undiscounted future cash flows of the assets, the carrying amount would be reduced to the present value of their expected future cash flows and an impairment loss would be recognized. During the fourth quarter of 2013, we chose to discontinue the HydroFix® product line. This action resulted in a disposal loss of approximately $30,000. This item is included in our Consolidated Statements of Operations for the year ended December 31, 2013, as Selling, General and Administrative expenses. |
Grant Income | ' |
Grant Income |
The Company received a Regional Economic Business Assistance ("REBA") grant in the amount of $250,000 from the State of Georgia to help the Company defray certain expenses and capital expenditures related to the Company's expansion of manufacturing activities in the State. In order to retain the grant monies the Company was required to add a certain number of full time positions and spend a certain amount on capital and operations expenditures by December 31, 2014. As of December 31, 2013, the Company had satisfied the grant requirements. Accordingly, the Company has recorded the $250,000 as a reduction of Selling, General and Administrative expenses in the accompanying Consolidated Statements of Operations. Previously, this amount was recorded as Deferred Grant Income and was included in Other Liabilities per ASC 450-30 Gain Contingencies. |
Debt Instruments with Detachable Warrants and Beneficial Conversion Features | ' |
Debt Instruments with Detachable Warrants and Beneficial Conversion Features |
According to ASC470-20 "Debt With Conversion and Other Options", proceeds from the sale of convertible debt instruments with stock purchase warrants (detachable call options) shall be allocated to the two elements based upon the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. The portion of the proceeds so allocated to the warrants shall be accounted for as paid-in capital. The remainder of the proceeds shall be allocated to the debt instrument portion of the transaction. Also, the embedded beneficial conversion feature present in the convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. |
Revenue Recognition | ' |
Revenue Recognition |
The Company sells its products primarily through a combination of a direct sales force, independent stocking distributors and third party representatives in the U.S. and independent distributors in international markets. The Company recognizes revenue when title to the goods and risk of loss transfers to customers, provided there are no material remaining performance obligations required of the Company or any matters of customer acceptance. In cases where the Company utilizes distributors or ships products directly to the end user, it recognizes revenue according to the shipping terms of the agreement provided all revenue recognition criteria have been met. A portion of the Company’s revenue is generated from inventory maintained at hospitals or with field representatives. For these products, revenue is recognized at the time the product has been used or implanted. The Company records estimated sales returns, discounts and allowances as a reduction of net sales in the same period revenue is recognized. |
Research and Development Costs | ' |
Research and Development Costs |
Research and development costs consist of direct and indirect costs associated with the development of the Company’s technologies. These costs are expensed as incurred. |
Income Taxes | ' |
Income Taxes |
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that included the enactment date. Valuation allowances are recorded for deferred tax assets when the recoverability of such assets is not deemed more likely than not. |
Uncertain Tax Positions | ' |
Uncertain Tax Positions |
Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is more than 50% likely of being realized upon ultimate settlement. The Company classifies gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as non-current liabilities in the Consolidated Balance Sheets. |
Share-based Compensation | ' |
Share-based Compensation |
The Company follows the provisions of ASC topic 718 “Compensation — Stock compensation”, which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (options and warrants). All awards are amortized on a straight-line basis over their vesting terms. |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments |
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, accounts receivable, accounts payable and accrued expenses. The fair value of the Company’s capital leases approximates its carrying value based upon current rates available to the Company. |
Fair Value Measurements | ' |
Fair Value Measurements |
The Company records certain financial instruments at fair value, including: cash equivalents and contingent consideration. The Company may make an irrevocable election to measure other financial instruments at fair value on an instrument-by-instrument basis; although as of December 31, 2013, the Company has not chosen to make any such elections. Fair value financial instruments are recorded in accordance with the fair value measurement framework. |
The Company also measures certain non-financial assets at fair value on a non-recurring basis. These non-recurring valuations include evaluating assets such as long-lived assets; and non-amortizing intangible assets for impairment; allocating value to assets in an acquired asset group; and applying accounting for business combinations. The Company uses the fair value measurement framework to value these assets and reports these fair values in the periods in which they are recorded or written down. |
The fair value measurement framework includes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair values in their broad levels. These levels from highest to lowest priority are as follows: |
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• | Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities; |
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• | Level 2: Quoted prices in active markets for similar assets or liabilities or observable prices that are based on inputs not quoted on active markets, but corroborated by market data; and |
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• | Level 3: Unobservable inputs or valuation techniques that are used when little or no market data is available. |
The determination of fair value and the assessment of a measurement’s placement within the hierarchy require judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include: estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist it in determining fair value, as appropriate. |
Although the Company believes that the recorded fair value of its financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values. |
Recently Issued Accounting Pronouncements | ' |
Recently Issued Accounting Pronouncements |
The Company considers the applicability and impact of all Accounting Standards Updates "ASUs". For the year ended December 31, 2013, and through the date of this report, all ASUs issued, effective and not yet effective, were assessed and determined to be either not applicable or are expected to have minimal impact on our financial position or results of operations. |