Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 12, 2019 | |
Cover page. | ||
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Entity Registrant Name | OrthoPediatrics Corp | |
Entity Central Index Key | 0001425450 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Small Business | true | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 14,939,596 | |
Entity File Number | 001-38242 | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 26-1761833 | |
Entity Address, Address Line One | 2850 Frontier Drive | |
Entity Address, City or Town | Warsaw | |
Entity Address, State or Province | IN | |
Entity Address, Postal Zip Code | 46582 | |
City Area Code | 574 | |
Local Phone Number | 268-6379 | |
Title of 12(b) Security | Common Stock, $0.00025 par value per share | |
Trading Symbol | KIDS | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Shell Company | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash | $ 21,858 | $ 60,691 |
Accounts receivable - trade, less allowance for doubtful accounts of $218 and $134, respectively | 14,974 | 8,999 |
Inventories, net | 32,855 | 25,708 |
Notes receivable | 515 | 502 |
Prepaid expenses and other current assets | 1,277 | 1,256 |
Current assets held for sale, net | 35,364 | 0 |
Total current assets | 106,843 | 97,156 |
Property and equipment, net | 20,915 | 12,768 |
Other assets: | ||
Amortizable intangible assets, net | 10,458 | 1,921 |
Goodwill | 10,971 | 0 |
Operating lease right-of-use asset | 75 | |
Other intangible assets | 2,170 | 260 |
Total other assets | 23,674 | 2,181 |
Total assets | 151,432 | 112,105 |
Current liabilities: | ||
Accounts payable - trade | 6,000 | 3,971 |
Accrued compensation and benefits | 4,011 | 3,552 |
Current portion of long-term debt with affiliate | 121 | 118 |
Short-term debt with affiliate | 30,000 | 0 |
Operating lease liabilities | 24 | |
Current liabilities held for sale | 494 | 0 |
Other current liabilities | 1,537 | 1,576 |
Total current liabilities | 42,187 | 9,217 |
Long-term liabilities: | ||
Long-term debt with affiliate, net of current portion | 21,112 | 21,156 |
Operating lease liabilities, net of current portion | 51 | |
Total long-term liabilities | 21,163 | 21,156 |
Total liabilities | 63,350 | 30,373 |
Stockholders' equity: | ||
Common stock, $0.00025 par value; 50,000,000 shares authorized; 14,939,462 shares and 14,538,202 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively | 4 | 4 |
Additional paid-in capital | 209,262 | 197,442 |
Accumulated deficit | (120,729) | (115,091) |
Accumulated other comprehensive (loss) income | (455) | (623) |
Total stockholders' equity | 88,082 | 81,732 |
Total liabilities and stockholders' equity | $ 151,432 | $ 112,105 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 218 | $ 134 |
Common stock, par value (in dollars per share) | $ 0.00025 | $ 0.00025 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 14,939,462 | 14,538,202 |
Common stock, shares outstanding | 14,939,462 | 14,538,202 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||||
Net revenue | $ 18,200 | $ 15,077 | $ 32,856 | $ 27,171 |
Cost of revenue | 4,581 | 3,807 | 8,582 | 6,982 |
Gross profit | 13,619 | 11,270 | 24,274 | 20,189 |
Operating expenses: | ||||
Sales and marketing | 7,606 | 6,776 | 14,153 | 12,855 |
General and administrative | 6,569 | 5,499 | 12,181 | 11,516 |
Research and development | 1,234 | 1,115 | 2,447 | 2,333 |
Total operating expenses | 15,409 | 13,390 | 28,781 | 26,704 |
Operating loss | (1,790) | (2,120) | (4,507) | (6,515) |
Other expenses: | ||||
Interest expense, net | 632 | 562 | 935 | 1,114 |
Other expense (income) | 37 | 10 | 37 | 63 |
Total other expenses | 669 | 572 | 972 | 1,177 |
Net loss from continuing operations | (2,459) | (2,692) | (5,479) | (7,692) |
Net loss from discontinued operations | (159) | 0 | (159) | 0 |
Net loss | (2,618) | (2,692) | (5,638) | (7,692) |
Net loss attributable to common stockholders | $ (2,618) | $ (2,692) | $ (5,638) | $ (7,692) |
Weighted average common shares - basic and diluted (in shares) | 14,451,979 | 12,549,226 | 14,409,752 | 12,312,814 |
Net loss per share attributable to common stockholders - basic and diluted (in dollars per share) | $ (0.18) | $ (0.21) | $ (0.39) | $ (0.62) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (2,618) | $ (2,692) | $ (5,638) | $ (7,692) |
Other comprehensive (loss) income: | ||||
Foreign currency translation adjustment | (133) | (459) | 168 | (377) |
Other comprehensive (loss) income | (133) | (459) | 168 | (377) |
Comprehensive loss | $ (2,751) | $ (3,151) | $ (5,470) | $ (8,069) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income |
Balance (in shares) at Dec. 31, 2017 | 12,621,781,000 | ||||
Balance at Dec. 31, 2017 | $ 47,495 | $ 2 | $ 150,424 | $ (103,066) | $ 135 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (5,000) | (5,000) | |||
Other comprehensive (loss) income | 82 | 82 | |||
Restricted stock (in shares) | 149,015,000 | ||||
Restricted stock | 2,177 | 2,177 | |||
Balance (in shares) at Mar. 31, 2018 | 12,770,796,000 | ||||
Balance at Mar. 31, 2018 | 44,754 | $ 2 | 152,601 | (108,066) | 217 |
Balance (in shares) at Dec. 31, 2017 | 12,621,781,000 | ||||
Balance at Dec. 31, 2017 | 47,495 | $ 2 | 150,424 | (103,066) | 135 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (7,692) | ||||
Other comprehensive (loss) income | (377) | ||||
Balance (in shares) at Jun. 30, 2018 | 12,789,039,000 | ||||
Balance at Jun. 30, 2018 | 42,057 | $ 2 | 153,055 | (110,758) | (242) |
Balance (in shares) at Mar. 31, 2018 | 12,770,796,000 | ||||
Balance at Mar. 31, 2018 | 44,754 | $ 2 | 152,601 | (108,066) | 217 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (2,692) | (2,692) | |||
Other comprehensive (loss) income | (459) | (459) | |||
Restricted stock (in shares) | 18,243,000 | ||||
Restricted stock | 454 | 454 | |||
Balance (in shares) at Jun. 30, 2018 | 12,789,039,000 | ||||
Balance at Jun. 30, 2018 | $ 42,057 | $ 2 | 153,055 | (110,758) | (242) |
Balance (in shares) at Dec. 31, 2018 | 14,538,202 | 14,538,202 | |||
Balance at Dec. 31, 2018 | $ 81,732 | $ 4 | 197,442 | (115,091) | (623) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (3,020) | (3,020) | |||
Other comprehensive (loss) income | 301 | 301 | |||
Stock option exercise (in shares) | 18,427 | ||||
Stock option exercise | 565 | 565 | |||
Restricted stock (in shares) | 125,769 | ||||
Restricted stock | 471 | 471 | |||
Balance (in shares) at Mar. 31, 2019 | 14,682,398 | ||||
Balance at Mar. 31, 2019 | $ 80,049 | $ 4 | 198,478 | (118,111) | (322) |
Balance (in shares) at Dec. 31, 2018 | 14,538,202 | 14,538,202 | |||
Balance at Dec. 31, 2018 | $ 81,732 | $ 4 | 197,442 | (115,091) | (623) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (5,638) | ||||
Other comprehensive (loss) income | $ 168 | ||||
Stock option exercise (in shares) | 21,409 | ||||
Balance (in shares) at Jun. 30, 2019 | 14,939,462 | 14,939,462 | |||
Balance at Jun. 30, 2019 | $ 88,082 | $ 4 | 209,262 | (120,729) | (455) |
Balance (in shares) at Mar. 31, 2019 | 14,682,398 | ||||
Balance at Mar. 31, 2019 | 80,049 | $ 4 | 198,478 | (118,111) | (322) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (2,618) | (2,618) | |||
Other comprehensive (loss) income | (133) | (133) | |||
Acquisition consideration (in shares) | 245,352 | ||||
Acquisition consideration | 10,000 | 10,000 | |||
Stock option exercise (in shares) | 2,983 | ||||
Stock option exercise | 92 | 92 | |||
Restricted stock (in shares) | 8,729 | ||||
Restricted stock | $ 692 | 692 | |||
Balance (in shares) at Jun. 30, 2019 | 14,939,462 | 14,939,462 | |||
Balance at Jun. 30, 2019 | $ 88,082 | $ 4 | $ 209,262 | $ (120,729) | $ (455) |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
OPERATING ACTIVITIES | ||
Net loss | $ (5,638) | $ (7,692) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 1,912 | 1,400 |
Stock-based compensation | 1,163 | 2,631 |
Changes in certain current assets and liabilities: | ||
Accounts receivable - trade | (5,499) | (4,152) |
Prepaid expenses and other current assets | (14) | (232) |
Accounts payable - trade | 1,934 | (40) |
Accrued expenses and other liabilities | 357 | 1,061 |
Other | 139 | (377) |
Net cash used in operating activities - continuing operations | (10,785) | (11,673) |
Net cash provided by operating activities - discontinued operations | 371 | 0 |
Net cash used in operating activities | (10,414) | (11,673) |
INVESTING ACTIVITIES | ||
Acquisition of Vilex and Orthex, net of cash acquired | (49,926) | 0 |
Purchases of licenses | (170) | (180) |
Purchases of property and equipment | (8,514) | (4,167) |
Net cash used in investing activities - continuing operations | (58,610) | (4,347) |
Net cash used in investing activities - discontinued operations | (47) | 0 |
Net cash used in investing activities | (58,657) | (4,347) |
FINANCING ACTIVITIES | ||
Payments on mortgage notes | (59) | (56) |
Proceeds from issuance of debt with affiliate | 30,000 | 0 |
Proceeds from exercise of stock options | 657 | 0 |
Net cash (used in) provided by financing activities | 30,598 | (56) |
NET DECREASE IN CASH | (38,473) | (16,076) |
Cash, beginning of year | 60,691 | 42,582 |
Cash, end of period | 22,218 | 26,506 |
Less cash of discontinued operations, end of period | 360 | 0 |
Cash of continuing operations, end of period | 21,858 | 26,506 |
SUPPLEMENTAL DISCLOSURES | ||
Cash paid for interest | 935 | 1,114 |
Transfer of instruments from property and equipment to inventory | 267 | 594 |
Acquisition consideration of common shares | 10,000 | 0 |
U.S. | ||
Changes in certain current assets and liabilities: | ||
Inventories | (5,306) | (4,724) |
International | ||
Changes in certain current assets and liabilities: | ||
Inventories | $ 167 | $ 452 |
BUSINESS
BUSINESS | 6 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BUSINESS | BUSINESS OrthoPediatrics Corp., a Delaware corporation, is a medical device company committed to designing, developing and marketing anatomically appropriate implants and devices for children with orthopedic conditions, giving pediatric orthopedic surgeons and caregivers the ability to treat children with technologies specifically designed to meet their needs. We sell our specialized products, including PediLoc ® , PediPlates ® , Cannulated Screws, PediFlex TM nail, PediNail TM , PediLoc ® Tibia, ACL Reconstruction System, Locking Cannulated Blade, Locking Proximal Femur, Spica Tables, RESPONSE Spine, BandLoc, Pediguard and Pediatric Nailing Platform | Femur, to various hospitals and medical facilities throughout the United States and various international markets. We currently use a contract manufacturing model for the manufacturing of implants and related surgical instrumentation. In 2017, we expanded operations and established legal entities in the United Kingdom, Australia and New Zealand permitting us to sell under an agency model direct to local hospitals in these countries. In September 2018, we further expanded operations in Canada selling direct to local hospitals, and in January 2019 we expanded to Belgium and the Netherlands. Additionally, in March 2019 we established a holding company and an operating company in the Netherlands that are expected to enhance our operations in Europe. On June 4, 2019, we purchased all the issued and outstanding shares of stock of Vilex in Tennessee, Inc. ("Vilex") and all the issued and outstanding units of membership interests in Orthex, LLC ("Orthex") for $60,000 in total consideration. Vilex and Orthex are primarily manufacturers of foot and ankle surgical implants, including cannulated screws, fusion devices, surgical staples and bone plates, as well as Orthex Hexapod technology which is used to treat pediatrics congenital deformities and limb length discrepancies. Because the current products of Vilex also include adult offerings that are not core to the Company's pediatrics business, the Company has begun taking steps to divest the non-core Vilex assets. The Company anticipates completing the divestiture by the end of 2019. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of OrthoPediatrics Corp. and its wholly-owned subsidiaries, OrthoPediatrics US Distribution Corp., OrthoPediatrics EU Limited, OrthoPediatrics AUS PTY LTD, OrthoPediatrics NZ Limited, OP EU B.V., and OP Netherlands B.V., Vilex in Tennessee, Inc., and Orthex, LLC (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated. Unaudited Interim Condensed Consolidated Financial Statements We have prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated balance sheets as of June 30, 2019 and December 31, 2018, the condensed consolidated statements of operations for the three and six months ended June 30, 2019 and 2018, the condensed consolidated statements of comprehensive loss for the three and six months ended June 30, 2019 and 2018, the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2019 and 2018 and the condensed consolidated statements of cash flows for the six months ended June 30, 2019 and 2018 are unaudited and should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, 2018 and related notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 7, 2019. The financial data and other financial information disclosed in the notes to the accompanying condensed consolidated financial statements are also unaudited. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations thereunder. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2018 and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the financial statements for the interim periods. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full fiscal year or for any other period. The accompanying condensed consolidated financial statements have been prepared assuming our Company will continue as a going concern. We have experienced recurring losses from operations since our inception and had an accumulated deficit of $120,729 and $115,091 as of June 30, 2019 and December 31, 2018, respectively. In conjunction with the acquisition of Vilex and Orthex, the Company entered into a new $30,000 short-term loan facility with Squadron in addition to the existing $20,000 term loan facility and $15,000 revolving credit facility previously established. The new term loan is due upon the earliest of: (i) the date on which any persons acquire (x) capital stock of the Company possessing the voting power to elect a majority of the Company's Board of Directors (whether by merger, consolidation, reorganization, combination, sale or transfer), or (y) all or substantially all of the Company's assets, determined on a consolidated basis; (ii) the date on which the Company sells its equity interest in, or all or substantially all of the assets of, Vilex; and (iii) May 31, 2020. The maturity date for the remaining Squadron debt is January 31, 2023. Management continues to monitor cash flows and liquidity on a regular basis. We believe that our cash balance at June 30, 2019, expected cash flows from operations for the next twelve months subsequent to the issuance of the condensed consolidated financial statements, and the likelihood that the Vilex assets held for sale will be sold prior to the maturity of the new term loan are sufficient to enable us to maintain current and essential planned operations for more than the next twelve months. If the Vilex assets are not sold prior to the maturity of the new term loan, we will work to extend the maturity date or obtain external funding in order to repay the loan. Use of Estimates Preparation of the condensed consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as of the date of the condensed consolidated financial statements. By their nature, these judgments are subject to an inherent degree of uncertainty. We use historical experience and other assumptions as the basis for our judgments and estimates. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in these estimates will be reflected in the condensed consolidated financial statements. Foreign Currency Transactions We currently bill our international distributors in United States ("U.S.") dollars, resulting in minimal foreign exchange transaction expense. Beginning in the second quarter of 2017, we began selling direct within the United Kingdom, Ireland, Australia and New Zealand and billing using the local currency for each country. In September 2018, we began selling direct in Canada and in January 2019 in Belgium and the Netherlands. The financial statements of our foreign subsidiaries are accounted for and have been translated into U.S. dollars using end-of-period exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. Foreign currency translation adjustments have been recorded as a separate component of the condensed consolidated statements of comprehensive loss. Revenue from Contracts with Customers In accordance with ASC 606, " Revenue From Contracts With Customers (ASC 606)", revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from a customer which are subsequently remitted to government authorities. Revenue Recognition – United States Revenue in the United States is generated primarily from the sale of our implants and, to a much lesser extent, from the sale of our instruments. Sales in the United States are primarily to hospital accounts through independent sales agencies. We recognize revenue when our performance obligations under the terms of a contract with our customer are satisfied. This typically occurs when we transfer control of our products to the customer, generally upon implantation or when title passes upon shipment. The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis. On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when the hospital obtains control of the product, typically either upon shipment or delivery of the product dependent on the terms of the contract. Pricing for each customer is dictated by a unique pricing agreement, which does not generally include rebates or discounts. Revenue Recognition – International Outside of the United States, we primarily sell our products through independent stocking distributors. Generally, the distributors are allowed to return products, and some are thinly capitalized. Based on our history of collections and returns from international customers, we previously concluded that collectibility was not reasonably assured at the time of delivery for certain customers who had not evidenced a consistent pattern of timely payment. Accordingly, in the past we did not recognize international revenue and associated cost of revenue at the time title transfers for these customers for whom collectibility had not been deemed probable based on the customer’s history and ability to pay, but rather when cash had been received. Until such payment, cost of revenue was recorded as inventories held by international distributors, net of adjustment for estimated unreturnable inventory, on our condensed consolidated balance sheets. Following a review of our collection history, we deemed collectibility was probable for all international stocking distributors effective January 1, 2019. Based on a history of reliable collections, we have concluded that a contract exists and revenue should be recognized when we transfer control of our products to the customer, generally upon implantation or when title passes upon shipment. In early 2017, we expanded operations and established legal entities in the United Kingdom, Australia and New Zealand permitting us to sell under an agency model direct to local hospitals in these countries. Additionally, in September 2018 we began selling in Canada and in January 2019 to Belgium and the Netherlands utilizing the agency model. The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis. On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when the hospital obtains control of the product, typically either upon shipment or delivery of the product dependent on the terms of the contract. Pricing for each customer is dictated by a unique pricing agreement, which does not generally include rebates or discounts. Cash and Cash Equivalents We maintain cash in bank deposit accounts which, at times, may exceed federally insured limits. To date, we have not experienced any loss in such accounts. We consider all highly liquid investments with original maturity of three months or less at inception to be cash equivalents. The carrying amounts reported in the balance sheet for cash are valued at cost, which approximates fair value. Accounts Receivable Accounts receivable are uncollateralized customer obligations due under normal trade terms, generally requiring payment within 30 days from the invoice date. Account balances with invoices over 30 days past due are considered delinquent. No interest is charged on past due accounts. Payments of accounts receivable are applied to the specific invoices identified on the customer's remittance advice or, if unspecified, to the customer's account as an unapplied credit. The carrying amount of accounts receivable is reduced by an allowance that reflects management's best estimate of the amounts that will not be collected, determined principally on the basis of historical experience, management's assessment of the collectability of specific customer accounts and the aging of the accounts receivable. All accounts or portions thereof deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for doubtful accounts. Inventories, net Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method. Inventories, which consist of implants and instruments held in our warehouse or with third-party independent sales agencies or distributors, are considered finished goods and are purchased from third parties. We evaluate the carrying value of our inventories in relation to the estimated forecast of product demand, which takes into consideration the life cycle of the product. A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory. The need to maintain substantial levels of inventory impacts our estimates for excess and obsolete inventory. Each of our implant systems are designed to include implantable products that come in different sizes and shapes to accommodate the surgeon’s needs. Typically, a small number of the set components are used in each surgical procedure. Certain components within each set may become obsolete before other components based on the usage patterns. We adjust inventory values, as needed, to reflect these usage patterns and life cycle. In addition, we continue to introduce new products, which may require us to take additional charges for excess and obsolete inventory in the future. Property and Equipment, net Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the assets. When assets are retired or otherwise disposed of, costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in operations for the period. Maintenance and repairs that prolong or extend the useful life are capitalized, whereas standard maintenance, replacements, and repair costs are expensed as incurred. Instruments are hand-held devices, specifically designed for use with our implants and are used by surgeons during surgery. Instruments deployed within the United States, United Kingdom, Australia, New Zealand, Canada, Belgium and the Netherlands are carried at cost less accumulated depreciation and are recorded in property and equipment, net on the condensed consolidated balance sheets. Sample inventory consists of our implants and instruments, and is maintained to market and promote our products. Sample inventory is carried at cost less accumulated depreciation. Depreciable lives are generally as follows: Building and building improvements 25 to 30 years Furniture and fixtures 5 to 7 years Computer equipment 3 to 5 years Business software 3 years Office and other equipment 5 to 7 years Instruments 5 years Sample inventory 2 years Amortizable Intangible Assets, net Amortizable intangible assets include fees necessary to secure various patents and licenses, and the value of internally developed software, customer relationships and non-competition agreements related to the acquisition of Orthex. Vilex has amortizable intangible assets including patents, customer relationships and non-competition agreements which are included in current assets held for sale, net on the condensed consolidated balance sheet as of June 30, 2019. Amortization is calculated on a straight-line basis over the estimated useful life of the asset. Amortization for patents and licenses commences at the time of patent approval and market launch, respectively. Amortization for the Orthex and Vilex assets commenced upon acquisition. Intangible assets are amortized over a 3 to 20 year period. Amortizable intangible assets are assessed for impairment annually or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net undiscounted cash flows expected to be generated by the associated asset. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the assets. No impairment charges were recorded in any of the periods presented. Goodwill and Other Intangible Assets Our goodwill represents the excess of the cost over the fair value of net assets acquired. The determination of the value of goodwill and intangible assets arising from acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstances warrant such a review. The goodwill is considered to be impaired if we determine that the carrying value of the reporting unit exceeds its respective fair value. We have indefinite lived tradename assets that are reviewed for impairment by performing a quantitative analysis, which occurs annually in the fourth quarter or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net undiscounted cash flows expected to be generated by the associated asset. If such assets are determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair market value of the assets. No impairment charges were recorded in any of the periods presented. Cost of Revenue Cost of revenue consists primarily of products purchased from third-party suppliers, excess and obsolete inventory adjustments, inbound freight, and royalties. Our implants and instruments are manufactured to our specifications by third-party suppliers who meet our manufacturer qualifications standards. Our third-party manufacturers are required to meet the standards of the Food and Drug Administration (the “FDA”), and the International Organization for Standardization, as well as other country-specific quality standards. The majority of our implants and instruments are produced in the United States. Sales and Marketing Expenses Sales and marketing expenses primarily consist of commissions to our domestic and select international independent sales agencies and consignment distributors, as well as compensation, commissions, benefits and other related costs for personnel we employ. Commissions and bonuses are generally based on a percentage of sales. Our international independent stocking distributors purchase instrument sets and replenishment stock for resale, and we do not pay commissions or any other sales related costs for international sales to distributors. Advertising Costs Advertising costs consist primarily of print advertising, trade shows, and other related expenses. Advertising costs are expensed as incurred and are recorded as a component of sales and marketing expense. Research and Development Costs Research and development costs are expensed as incurred. Our research and development expenses primarily consist of costs associated with engineering, product development, consulting services, outside prototyping services, outside research activities, materials, development and protection of our intellectual property portfolio, as well as other costs associated with development of our products. Research and development costs also include related personnel and consultants’ compensation expense. Research and development costs were $1,234 and $1,115 for the three months ended June 30, 2019 and 2018, respectively, and $2,447 and $2,333 for the six months ended June 30, 2019 and 2018, respectively. Stock-Based Compensation Prior to our Initial Public Offering ("IPO") in October 2017, we maintained an Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”) that provided for grants of options and restricted stock to employees, directors and associated third-party representatives of the Company as determined by the Board of Directors. The 2007 Plan had authorized 1,585,000 shares for award. Immediately prior to our IPO, we adopted our 2017 Incentive Award Plan (the "2017 Plan") which replaced the 2007 Plan. The 2017 Plan provides for grants of options and restricted stock to officers, employees, consultants or directors of our Company. The 2017 Plan has authorized 1,789,647 shares for award. Options holders, upon vesting, may purchase common stock at the exercise price, which is the estimated fair value of our common stock on the date of grant. Option grants generally vest immediately or over three years. No stock options were granted in any of the periods presented. Restricted stock may not be transferred prior to the expiration of the restricted period, which is typically three years. The restricted stock that had been granted under the 2007 Plan had restriction periods that generally lasted until the earlier of six years from the date of grant, or an IPO or change in control, as defined in the 2007 Plan. All restricted stock granted prior to May 2014 vested upon our IPO and the remaining grants under the 2007 Plan vested six months after the IPO. We recognize the reversal of stock compensation expense when a restricted stock forfeiture occurs as opposed to estimating future forfeitures. We estimate the fair value of stock options and restricted stock at the grant date. Stock-based compensation is recognized ratably over the requisite service period, which is generally the vesting period for stock options and the restriction period for restricted stock. Calculating the fair value of stock-based awards requires that we make highly subjective assumptions. We use the Black-Scholes option pricing model to value our stock options. Use of the valuation methodology requires that we make assumptions as to the volatility of our common stock, the expected term of our stock options and the risk free rate of return for a period that approximates the expected term of our stock options. Because we were a privately-held company with a limited operating history, we utilized the historical stock price volatility from a representative group of comparable industry competitors to estimate expected stock price volatility. Prior to our IPO, for restricted stock awards we applied a discount for lack of marketability to the fair value of common stock to estimate the impact of valuing a minority interest in our Company as a closely held, non-public company with no liquid market for its shares. Following the IPO, we value restricted stock awards using the market value on the grant date. Comprehensive Income (Loss) Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) includes foreign currency translation adjustments. Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance. We record uncertain tax positions on the bases of a two-step process in which (i) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the positions and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. “Emerging Growth Company” and "Smaller Reporting Company" Reporting Requirements We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as a company is deemed to be an emerging growth company, it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 and our disclosure obligations regarding executive compensation may be reduced. We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of our initial public offering, or December 31, 2022. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenue exceeds $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. Section 107 of the JOBS Act also provides that an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we are subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We are also a "smaller reporting company," as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. As a result, many of the same exemptions from reporting requirements available to us as an emerging growth company are also available to us as a smaller reporting company, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation. To the extent that we continue to qualify as a smaller reporting company, after we cease to qualify as an emerging growth company, those exemptions may continue to be available to us. Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02 “ Leases, ” which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company adopted this standard on January 1, 2019. The new standard requires lessees to recognize both the right-of-use assets and lease liabilities in the balance sheet for most leases, whereas under previous GAAP only finance lease liabilities (previously referred to as capital leases) were recognized in the balance sheet. In addition, the definition of a lease has been revised which may result in changes to the classification of an arrangement as a lease. Under the new standard, an arrangement that conveys the right to control the use of an identified asset by obtaining substantially all of its economic benefits and directing how it is used is a lease, whereas the previous definition focuses on the ability to control the use of the asset or to obtain its output. Quantitative and qualitative disclosures related to the amount, timing and judgments of an entity's accounting for leases and the related cash flows are expanded. Disclosure requirements apply to both lessees and lessors, whereas, previous disclosures related only to lessees. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. Lessor accounting is also largely unchanged. The new standard provides a number of transition practical expedients, which the Company has elected, including: • a "package of three" expedients that must be taken together and allow entities to (1) not reassess whether existing contracts contain leases, (2) carryforward the existing lease classification, and (3) not reassess initial direct costs associated with existing leases, and • an implementation expedient which allows the requirements of the standard in the period of adoption with no restatement of prior periods. The Company has assessed the lease standard and executed a detailed implementation plan, which included the following key activities: • Developed a complete lease inventory and abstracted the required data attributes as applicable in a manner that supports the Company's lease portfolio. • Evaluated the transition practical expedients available under the standard. • Identified, assessed and documented technical accounting issues, policy considerations and financial reporting implications. • Identified and implemented changes to processes and controls to ensure all impacts of the new standard are effectively addressed. The adoption of the new standard did not result in a material right of use asset or lease obligation for operating leases recorded in the Company's condensed consolidated balance sheets on January 1, 2019, primarily due to the lack of existing lease contracts, or other contracts that meet the standard for consideration as a lease under the definitions discussed above. The Company has limited operating leases for office equipment maintained at its headquarters, and has not historically leased any real estate or office space. |
BUSINESS COMBINATION
BUSINESS COMBINATION | 6 Months Ended |
Jun. 30, 2019 | |
Business Combinations [Abstract] | |
BUSINESS COMBINATION | BUSINESS COMBINATION On June 4, 2019, the Company purchased all the issued and outstanding shares of stock of Vilex and units of membership interests in Orthex for $50,000 in cash, adjusted for working capital, and 245,352 shares of common stock, $0.00025 par value per share, of the Company. The shares of common stock were valued at $40.76 per share, the volume weighted average trading price during the thirty day trading period ending on May 30, 2019. In addition, $3,000 was placed in an escrow account for a period of up to twenty months to cover certain indemnification obligations and to secure certain closing adjustments. The Company incurred $589 of acquisition-related costs that are included in general and administrative expenses on the condensed consolidated statement of operations. The purchase price allocation set forth herein is preliminary and may be revised as we finalize the fair value determination for certain assets acquired, and determine any further working capital adjustments. Any revisions or changes identified during the measurement period, which could be up to 12 months from the closing date of the acquisition, may be material. The following table summarizes the total consideration paid for Vilex and Orthex and the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands): Description Amount Preliminary fair value of estimated total acquisition consideration $ 60,276 Assets Cash and cash equivalents 348 Trade receivables 1,849 Inventory 3,905 Prepaid expenses and other current assets 12 Property and equipment 7,541 Intangible assets 18,260 Operating lease right-of-use asset 323 Total assets 32,238 Liabilities Accounts payable and accrued liabilities 564 Operating lease liabilities 323 Other long-term liabilities 68 Total liabilities 955 Less: total net assets 31,283 Goodwill $ 28,993 The fair value of identifiable intangible assets were based on valuations using a combination of the income and cost approach. The estimated fair value and useful life of identifiable intangible assets are as follows: Amount Remaining Economic Useful Life Trademarks / Names $ 4,160 Indefinite Patents 8,380 15 years Internally Developed Software 960 10 years Customer Relationships 4,690 12 years Non-competition Agreements 70 5 years $ 18,260 |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 6 Months Ended |
Jun. 30, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | |
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS On June 4, 2019, the Company acquired Vilex, a manufacturer of foot and ankle surgical implants. Since the Vilex products include adult offerings that are not core to the Company's pediatric business, the Company received Board approval to take the steps necessary to divest the non-core Vilex assets. As a result, certain assets and liabilities of Vilex are classified as held for sale on the condensed consolidated balance sheet as of June 30, 2019. The following summarized financial information has been segregated from continuing operations and reported as discontinued operations for the three and six months ended June 30, 2019: Three and Six Months Ended June 30, 2019 Revenue $ 414 Operating expenses 507 Depreciation and amortization 66 Operating loss (159) Loss from discontinued operations $ (159) The assets and liabilities held for sale on the condensed consolidated balance sheet as of June 30, 2019 are as follows: June 30, 2019 Assets: Cash $ 360 Accounts receivable 850 Inventories 2,163 Prepaid expenses and other current assets 12 Property and equipment 6,015 Amortizable intangible assets 5,452 Goodwill 18,022 Operating lease right-of-use asset 240 Other intangible assets 2,250 Current assets held for sale, net 35,364 Liabilities: Accounts payable 71 Accrued compensation and benefits 159 Operating lease liabilities 239 Other current liabilities 25 Liabilities held for sale $ 494 |
DEBT AND CREDIT ARRANGEMENTS
DEBT AND CREDIT ARRANGEMENTS | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
DEBT AND CREDIT ARRANGEMENTS | DEBT AND CREDIT ARRANGEMENTS Long-term debt consisted of the following: June 30, 2019 December 31, 2018 Note payable to Squadron $ 19,874 $ 19,856 Short-term debt with affiliate 30,000 — Mortgage payable to affiliate 1,359 1,418 Total debt 51,233 21,274 Less: current maturities 30,121 118 Long-term debt with affiliate, net of current maturities $ 21,112 $ 21,156 In April 2017, we entered into the Third Amended and Restated Loan and Security Agreement with Squadron providing us with (i) a term loan in the amount of $18,400, bearing interest at a per annum rate of 10%, and (ii) a term loan in the amount of $16,000, bearing interest at a per annum rate of 11%. Each of the term loans was to have matured on March 31, 2019. In addition, the agreement provided for a $1,000 extension fee payable in three annual installments. The extension fee was recorded in full upon closing as a deferred financing cost within long-term debt with affiliate, net of current portion, and was to be recognized ratably over the term of the agreement as deferred financing charges within interest expense on the consolidated statements of operations assuming an IPO did not happen. Effective December 31, 2017, we entered into a Fourth Amended and Restated Loan and Security Agreement, or the Loan Agreement, with Squadron. Pursuant to the Loan Agreement, a majority of the term loan amounts under the previous agreement with Squadron were consolidated into a $20,000 term note, or the Term Note A, and a $15,000 revolving credit facility was established. Also, $667 of the extension fee was canceled as of the completion of our IPO in October 2017. Both facilities include interest only payments and have interest rates equal to the greater of (a) three month LIBOR plus 8.61% and (b) 10%. The Loan Agreement also extended the maturity date to January 31, 2023. In order to finance a portion of the cash consideration for the acquisition of Vilex and Orthex, the Company entered into a first Amendment, or the Amendment, to the Loan Agreement (as so amended, the "Amended Loan Agreement"), with Squadron. The Amended Loan Agreement provides for a new $30,000 term loan facility, represented by a Term Note B, in addition to the existing $20,000 Term Note A and $15,000 revolving credit facility. Similar to the other facilities under the Amended Loan Agreement, the Term Note B is subject to interest only payments at an interest rate equal to the greater of (a) three month LIBOR plus 8.61%, and (b) 10.00%. The maturity date for the Term Note B is the earliest of: (i) the date on which any persons acquire (x) capital stock of the Company possessing the voting power to elect a majority of the Company's Board of Directors (whether by merger, consolidation, reorganization, combination, sale or transfer), or (y) all or substantially all of the Company's assets, determined on a consolidated basis; (ii) the date on which the Company sells its equity interest in, or all or substantially all of the assets of, Vilex; and (iii) May 31, 2020. Until such time that the Term Note B and all accrued interest thereon has been paid in full, no borrowings under the revolving loan facility are permitted. As provided in the Amendment, Orthex has become a "Borrower" under the Amended Loan Agreement and, as such, granted to Squadron a security interest in all of its personal property as collateral for all borrowings under the Amended Loan Agreement. In connection with the Amendment, the Company granted a security interest in (a) the units of membership interest in Orthex held by the Company, and (b) the shares of stock of Vilex held by the Company, as collateral for borrowings under the Amended Loan Agreement. Borrowings under the Amended Loan Agreement are secured by substantially all of the Company's assets and are unconditionally guaranteed by each of its subsidiaries with the exception of Vilex. The fair value of our notes payable to Squadron were estimated based on prices for the same or similar issues and the current interest rates offered for the debt of the same remaining maturities, which are considered level 2 inputs in accordance with ASC Topic 820, “ Fair Value Measurements and Disclosures .” At June 30, 2019, the fair value approximated the carrying value. In connection with the purchase of our office and warehouse space in Warsaw, Indiana in August 2013, we entered into a mortgage note payable to Tawani Enterprises Inc., an affiliate of Squadron. Pursuant to the terms of the mortgage note, we pay Tawani Enterprises Inc. monthly principal and interest installments of $16 with interest compounded at 5% until maturity in 2028, at which time a final payment of remaining principal and interest is due. The mortgage is secured by the related real estate and building. At December 31, 2018, the mortgage balance was $1,418 of which current principal due of $118 was included in current portion of long-term debt. At June 30, 2019, the mortgage balance was $1,359 of which current principal due of $121 was included in current portion of long-term debt. |
STRATEGIC ARRANGEMENTS
STRATEGIC ARRANGEMENTS | 6 Months Ended |
Jun. 30, 2019 | |
Research and Development [Abstract] | |
STRATEGIC ARRANGEMENTS | STRATEGIC ARRANGEMENTS Effective December 1, 2007, we entered into a ten ten In exchange for services, CASE receives certain royalties and up-front fees. The royalties and certain fees are contingent upon our obtaining FDA approval and the launch of our products into the marketplace. CASE receives a minimum annual royalty of $10 or a royalty of 3% of net sales on products, whichever is greater. Additionally, for each new product developed, CASE will receive milestone payments of $5 for FDA approval to sell our products within the United States and $10 for general product launch. Additionally, CASE receives a royalty of 3% of net sales on products fully developed and being sold in the marketplace. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES For the three and six month periods ended June 30, 2019 and 2018, we calculated the provision of income taxes by applying an estimate of the annual effective tax rate for the full fiscal year to the ordinary loss for the reporting period resulting in a zero tax provision consistent with prior periods. The deferred tax assets were fully offset by a valuation allowance at June 30, 2019 and December 31, 2018, and no income tax benefit has been recognized in our condensed consolidated statements of operations for any of the periods presented. At December 31, 2018, we had available federal and state tax loss carryforwards of $87,345 and tax credits for federal and state tax purposes of $335 which begin to expire in 2028. Any losses incurred in 2018 and beyond do not expire. An ownership change under Section 382 of the Internal Revenue Code was deemed to occur on May 30, 2014. Given the limitation calculation, we anticipate approximately $16,200 in losses generated prior to the ownership change date will be subject to potential limitation. The estimated annual limitation is $1,062, which is increased by $2,302 over the first five years as a result of an unrealized built in gain. A second ownership change under Section 382 was deemed to occur on December 11, 2018. The estimated annual limitation is$9,736, which is increased by $22,430 over the first five years as a result of an unrealized built in gain. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY Stock Options The fair value for options granted at the time of issuance were estimated at the date of grant using a Black-Scholes options pricing model. Significant assumptions included in the option value model include the fair value of our common stock at the grant date, weighted average volatility, risk-free interest rate, dividend yield and the forfeiture rate. There were no stock options granted in any of the periods presented. Our stock option activity and related information are summarized as follows: Weighted-Average Contractual Terms Options Exercise Price (in Years) Outstanding at January 1, 2019 112,094 $ 30.32 1.8 Exercised (21,409) 30.69 Outstanding at June 30, 2019 90,685 $ 30.23 1.4 Options generally include a time-based vesting schedule permitting the options to vest ratably over three years. At June 30, 2019 and December 31, 2018, all options were fully vested. There was no stock-based compensation expense on stock options for the three and six month periods ended June 30, 2019 and 2018, respectively. Restricted Stock Our restricted stock activity and related information are summarized as follows: Weighted-Average Remaining Restricted Contractual Terms Stock (in Years) Outstanding at January 1, 2019 177,293 2.2 Granted 139,619 Forfeited (5,121) Vested (4,444) Outstanding at June 30, 2019 307,347 2.1 Restricted stock exercisable at June 30, 2019 — At June 30, 2019, there was $6,999 of unrecognized compensation expense remaining related to our service-based restricted stock awards. The unrecognized compensation cost was expected to be recognized over a weighted-average period of 2.1 years or earlier upon an elimination of the restriction period as a result of a change in control event. Stock-based compensation expense on restricted stock amounted to $692 and $454 for the three months ended June 30, 2019 and 2018, respectively, and $1,163 and $2,631 for the six months ended June 30, 2019 and 2018, respectively. Warrants Our warrant activity and related information are summarized as follows: Weighted-Average Warrants Exercise Price Outstanding at January 1, 2019 6,790 $ 27.81 Forfeited or expired (1,811) — Outstanding at June 30, 2019 4,979 $ 27.88 For all periods presented, the warrants were issued at exercise prices ranging from $26.27 to $30.97 per share. The warrants generally have a ten |
NET LOSS PER SHARE
NET LOSS PER SHARE | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
NET LOSS PER SHARE | NET LOSS PER SHARE The following is a reconciliation of basic and diluted net loss per share attributable to common stockholders: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Net loss attributable to common stockholders - basic and diluted $ (2,618) $ (2,692) $ (5,638) $ (7,692) Weighted average number of shares - basic and diluted 14,451,979 12,549,226 14,409,752 12,312,814 Net loss per share attributable to common stockholders - basic and diluted (1) $ (0.18) $ (0.21) $ (0.39) $ (0.62) (1) The effect of discontinued operations on loss per share has been excluded for 2019 as it is not material. Our basic and diluted net loss per share is computed using the two-class method. The two-class method is an earnings allocation that determines net income per share for each class of common stock and participating securities according to their participation rights in dividends and undistributed earnings or losses. Non-vested restricted stock that includes non-forfeitable rights to dividends are considered participating securities. Because we have incurred a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share. The following contingently issuable and convertible equity shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for all periods presented: Six Months Ended June 30, 2019 2018 Restricted stock 307,347 167,593 Stock options 90,685 135,365 Warrants 4,979 44,101 403,011 347,059 |
BUSINESS SEGMENT
BUSINESS SEGMENT | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
BUSINESS SEGMENT | BUSINESS SEGMENT Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. We have one operating and reporting segment, OrthoPediatrics Corp., which designs, develops and markets anatomically appropriate implants and devices for children with orthopedic problems. Our chief operating decision-maker, our Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance, accompanied by disaggregated revenue information by product category. We disaggregate revenue from contracts with customers by operating segment. We determined that disaggregating revenue into these categories achieves the disclosure objective of illustrating the differences in the nature, timing and uncertainty of our revenue streams. We do not assess the performance of our individual product categories on measures of profit or loss, or other asset-based metrics. Therefore, the information below is presented only for revenue by category and geography. Product sales attributed to a country or region includes product sales to hospitals, physicians and distributors and is based on the final destination where the products are sold. No individual customer accounted for more than 10% of total product sales for the three and six months ended June 30, 2019 or 2018. No customer accounted for more than 10% of consolidated accounts receivable as of June 30, 2019 and December 31, 2018. Product sales by source were as follows: Three Months Ended June 30, Six Months Ended June 30, Product sales by geographic location: 2019 2018 2019 2018 U.S. $ 13,848 $ 11,458 $ 24,115 $ 20,111 International 4,352 3,619 8,741 7,060 Total $ 18,200 $ 15,077 $ 32,856 $ 27,171 Three Months Ended June 30, Six Months Ended June 30, Product sales by category: 2019 2018 2019 2018 Trauma and deformity $ 11,887 $ 9,860 $ 21,904 $ 18,983 Scoliosis 5,866 4,897 10,124 7,582 Sports medicine/other 447 320 828 606 Total $ 18,200 $ 15,077 $ 32,856 $ 27,171 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONSIn addition to the debt and credit agreements and mortgage with Squadron and its affiliate (see Note 3), we currently use Structure Medical, LLC (“Structure Medical”) as one of our suppliers. Structure Medical is affiliated with Squadron and we do not have a long-term contract with them. We made aggregate payments to Structure Medical of $1,729 and $1,565 for the three months ended June 30, 2019 and 2018, respectively, and $2,493 and $2,266 for the six months ended June 30, 2019 and 2018, respectively. |
EMPLOYEE BENEFIT PLAN
EMPLOYEE BENEFIT PLAN | 6 Months Ended |
Jun. 30, 2019 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFIT PLAN | EMPLOYEE BENEFIT PLANWe have a defined-contribution plan, OrthoPediatrics 401(k) Retirement Plan (the “401(k) Plan”), which includes a cash or deferral (Section 401(k)) arrangement. The 401(k) Plan covers those employees who meet certain eligibility requirements and elect to participate. Employee contributions are limited to the annual amounts permitted under the Internal Revenue Code. The 401(k) Plan allows us to make a discretionary matching contribution. Discretionary matching contributions are determined annually by management. Effective January 1, 2018, we have elected to match our employees' 401(k) contributions up to 3% of employees' salary. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Leases At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the Company calculates the associated lease liability and corresponding right-of-use asset upon lease commencement using a discount rate based on a borrowing rate commensurate with the term of the lease. The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its operating lease right-of-use assets as long-term assets. The Company leases an office facility in Florida for the Orthex business acquired in June. The term of the lease is 4 years and provides for periodic rent increases. The lease agreement does not contain any material variable lease payments, a residual value guarantee or material restrictive covenants. As of June 30, 2019, the Company has recorded a lease liability of $75 and corresponding right-of-use-asset of $75 on its condensed consolidated balance sheet. Legal Proceedings From time to time, we are involved in various legal proceedings arising in the ordinary course of our business. On January 20, 2017, K2M, Inc. filed suit against us in the United States District Court for the District of Delaware (K2M, Inc. v. OrthoPediatrics Corp. et al., Case No. 1:17-cv-0061) seeking unspecified damages for alleged infringement of U.S. Patent No. 9,532,816. The complaint was amended on August 21, 2017 to add, among other things, a claim of patent infringement regarding U.S. Patent No. 9,655,664. These patents relate to certain instruments used in our RESPONSE TM spine systems, which represent a portion of our total scoliosis portfolio. We have denied these claims and responded with counterclaims seeking declaratory relief that the patents in question are both invalid and not infringed. The parties attended a court-ordered mediation on October 24, 2017, which did not resolve the dispute, but as we move forward with this matter we welcome constructive discussions on a negotiated settlement. Nevertheless, we view our case as particularly strong and will continue to vigorously defend this matter. On January 8 and 22, 2018, we filed our first and second petitions for inter partes review ("IPR") with the United States Patent and Trademark Office's Patent Trial and Appeal Board ("PTAB") to challenge the patentability of U.S. Patent No. 9,532,816 (OrthoPediatrics Corp., v. K2M, Inc., Inter Partes Case Nos. IPR2018-00429 and IPR2018-00521). On June 28, 2018, the PTAB instituted the subject IPRs and set a trial date of February 20, 2019 for both IPRs. Due to inclement weather, the subject February 20 hearing was postponed and took place on February 21, 2019. On June 4, 2019, we learned PTAB ruled against OrthoPediatrics with respect to its challenge of the validity of K2M, Inc's U.S. Patent No. 9,532,816. In early July 2019, we sought a rehearing of PTAB's decision and was notified on July 23, 2019 PTAB denied our rehearing request. Additionally, the parties have agreed to stay the above-referenced district court proceedings pending the outcome of the subject IPR proceedings. The Court ordered the stay on July 10, 2018. To date, the stay has not been lifted. Moreover, on August 21, 2018, we filed three petitions with PTAB to challenge the patentability of the above-referenced U.S. Patent No. 9,655,664 (OrthoPediatrics Corp., v. K2M, Inc., Inter Partes Case Nos. IPR2018-01546, IPR2018-01547, and IPR2018-01548). On February 14 and 22, 2019 and March 1, 2019, PTAB declined to initiate IPR Case Nos. IPR2018-01546, IPR2018-01547, and IPR2018-01548, respectively. Although we believe that the K2M lawsuit is without merit and will vigorously defend the claims asserted against us, intellectual property litigation can involve complex factual and legal questions, and an adverse resolution of this proceeding could have a material adverse effect on our business, operating results and financial condition. We are not presently a party to any other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate materially affect our financial position or results of operations or cash flows. Royalties As of June 30, 2019, we are contracted to pay royalties to individuals and entities that provide research and development services, which range from 0.5% to 20% of sales. Additionally, we have minimum royalty commitments of $500 annually through 2026. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Unaudited Interim Consolidated Financial Statements | Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of OrthoPediatrics Corp. and its wholly-owned subsidiaries, OrthoPediatrics US Distribution Corp., OrthoPediatrics EU Limited, OrthoPediatrics AUS PTY LTD, OrthoPediatrics NZ Limited, OP EU B.V., and OP Netherlands B.V., Vilex in Tennessee, Inc., and Orthex, LLC (collectively, the “Company,” “we,” “our” or “us”). All intercompany balances and transactions have been eliminated. Unaudited Interim Condensed Consolidated Financial Statements We have prepared the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying condensed consolidated balance sheets as of June 30, 2019 and December 31, 2018, the condensed consolidated statements of operations for the three and six months ended June 30, 2019 and 2018, the condensed consolidated statements of comprehensive loss for the three and six months ended June 30, 2019 and 2018, the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2019 and 2018 and the condensed consolidated statements of cash flows for the six months ended June 30, 2019 and 2018 are unaudited and should be read in conjunction with the annual consolidated financial statements as of and for the year ended December 31, 2018 and related notes thereto contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 7, 2019. The financial data and other financial information disclosed in the notes to the accompanying condensed consolidated financial statements are also unaudited. As such, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations thereunder. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2018 and, in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the financial statements for the interim periods. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full fiscal year or for any other period. |
Use of Estimates | Use of EstimatesPreparation of the condensed consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as of the date of the condensed consolidated financial statements. By their nature, these judgments are subject to an inherent degree of uncertainty. We use historical experience and other assumptions as the basis for our judgments and estimates. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in these estimates will be reflected in the condensed consolidated financial statements. |
Foreign Currency Transactions | Foreign Currency Transactions We currently bill our international distributors in United States ("U.S.") dollars, resulting in minimal foreign exchange transaction expense. Beginning in the second quarter of 2017, we began selling direct within the United Kingdom, Ireland, Australia and New Zealand and billing using the local currency for each country. In September 2018, we began selling direct in Canada and in January 2019 in Belgium and the Netherlands. The financial |
Revenue Recognition - United States and International | Revenue from Contracts with Customers In accordance with ASC 606, " Revenue From Contracts With Customers (ASC 606)", revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from a customer which are subsequently remitted to government authorities. Revenue Recognition – United States Revenue in the United States is generated primarily from the sale of our implants and, to a much lesser extent, from the sale of our instruments. Sales in the United States are primarily to hospital accounts through independent sales agencies. We recognize revenue when our performance obligations under the terms of a contract with our customer are satisfied. This typically occurs when we transfer control of our products to the customer, generally upon implantation or when title passes upon shipment. The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis. On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when the hospital obtains control of the product, typically either upon shipment or delivery of the product dependent on the terms of the contract. Pricing for each customer is dictated by a unique pricing agreement, which does not generally include rebates or discounts. Revenue Recognition – International Outside of the United States, we primarily sell our products through independent stocking distributors. Generally, the distributors are allowed to return products, and some are thinly capitalized. Based on our history of collections and returns from international customers, we previously concluded that collectibility was not reasonably assured at the time of delivery for certain customers who had not evidenced a consistent pattern of timely payment. Accordingly, in the past we did not recognize international revenue and associated cost of revenue at the time title transfers for these customers for whom collectibility had not been deemed probable based on the customer’s history and ability to pay, but rather when cash had been received. Until such payment, cost of revenue was recorded as inventories held by international distributors, net of adjustment for estimated unreturnable inventory, on our condensed consolidated balance sheets. Following a review of our collection history, we deemed collectibility was probable for all international stocking distributors effective January 1, 2019. Based on a history of reliable collections, we have concluded that a contract exists and revenue should be recognized when we transfer control of our products to the customer, generally upon implantation or when title passes upon shipment. In early 2017, we expanded operations and established legal entities in the United Kingdom, Australia and New Zealand permitting us to sell under an agency model direct to local hospitals in these countries. Additionally, in September 2018 we began selling in Canada and in January 2019 to Belgium and the Netherlands utilizing the agency model. The products are generally consigned to our independent sales agencies, and revenue is recognized when the products are used by or shipped to the hospital for surgeries on a case by case basis. On rare occasions, hospitals purchase products for their own inventory, and revenue is recognized when the hospital obtains control of the product, typically either upon shipment or delivery of the product dependent on the terms of the contract. Pricing for each |
Cash and Cash Equivalents | Cash and Cash EquivalentsWe maintain cash in bank deposit accounts which, at times, may exceed federally insured limits. To date, we have not experienced any loss in such accounts. We consider all highly liquid investments with original maturity of three months or less at inception to be cash equivalents. The carrying amounts reported in the balance sheet for cash are valued at cost, which approximates fair value. |
Accounts Receivable | Accounts Receivable Accounts receivable are uncollateralized customer obligations due under normal trade terms, generally requiring payment within 30 days from the invoice date. Account balances with invoices over 30 days past due are considered delinquent. No interest is charged on past due accounts. Payments of accounts receivable are applied to the specific invoices identified on the customer's remittance advice or, if unspecified, to the customer's account as an unapplied credit. |
Inventories, net | Inventories, net Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in-first-out method. Inventories, which consist of implants and instruments held in our warehouse or with third-party independent sales agencies or distributors, are considered finished goods and are purchased from third parties. We evaluate the carrying value of our inventories in relation to the estimated forecast of product demand, which takes into consideration the life cycle of the product. A significant decrease in demand could result in an increase in the amount of excess inventory on hand, which could lead to additional charges for excess and obsolete inventory. The need to maintain substantial levels of inventory impacts our estimates for excess and obsolete inventory. Each of our implant systems are designed to include implantable products that come in different sizes and shapes to accommodate the surgeon’s needs. Typically, a small number of the set components are used in each surgical procedure. Certain components within each set may become obsolete before other components based on the usage patterns. We adjust inventory values, as needed, to reflect these usage patterns and life cycle. |
Property and Equipment, net | Property and Equipment, net Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the assets. When assets are retired or otherwise disposed of, costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in operations for the period. Maintenance and repairs that prolong or extend the useful life are capitalized, whereas standard maintenance, replacements, and repair costs are expensed as incurred. Instruments are hand-held devices, specifically designed for use with our implants and are used by surgeons during surgery. Instruments deployed within the United States, United Kingdom, Australia, New Zealand, Canada, Belgium and the Netherlands are carried at cost less accumulated depreciation and are recorded in property and equipment, net on the condensed consolidated balance sheets. Sample inventory consists of our implants and instruments, and is maintained to market and promote our products. Sample inventory is carried at cost less accumulated depreciation. Depreciable lives are generally as follows: Building and building improvements 25 to 30 years Furniture and fixtures 5 to 7 years Computer equipment 3 to 5 years Business software 3 years Office and other equipment 5 to 7 years Instruments 5 years Sample inventory 2 years |
Amortizable Intangible Assets, net | Amortizable Intangible Assets, net Amortizable intangible assets include fees necessary to secure various patents and licenses, and the value of internally developed software, customer relationships and non-competition agreements related to the acquisition of Orthex. Vilex has amortizable intangible assets including patents, customer relationships and non-competition agreements which are included in current assets held for sale, net on the condensed consolidated balance sheet as of June 30, 2019. Amortization is calculated on a straight-line basis over the estimated useful life of the asset. Amortization for patents and licenses commences at the time of patent approval and market launch, respectively. Amortization for the Orthex and Vilex assets commenced upon acquisition. Intangible assets are amortized over a 3 to 20 year period. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Our goodwill represents the excess of the cost over the fair value of net assets acquired. The determination of the value of goodwill and intangible assets arising from acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is assessed for impairment using fair value measurement techniques on an annual basis or more frequently if facts and circumstances warrant such a review. The goodwill is considered to be impaired if we determine that the carrying value of the reporting unit exceeds its respective fair value. We have indefinite lived tradename assets that are reviewed for impairment by performing a quantitative analysis, which occurs annually in the fourth quarter or whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount to future net undiscounted cash flows expected to be generated by the associated asset. If such assets are determined to be impaired, the impairment to be recognized is |
Cost of Revenue | Cost of RevenueCost of revenue consists primarily of products purchased from third-party suppliers, excess and obsolete inventory adjustments, inbound freight, and royalties. Our implants and instruments are manufactured to our specifications by third-party suppliers who meet our manufacturer qualifications standards. Our third-party manufacturers are required to meet the standards of the Food and Drug Administration (the “FDA”), and the International Organization for Standardization, as well as other country-specific quality standards. The majority of our implants and instruments are produced in the United States. |
Sales and Marketing Expenses | Sales and Marketing ExpensesSales and marketing expenses primarily consist of commissions to our domestic and select international independent sales agencies and consignment distributors, as well as compensation, commissions, benefits and other related costs for personnel we employ. Commissions and bonuses are generally based on a percentage of sales. Our international independent stocking distributors purchase instrument sets and replenishment stock for resale, and we do not pay commissions or any other sales related costs for international sales to distributors. |
Advertising Costs | Advertising Costs Advertising costs consist primarily of print advertising, trade shows, and other related expenses. Advertising costs are expensed as incurred and are recorded as a component of sales and marketing expense. |
Research and Development Costs | Research and Development CostsResearch and development costs are expensed as incurred. Our research and development expenses primarily consist of costs associated with engineering, product development, consulting services, outside prototyping services, outside research activities, materials, development and protection of our intellectual property portfolio, as well as other costs associated with development of our products. Research and development costs also include related personnel and consultants’ compensation expense. |
Stock-Based Compensation | Stock-Based Compensation Prior to our Initial Public Offering ("IPO") in October 2017, we maintained an Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”) that provided for grants of options and restricted stock to employees, directors and associated third-party representatives of the Company as determined by the Board of Directors. The 2007 Plan had authorized 1,585,000 shares for award. Immediately prior to our IPO, we adopted our 2017 Incentive Award Plan (the "2017 Plan") which replaced the 2007 Plan. The 2017 Plan provides for grants of options and restricted stock to officers, employees, consultants or directors of our Company. The 2017 Plan has authorized 1,789,647 shares for award. Options holders, upon vesting, may purchase common stock at the exercise price, which is the estimated fair value of our common stock on the date of grant. Option grants generally vest immediately or over three years. No stock options were granted in any of the periods presented. Restricted stock may not be transferred prior to the expiration of the restricted period, which is typically three years. The restricted stock that had been granted under the 2007 Plan had restriction periods that generally lasted until the earlier of six years from the date of grant, or an IPO or change in control, as defined in the 2007 Plan. All restricted stock granted prior to May 2014 vested upon our IPO and the remaining grants under the 2007 Plan vested six months after the IPO. We recognize the reversal of stock compensation expense when a restricted stock forfeiture occurs as opposed to estimating future forfeitures. We estimate the fair value of stock options and restricted stock at the grant date. Stock-based compensation is recognized ratably over the requisite service period, which is generally the vesting period for stock options and the restriction period for restricted stock. Calculating the fair value of stock-based awards requires that we make highly subjective assumptions. We use the Black-Scholes option pricing model to value our stock options. Use of the valuation methodology requires that we make assumptions as to the volatility of our common stock, the expected term of our stock options and the risk free rate of return for a period that approximates the expected term of our stock options. Because we were a privately-held company with a limited operating history, we utilized the historical stock price volatility from a representative group of comparable industry competitors to estimate expected stock price volatility. |
Comprehensive Income (Loss) | Comprehensive Income (Loss)Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) includes foreign currency translation adjustments. |
Income Taxes | Income Taxes We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the condensed consolidated financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance. |
"Emerging Growth Company" and "Smaller Reporting Company" Reporting Requirements | “Emerging Growth Company” and "Smaller Reporting Company" Reporting Requirements We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as a company is deemed to be an emerging growth company, it may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 and our disclosure obligations regarding executive compensation may be reduced. We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of our initial public offering, or December 31, 2022. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenue exceeds $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. Section 107 of the JOBS Act also provides that an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we are subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02 “ Leases, ” which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company adopted this standard on January 1, 2019. The new standard requires lessees to recognize both the right-of-use assets and lease liabilities in the balance sheet for most leases, whereas under previous GAAP only finance lease liabilities (previously referred to as capital leases) were recognized in the balance sheet. In addition, the definition of a lease has been revised which may result in changes to the classification of an arrangement as a lease. Under the new standard, an arrangement that conveys the right to control the use of an identified asset by obtaining substantially all of its economic benefits and directing how it is used is a lease, whereas the previous definition focuses on the ability to control the use of the asset or to obtain its output. Quantitative and qualitative disclosures related to the amount, timing and judgments of an entity's accounting for leases and the related cash flows are expanded. Disclosure requirements apply to both lessees and lessors, whereas, previous disclosures related only to lessees. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. Lessor accounting is also largely unchanged. The new standard provides a number of transition practical expedients, which the Company has elected, including: • a "package of three" expedients that must be taken together and allow entities to (1) not reassess whether existing contracts contain leases, (2) carryforward the existing lease classification, and (3) not reassess initial direct costs associated with existing leases, and • an implementation expedient which allows the requirements of the standard in the period of adoption with no restatement of prior periods. The Company has assessed the lease standard and executed a detailed implementation plan, which included the following key activities: • Developed a complete lease inventory and abstracted the required data attributes as applicable in a manner that supports the Company's lease portfolio. • Evaluated the transition practical expedients available under the standard. • Identified, assessed and documented technical accounting issues, policy considerations and financial reporting implications. • Identified and implemented changes to processes and controls to ensure all impacts of the new standard are effectively addressed. The adoption of the new standard did not result in a material right of use asset or lease obligation for operating leases recorded in the Company's condensed consolidated balance sheets on January 1, 2019, primarily due to the lack of existing lease contracts, or other contracts that meet the standard for consideration as a lease under the definitions discussed above. The Company has limited operating leases for office equipment maintained at its headquarters, and has not historically leased any real estate or office space. |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Property and equipment, depreciable lives | Sample inventory is carried at cost less accumulated depreciation. Depreciable lives are generally as follows: Building and building improvements 25 to 30 years Furniture and fixtures 5 to 7 years Computer equipment 3 to 5 years Business software 3 years Office and other equipment 5 to 7 years Instruments 5 years Sample inventory 2 years |
BUSINESS COMBINATION (Tables)
BUSINESS COMBINATION (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Business Combinations [Abstract] | |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following table summarizes the total consideration paid for Vilex and Orthex and the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands): Description Amount Preliminary fair value of estimated total acquisition consideration $ 60,276 Assets Cash and cash equivalents 348 Trade receivables 1,849 Inventory 3,905 Prepaid expenses and other current assets 12 Property and equipment 7,541 Intangible assets 18,260 Operating lease right-of-use asset 323 Total assets 32,238 Liabilities Accounts payable and accrued liabilities 564 Operating lease liabilities 323 Other long-term liabilities 68 Total liabilities 955 Less: total net assets 31,283 Goodwill $ 28,993 |
Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination | The fair value of identifiable intangible assets were based on valuations using a combination of the income and cost approach. The estimated fair value and useful life of identifiable intangible assets are as follows: Amount Remaining Economic Useful Life Trademarks / Names $ 4,160 Indefinite Patents 8,380 15 years Internally Developed Software 960 10 years Customer Relationships 4,690 12 years Non-competition Agreements 70 5 years $ 18,260 |
Schedule of Indefinite-lived Intangible Assets Acquired as Part of Business Combination | The fair value of identifiable intangible assets were based on valuations using a combination of the income and cost approach. The estimated fair value and useful life of identifiable intangible assets are as follows: Amount Remaining Economic Useful Life Trademarks / Names $ 4,160 Indefinite Patents 8,380 15 years Internally Developed Software 960 10 years Customer Relationships 4,690 12 years Non-competition Agreements 70 5 years $ 18,260 |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Disposal Groups, Including Discontinued Operations | The following summarized financial information has been segregated from continuing operations and reported as discontinued operations for the three and six months ended June 30, 2019: Three and Six Months Ended June 30, 2019 Revenue $ 414 Operating expenses 507 Depreciation and amortization 66 Operating loss (159) Loss from discontinued operations $ (159) The assets and liabilities held for sale on the condensed consolidated balance sheet as of June 30, 2019 are as follows: June 30, 2019 Assets: Cash $ 360 Accounts receivable 850 Inventories 2,163 Prepaid expenses and other current assets 12 Property and equipment 6,015 Amortizable intangible assets 5,452 Goodwill 18,022 Operating lease right-of-use asset 240 Other intangible assets 2,250 Current assets held for sale, net 35,364 Liabilities: Accounts payable 71 Accrued compensation and benefits 159 Operating lease liabilities 239 Other current liabilities 25 Liabilities held for sale $ 494 |
DEBT AND CREDIT ARRANGEMENTS (T
DEBT AND CREDIT ARRANGEMENTS (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt instruments | Long-term debt consisted of the following: June 30, 2019 December 31, 2018 Note payable to Squadron $ 19,874 $ 19,856 Short-term debt with affiliate 30,000 — Mortgage payable to affiliate 1,359 1,418 Total debt 51,233 21,274 Less: current maturities 30,121 118 Long-term debt with affiliate, net of current maturities $ 21,112 $ 21,156 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of stock option activity | Our stock option activity and related information are summarized as follows: Weighted-Average Contractual Terms Options Exercise Price (in Years) Outstanding at January 1, 2019 112,094 $ 30.32 1.8 Exercised (21,409) 30.69 Outstanding at June 30, 2019 90,685 $ 30.23 1.4 |
Schedule of restricted stock activity | Our restricted stock activity and related information are summarized as follows: Weighted-Average Remaining Restricted Contractual Terms Stock (in Years) Outstanding at January 1, 2019 177,293 2.2 Granted 139,619 Forfeited (5,121) Vested (4,444) Outstanding at June 30, 2019 307,347 2.1 Restricted stock exercisable at June 30, 2019 — |
Schedule of Warrants | Our warrant activity and related information are summarized as follows: Weighted-Average Warrants Exercise Price Outstanding at January 1, 2019 6,790 $ 27.81 Forfeited or expired (1,811) — Outstanding at June 30, 2019 4,979 $ 27.88 |
NET LOSS PER SHARE (Tables)
NET LOSS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Reconciliation of basic and diluted net loss per share attributable to common stockholders | The following is a reconciliation of basic and diluted net loss per share attributable to common stockholders: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Net loss attributable to common stockholders - basic and diluted $ (2,618) $ (2,692) $ (5,638) $ (7,692) Weighted average number of shares - basic and diluted 14,451,979 12,549,226 14,409,752 12,312,814 Net loss per share attributable to common stockholders - basic and diluted (1) $ (0.18) $ (0.21) $ (0.39) $ (0.62) |
Schedule of antidilutive securities excluded from computation of net loss per share | The following contingently issuable and convertible equity shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for all periods presented: Six Months Ended June 30, 2019 2018 Restricted stock 307,347 167,593 Stock options 90,685 135,365 Warrants 4,979 44,101 403,011 347,059 |
BUSINESS SEGMENT (Tables)
BUSINESS SEGMENT (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Schedule of product sales by geographic location | Product sales by source were as follows: Three Months Ended June 30, Six Months Ended June 30, Product sales by geographic location: 2019 2018 2019 2018 U.S. $ 13,848 $ 11,458 $ 24,115 $ 20,111 International 4,352 3,619 8,741 7,060 Total $ 18,200 $ 15,077 $ 32,856 $ 27,171 |
Schedule of product sales by category | Three Months Ended June 30, Six Months Ended June 30, Product sales by category: 2019 2018 2019 2018 Trauma and deformity $ 11,887 $ 9,860 $ 21,904 $ 18,983 Scoliosis 5,866 4,897 10,124 7,582 Sports medicine/other 447 320 828 606 Total $ 18,200 $ 15,077 $ 32,856 $ 27,171 |
BUSINESS (Details)
BUSINESS (Details) $ in Thousands | Jun. 04, 2019USD ($) |
Vilex and Orthex | |
Business Acquisition [Line Items] | |
Total consideration | $ 60,000 |
SIGNIFICANT ACCOUNTING POLICI_4
SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) | Jun. 04, 2019USD ($)facility | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Dec. 31, 2018USD ($) |
Accounting Policies [Abstract] | ||||||
Accumulated deficit | $ 120,729,000 | $ 120,729,000 | $ 115,091,000 | |||
Impairment charges, finite-lived | 0 | $ 0 | 0 | $ 0 | ||
Impairment charges, indefinite-lived | 0 | 0 | 0 | 0 | ||
Research and development costs | 1,234,000 | $ 1,115,000 | 2,447,000 | $ 2,333,000 | ||
Business Acquisition [Line Items] | ||||||
Operating lease right-of-use asset | 75,000 | 75,000 | ||||
Operating lease liability | 75,000 | 75,000 | ||||
Orthex | ||||||
Business Acquisition [Line Items] | ||||||
Operating lease right-of-use asset | $ 77,000,000 | 75,000,000 | 75,000,000 | |||
Operating lease liability | $ 75,000,000 | $ 75,000,000 | ||||
Vilex | ||||||
Business Acquisition [Line Items] | ||||||
Operating lease liability | $ 246,000,000 | |||||
Vilex and Orthex | ||||||
Business Acquisition [Line Items] | ||||||
Number of facilities acquired | facility | 2 |
SIGNIFICANT ACCOUNTING POLICI_5
SIGNIFICANT ACCOUNTING POLICIES - Borrowings (Details) | Dec. 31, 2017USD ($) |
Revolving Credit Facility | |
Debt Instrument [Line Items] | |
Revolving credit facility | $ 15,000,000 |
Loan Agreement | Revolving Credit Facility | |
Debt Instrument [Line Items] | |
Revolving credit facility | 15,000,000 |
Note payable to Squadron | |
Debt Instrument [Line Items] | |
Long-term debt | 20,000,000 |
Note payable to Squadron | Loan Agreement | |
Debt Instrument [Line Items] | |
Long-term debt | $ 20,000,000 |
SIGNIFICANT ACCOUNTING POLICI_6
SIGNIFICANT ACCOUNTING POLICIES - Assets Useful Lives (Details) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Intangible asset, useful life | 3 years | |
Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Intangible asset, useful life | 20 years | |
Building and building improvements | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable lives | 25 years | |
Building and building improvements | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable lives | 30 years | |
Furniture and fixtures | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable lives | 5 years | |
Furniture and fixtures | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable lives | 7 years | |
Computer equipment | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable lives | 3 years | |
Computer equipment | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable lives | 5 years | |
Business software | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable lives | 3 years | |
Office and other equipment | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable lives | 5 years | |
Office and other equipment | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable lives | 7 years | |
Instruments | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable lives | 5 years | |
Sample inventory | ||
Property, Plant and Equipment [Line Items] | ||
Depreciable lives | 2 years |
SIGNIFICANT ACCOUNTING POLICI_7
SIGNIFICANT ACCOUNTING POLICIES - Stock-Based Compensation (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options granted (in shares) | 0 | 0 | 0 | 0 |
Stock Option | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting period (in years) | 3 years | |||
Restricted stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting period (in years) | 6 years | |||
2007 Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares available for award (in shares) | 1,585,000 | 1,585,000 | ||
2017 Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares available for award (in shares) | 1,789,647 | 1,789,647 |
BUSINESS COMBINATION (Details)
BUSINESS COMBINATION (Details) - USD ($) $ / shares in Units, $ in Thousands | Jun. 04, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Business Acquisition [Line Items] | |||
Common stock (in dollars per share) | $ 40.76 | ||
Escrow deposit period (in months) | 20 months | ||
Acquisition related costs | $ 589 | ||
Liabilities | |||
Goodwill | $ 10,971 | $ 0 | |
Vilex and Orthex | |||
Business Acquisition [Line Items] | |||
Acquisition of Vilex and Orthex, cash | $ 50,000 | ||
Acquisition of Vilex and Othex, common stock (in shares) | 245,352 | ||
Common stock, par value (in dollars per share) | $ 0.00025 | ||
Escrow deposit | $ 3,000 | ||
Preliminary fair value of estimated total acquisition consideration | 60,276 | ||
Assets | |||
Cash and cash equivalents | 348 | ||
Trade receivables | 1,849 | ||
Inventory | 3,905 | ||
Prepaid expenses and other current assets | 12 | ||
Property and equipment | 7,541 | ||
Intangible assets | 18,260 | ||
Operating lease right-of-use asset | 323 | ||
Total assets | 32,238 | ||
Liabilities | |||
Accounts payable and accrued liabilities | 564 | ||
Operating lease liabilities | 323 | ||
Other long-term liabilities | 68 | ||
Total liabilities | 955 | ||
Less: Net assets | 31,283 | ||
Goodwill | 28,993 | ||
Fair value of identifiable intangible assets | 18,260 | ||
Vilex and Orthex | Trademarks and Trade Names | |||
Liabilities | |||
Indefinite-lived intangible assets acquired | 4,160 | ||
Vilex and Orthex | Patents | |||
Liabilities | |||
Finite-lived intangible assets acquired | $ 8,380 | ||
Remaining Economic Useful Life (in years) | 15 years | ||
Vilex and Orthex | Developed Technology Rights | |||
Liabilities | |||
Finite-lived intangible assets acquired | $ 960 | ||
Remaining Economic Useful Life (in years) | 10 years | ||
Vilex and Orthex | Customer relationship | |||
Liabilities | |||
Finite-lived intangible assets acquired | $ 4,690 | ||
Remaining Economic Useful Life (in years) | 12 years | ||
Vilex and Orthex | Noncompete Agreements | |||
Liabilities | |||
Finite-lived intangible assets acquired | $ 70 | ||
Remaining Economic Useful Life (in years) | 5 years |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract] | ||||
Revenue | $ 414 | |||
Operating expenses | 507 | |||
Depreciation and amortization | 66 | |||
Operating loss | (159) | |||
Net loss from discontinued operations | (159) | $ 0 | $ (159) | $ 0 |
Assets: | ||||
Cash | 360 | $ 0 | 360 | $ 0 |
Held-for-sale | ||||
Assets: | ||||
Cash | 360 | 360 | ||
Accounts receivable | 850 | 850 | ||
Inventories | 2,163 | 2,163 | ||
Prepaid expenses and other current assets | 12 | 12 | ||
Property and equipment | 6,015 | 6,015 | ||
Amortizable intangible assets | 5,452 | 5,452 | ||
Goodwill | 18,022 | 18,022 | ||
Operating lease right-of-use asset | 240 | 240 | ||
Other intangible assets | 2,250 | 2,250 | ||
Assets held for sale | 35,364 | 35,364 | ||
Liabilities: | ||||
Accounts payable | 71 | 71 | ||
Accrued compensation and benefits | 159 | 159 | ||
Operating lease liabilities | 239 | 239 | ||
Other current liabilities | 25 | 25 | ||
Liabilities held for sale | $ 494 | $ 494 |
DEBT AND CREDIT ARRANGEMENTS -
DEBT AND CREDIT ARRANGEMENTS - Schedule of Long-term Debt (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Debt Instrument [Line Items] | |||
Short-term debt with affiliate | $ 30,000,000 | $ 0 | |
Total debt | 51,233,000 | 21,274,000 | |
Less: current maturities | 30,121,000 | 118,000 | |
Total long-term debt, net of current maturities | 21,112,000 | 21,156,000 | |
Note payable to Squadron | |||
Debt Instrument [Line Items] | |||
Note payable to Squadron | 19,874,000 | 19,856,000 | |
Mortgage payable to affiliate | $ 20,000,000 | ||
Mortgage payable to affiliate | |||
Debt Instrument [Line Items] | |||
Mortgage payable to affiliate | 1,359,000 | 1,418,000 | |
Less: current maturities | $ 121,000 | $ 118,000 |
DEBT AND CREDIT ARRANGEMENTS _2
DEBT AND CREDIT ARRANGEMENTS - Narrative (Details) - USD ($) | Jun. 04, 2019 | Dec. 31, 2017 | Apr. 30, 2017 | Oct. 31, 2017 | Apr. 30, 2017 | Aug. 31, 2013 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 |
Debt Instrument [Line Items] | |||||||||||
Current portion of long-term debt with affiliate | $ 30,121,000 | $ 30,121,000 | $ 118,000 | ||||||||
Term loan facility with Squadron | Loan Agreement | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt face amount | $ 30,000,000 | ||||||||||
Note payable to Squadron | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Interest rate | 10.00% | 10.00% | |||||||||
Deferred financing cost | $ 1,000,000 | $ 1,000,000 | |||||||||
Extension fee payable period | 3 years | ||||||||||
Mortgage balance | $ 20,000,000 | ||||||||||
Debt instrument, extension fee cancelled | $ 667,000 | ||||||||||
Interest expense | 632,000 | $ 562,000 | 935,000 | $ 1,114,000 | |||||||
Note payable to Squadron | Term Note A | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facilities made available | 18,400,000 | ||||||||||
Note payable to Squadron | Term Note B | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Credit facilities made available | $ 16,000,000 | ||||||||||
Interest rate | 11.00% | 11.00% | |||||||||
Note payable to Squadron | Loan Agreement | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Mortgage balance | 20,000,000 | ||||||||||
Mortgage payable to affiliate | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Interest rate | 5.00% | ||||||||||
Mortgage balance | 1,359,000 | 1,359,000 | 1,418,000 | ||||||||
Monthly interest and principal installments | $ 16,000 | ||||||||||
Current portion of long-term debt with affiliate | $ 121,000 | $ 121,000 | $ 118,000 | ||||||||
Revolving Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Revolving credit facility | 15,000,000 | ||||||||||
Revolving Credit Facility | Loan Agreement | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Revolving credit facility | $ 15,000,000 | ||||||||||
Three month LIBOR | Note payable to Squadron | Loan Agreement | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument, basis spread on variable rate | 8.61% | ||||||||||
Debt instrument, interest rate, effective percentage | 10.00% | ||||||||||
Three month LIBOR | Revolving Credit Facility | |||||||||||
Debt Instrument [Line Items] | |||||||||||
Debt instrument, basis spread on variable rate | 8.61% | ||||||||||
Debt instrument, interest rate, effective percentage | 10.00% |
STRATEGIC ARRANGEMENTS (Details
STRATEGIC ARRANGEMENTS (Details) - USD ($) | Aug. 02, 2017 | Dec. 01, 2007 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 |
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||||
Minimum annual royalty payment | $ 500,000 | ||||||
Royalty expense | 74,000 | $ 72,000 | |||||
CASE | |||||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||||
Royalty expense | $ 37,000 | $ 37,000 | |||||
Royalty payable | $ 37,000 | $ 37,000 | $ 36,000 | ||||
Royalty Agreement Terms | CASE | |||||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |||||||
Royalty agreement period | 10 years | 10 years | |||||
Minimum annual royalty payment | $ 10,000 | ||||||
Royalty agreement percentage | 3.00% | ||||||
Milestone payments for FDA approval to sell our products within the United States | $ 5,000 | ||||||
Milestone payment for general product launch | $ 10,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2019 | Jun. 30, 2017 | Dec. 31, 2018 | Dec. 11, 2018 | May 30, 2014 | |
Income Tax Disclosure [Abstract] | |||||||
Tax provision | $ 0 | $ 0 | $ 0 | $ 0 | |||
Loss carryforwards | $ 87,345,000 | ||||||
Tax credit carryforward | $ 335,000 | ||||||
Estimated limitation on losses generated prior to ownership change date | $ 16,200,000 | ||||||
Estimated annual limitation of losses | $ 9,736,000 | 1,062,000 | |||||
Increase of estimated annual limitation of first five years | $ 22,430,000 | $ 2,302,000 |
STOCKHOLDERS' EQUITY - Stock Op
STOCKHOLDERS' EQUITY - Stock Options (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Granted (in shares) | 0 | 0 | 0 | 0 | |
Options | |||||
Outstanding at period start (in shares) | 112,094 | ||||
Exercised (in shares) | (21,409) | ||||
Outstanding at period end (in shares) | 90,685 | 90,685 | 112,094 | ||
Weighted-Average Exercise Price | |||||
Outstanding at period start, Weighted-Average Exercise Price (in dollars per share) | $ 30.32 | ||||
Exercised, Weighted-Average Exercise Price (in dollars per share) | 30.69 | ||||
Outstanding at period end, Weighted-Average Exercise Price (in dollars per share) | $ 30.23 | $ 30.23 | $ 30.32 | ||
Contractual Terms (in years) | 1 year 4 months 24 days | 1 year 9 months 18 days | |||
Stock Option | |||||
Weighted-Average Exercise Price | |||||
Vesting period (in years) | 3 years | ||||
Stock-based compensation expense | $ 0 | $ 0 | $ 0 | $ 0 |
STOCKHOLDERS' EQUITY - Restrict
STOCKHOLDERS' EQUITY - Restricted Stock (Details) - Restricted stock - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Restricted Stock | |||||
Outstanding at period start (in shares) | 177,293 | ||||
Granted (in shares) | 139,619 | ||||
Forfeited (in shares) | (5,121) | ||||
Vested (in shares) | (4,444) | ||||
Outstanding at period end (in shares) | 307,347 | 307,347 | 177,293 | ||
Weighted-Average Remaining Contractual Terms (in years) | 2 years 1 month 6 days | 2 years 2 months 12 days | |||
Restricted stock exercisable (in shares) | 0 | 0 | |||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | |||||
Unrecognized compensation expense | $ 6,999 | $ 6,999 | |||
Unrecognized compensation expense, weighted average period of recognition (in years) | 2 years 1 month 6 days | ||||
General and Administrative Expense | |||||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized [Abstract] | |||||
Stock-based compensation expense | $ 692 | $ 454 | $ 1,163 | $ 2,631 |
STOCKHOLDERS' EQUITY - Warrants
STOCKHOLDERS' EQUITY - Warrants (Details) | 6 Months Ended |
Jun. 30, 2019$ / sharesshares | |
Class of Warrant or Right Outstanding [Roll Forward] | |
Outstanding at January 1, 2019 (in shares) | shares | 6,790 |
Forfeited or expired (in shares) | shares | (1,811) |
Outstanding at June 30, 2019 (in shares) | shares | 4,979 |
Beginning weighted-average exercise price (in dollars per share) | $ 27.81 |
Forfeited or expired, weighted average exercise price (in dollars per share) | 0 |
Ending weighted-average exercise price (in dollars per share) | $ 27.88 |
Term of warrants (in years) | 10 years |
Number of warrants exercised (in shares) | shares | 0 |
Minimum | |
Class of Warrant or Right Outstanding [Roll Forward] | |
Ending weighted-average exercise price (in dollars per share) | $ 26.27 |
Maximum | |
Class of Warrant or Right Outstanding [Roll Forward] | |
Ending weighted-average exercise price (in dollars per share) | $ 30.97 |
NET LOSS PER SHARE - Reconcilia
NET LOSS PER SHARE - Reconciliation of basic and diluted net loss per share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Earnings Per Share [Abstract] | ||||
Net loss attributable to common stockholders | $ (2,618) | $ (2,692) | $ (5,638) | $ (7,692) |
Weighted average common shares - basic and diluted (in shares) | 14,451,979 | 12,549,226 | 14,409,752 | 12,312,814 |
Net loss per share attributable to common stockholders - basic and diluted (in dollars per share) | $ (0.18) | $ (0.21) | $ (0.39) | $ (0.62) |
NET LOSS PER SHARE - Antidiluti
NET LOSS PER SHARE - Antidilutive Securities (Details) - shares | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share | 403,011 | 347,059 |
Restricted stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share | 307,347 | 167,593 |
Stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share | 90,685 | 135,365 |
Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share | 4,979 | 44,101 |
BUSINESS SEGMENT - Narrative (D
BUSINESS SEGMENT - Narrative (Details) - segment | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Segment Reporting [Abstract] | ||
Number of operating segments | 1 | |
Number of reportable segments | 1 |
BUSINESS SEGMENT - Schedule of
BUSINESS SEGMENT - Schedule of Revenue by Geographical Location (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Revenues | $ 18,200 | $ 15,077 | $ 32,856 | $ 27,171 |
U.S. | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Revenues | 13,848 | 11,458 | 24,115 | 20,111 |
International | ||||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||||
Revenues | $ 4,352 | $ 3,619 | $ 8,741 | $ 7,060 |
BUSINESS SEGMENT - Schedule o_2
BUSINESS SEGMENT - Schedule of Revenue by Category (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Segment Reporting Information [Line Items] | ||||
Revenues | $ 18,200 | $ 15,077 | $ 32,856 | $ 27,171 |
Trauma and deformity | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 11,887 | 9,860 | 21,904 | 18,983 |
Scoliosis | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 5,866 | 4,897 | 10,124 | 7,582 |
Sports medicine/other | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | $ 447 | $ 320 | $ 828 | $ 606 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - Affiliated Entity $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($)supplier | Jun. 30, 2018USD ($) | |
Related Party Transaction [Line Items] | ||||
Number of related party suppliers | supplier | 1 | |||
FMI | ||||
Related Party Transaction [Line Items] | ||||
Payments to related party | $ | $ 1,729 | $ 1,565 | $ 2,493 | $ 2,266 |
EMPLOYEE BENEFIT PLAN - Narrati
EMPLOYEE BENEFIT PLAN - Narrative (Details) | Jan. 01, 2018 |
Retirement Benefits [Abstract] | |
Employer contribution as a percentage of employees' salary | 3.00% |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Long-term Purchase Commitment [Line Items] | |
Lease term (in years) | 4 years |
Operating lease liability | $ 75,000 |
Operating lease right-of-use asset | 75,000 |
Minimum annual royalty payment | $ 500,000 |
Minimum | |
Long-term Purchase Commitment [Line Items] | |
Royalty agreement percentage | 0.50% |
Maximum | |
Long-term Purchase Commitment [Line Items] | |
Royalty agreement percentage | 20.00% |