Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2022 | Aug. 15, 2022 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Jun. 30, 2022 | |
Entity File Number | 001-39577 | |
Entity Registrant Name | Aziyo Biologics, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 47-4790334 | |
Entity Address State Or Province | MD | |
Entity Address, Address Line One | 12510 Prosperity Drive | |
Entity Address, Adress Line Two | Suite 370 | |
Entity Address, City or Town | Silver Spring | |
Entity Address, Postal Zip Code | 20904 | |
City Area Code | 240 | |
Local Phone Number | 247-1170 | |
Title of 12(b) Security | Class A Common Stock, par value $0.001 per share | |
Trading Symbol | AZYO | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0001708527 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Class A Common stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 9,308,719 | |
Class B Common stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 4,313,406 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash | $ 16,489 | $ 30,393 |
Restricted cash | 22 | 35 |
Accounts receivable, net | 6,646 | 5,996 |
Inventory | 9,699 | 9,554 |
Prepaid expenses and other current assets | 1,828 | 1,450 |
Total current assets | 34,684 | 47,428 |
Property and equipment, net | 1,326 | 1,200 |
Intangible assets, net | 16,768 | 18,466 |
Other assets | 76 | 76 |
Total assets | 52,854 | 67,170 |
Current liabilities: | ||
Accounts payable | 1,764 | 1,582 |
Accrued expenses | 7,517 | 6,375 |
Payables to tissue suppliers | 3,199 | 2,467 |
Current portion of long-term debt | 8,059 | 8,059 |
Current portion of revenue interest obligation | 7,750 | 2,750 |
Revolving line of credit | 6,452 | 4,763 |
Other current liabilities | 8 | 5 |
Total current liabilities | 34,749 | 26,001 |
Long-term debt | 7,106 | 10,410 |
Long-term revenue interest obligation | 11,469 | 16,540 |
Other long-term liabilities | 899 | 698 |
Total liabilities | 54,223 | 53,649 |
Commitments and contingencies (Note 8) | ||
Stockholders' equity (deficit): | ||
Additional paid-in capital | 121,256 | 118,599 |
Accumulated deficit | (122,638) | (105,091) |
Total stockholders' equity (deficit) | (1,369) | 13,521 |
Total liabilities and stockholders' equity | 52,854 | 67,170 |
Class A Common stock | ||
Stockholders' equity (deficit): | ||
Common stock | 9 | 9 |
Class B Common stock | ||
Stockholders' equity (deficit): | ||
Common stock | $ 4 | $ 4 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares | Jun. 30, 2022 | Dec. 31, 2021 |
Class A Common stock | ||
Common stock, par value (in dollar per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 9,306,838 | 9,245,146 |
Common stock, shares outstanding | 9,306,738 | 9,245,146 |
Class B Common stock | ||
Common stock, par value (in dollar per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 4,313,406 | 4,313,406 |
Common stock, shares outstanding | 4,313,406 | 4,313,406 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Net sales | $ 12,638 | $ 12,160 | $ 24,133 | $ 25,044 |
Cost of goods sold | 7,740 | 6,546 | 14,954 | 13,101 |
Gross profit | 4,898 | 5,614 | 9,179 | 11,943 |
Sales and marketing | 5,406 | 4,799 | 10,224 | 9,502 |
General and administrative | 5,057 | 3,529 | 9,170 | 7,134 |
Research and development | 2,617 | 1,881 | 4,889 | 3,601 |
Total operating expenses | 13,080 | 10,209 | 24,283 | 20,237 |
Loss from operations | (8,182) | (4,595) | (15,104) | (8,294) |
Interest expense | 1,204 | 1,351 | 2,419 | 2,706 |
Other (income) expense, net | (3,579) | (3,579) | ||
Loss before provision for income taxes | (9,386) | (2,367) | (17,523) | (7,421) |
Income tax expense | 12 | 18 | 24 | 31 |
Net loss | $ (9,398) | $ (2,385) | $ (17,547) | $ (7,452) |
Net loss per share - basic (in dollar per share) | $ (0.69) | $ (0.23) | $ (1.29) | $ (0.73) |
Net loss per share - diluted (in dollar per share) | $ (0.69) | $ (0.23) | $ (1.29) | $ (0.73) |
Weighted average common shares outstanding - basic | 13,620,196 | 10,228,296 | 13,597,243 | 10,227,240 |
Weighted average common shares outstanding - diluted | 13,620,196 | 10,228,296 | 13,597,243 | 10,227,240 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands | Common Stock Class A Common stock | Common Stock Class B Common stock | Additional Paid-in Capital Private Placement [Member] | Additional Paid-in Capital | Accumulated Deficit | Private Placement [Member] | Total |
Balance at the beginning at Dec. 31, 2020 | $ 7 | $ 3 | $ 101,080 | $ (80,259) | $ 20,831 | ||
Balance at the beginning (in shares) at Dec. 31, 2020 | 7,091,960 | 3,134,162 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Proceeds from stock option exercises | 26 | 26 | |||||
Proceeds from stock option exercises (in shares) | 3,305 | ||||||
Stock-based compensation | 1,562 | 1,562 | |||||
Net loss | (7,452) | (7,452) | |||||
Balance at the ending at Jun. 30, 2021 | $ 7 | $ 3 | 102,668 | (87,711) | 14,967 | ||
Balance at the ending (in shares) at Jun. 30, 2021 | 7,095,265 | 3,134,162 | |||||
Balance at the beginning at Mar. 31, 2021 | $ 7 | $ 3 | 101,760 | (85,326) | 16,444 | ||
Balance at the beginning (in shares) at Mar. 31, 2021 | 7,092,521 | 3,134,162 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Proceeds from stock option exercises | 23 | 23 | |||||
Proceeds from stock option exercises (in shares) | 2,744 | ||||||
Stock-based compensation | 885 | 885 | |||||
Net loss | (2,385) | (2,385) | |||||
Balance at the ending at Jun. 30, 2021 | $ 7 | $ 3 | 102,668 | (87,711) | 14,967 | ||
Balance at the ending (in shares) at Jun. 30, 2021 | 7,095,265 | 3,134,162 | |||||
Balance at the beginning at Dec. 31, 2021 | $ 9 | $ 4 | 118,599 | (105,091) | 13,521 | ||
Balance at the beginning (in shares) at Dec. 31, 2021 | 9,245,146 | 4,313,406 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Additional issuance costs in connection with Private Placement | $ (110) | $ (110) | |||||
Proceeds from sale of common stock through Employee Stock Purchase Plan | 192 | 192 | |||||
Proceeds from sale of common stock through Employee Stock Purchase Plan (in shares) | 42,345 | ||||||
Vesting of restricted stock units (in shares) | 19,347 | ||||||
Stock-based compensation | 2,575 | 2,575 | |||||
Net loss | (17,547) | (17,547) | |||||
Balance at the ending at Jun. 30, 2022 | $ 9 | $ 4 | 121,256 | (122,638) | (1,369) | ||
Balance at the ending (in shares) at Jun. 30, 2022 | 9,306,838 | 4,313,406 | |||||
Balance at the beginning at Mar. 31, 2022 | $ 9 | $ 4 | 119,786 | (113,240) | 6,559 | ||
Balance at the beginning (in shares) at Mar. 31, 2022 | 9,306,738 | 4,313,406 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Vesting of restricted stock units (in shares) | 100 | ||||||
Stock-based compensation | 1,470 | 1,470 | |||||
Net loss | (9,398) | (9,398) | |||||
Balance at the ending at Jun. 30, 2022 | $ 9 | $ 4 | $ 121,256 | $ (122,638) | $ (1,369) | ||
Balance at the ending (in shares) at Jun. 30, 2022 | 9,306,838 | 4,313,406 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
OPERATING ACTIVITIES: | ||
Net loss | $ (17,547) | $ (7,452) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 1,863 | 1,865 |
Gain on forgiveness of debt | (3,029) | |
Amortization of deferred financing costs | 29 | 60 |
Interest expense recorded as additional revenue interest obligation | 1,319 | 1,326 |
Stock-based compensation | 2,575 | 1,562 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (650) | (583) |
Inventory | (145) | (224) |
Prepaid expenses and other | (378) | 1,133 |
Accounts payable and accrued expenses | 1,324 | (396) |
Obligations to tissue suppliers | 732 | (89) |
Deferred revenue and other liabilities | 204 | (134) |
Net cash used in operating activities | (10,674) | (5,961) |
INVESTING ACTIVITIES: | ||
Expenditures for property, plant and equipment | (289) | (247) |
Net cash used in investing activities | (289) | (247) |
FINANCING ACTIVITIES: | ||
Additional issuance costs in connection with Private Placement | (110) | |
Net borrowings (repayments) under revolving line of credit | 1,689 | (3,610) |
Proceeds from stock option exercises | 26 | |
Repayments of long-term debt | (3,333) | |
Payments on revenue interest obligation | (1,392) | (1,372) |
Proceeds from sales of common stock through Employee Stock Purchase Plan | 192 | |
Net cash used in financing activities | (2,954) | (4,956) |
Net decrease in cash and restricted cash | (13,917) | (11,164) |
Cash and restricted cash, beginning of period | 30,428 | 39,532 |
Cash and restricted cash, end of period | 16,511 | 28,368 |
Supplemental Cash Flow and Non-Cash Financing Activities Disclosures: | ||
Cash paid for interest | $ 1,162 | 2,522 |
Forgiveness of SBA PPP loan | $ 3,029 |
Organization and Description of
Organization and Description of Business | 6 Months Ended |
Jun. 30, 2022 | |
Organization and Description of Business | |
Organization and Description of Business | Note 1. Organization and Description of Business Aziyo Biologics, Inc. (together with its consolidated subsidiaries, "Aziyo” or the “Company”) is a regenerative medicine company, with a focus on patients receiving implantable medical devices. The Company has developed a portfolio of regenerative products using both human and porcine tissue that are designed to be as close to natural biological material as possible. Aziyo’s portfolio of core products spans the implantable electronic devices/cardiovascular-related market, the orthopedic/spinal repair market and the soft tissue reconstruction market (“Core Products”). These products are primarily sold to healthcare providers or commercial partners. The Company also sells human tissue products under contract manufacturing and certain other arrangements (“Non-Core Products”) with corporate customers. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2022 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 2. Summary of Significant Accounting Policies Basis of Presentation and Liquidity The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included in the Company's annual report on Form 10-K (“Annual Report”) for the fiscal year ended December 31, 2021. The financial information as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 is unaudited, but in the opinion of management, all adjustments considered necessary for a fair statement of the results for these interim periods have been included. The condensed consolidated balance sheet data as of December 31, 2021 was derived from audited financial statements but does not include all disclosures required by GAAP. The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or any future year or period. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) In order to mitigate the current and potential future liquidity issues caused by the matters noted above, the Company may seek to raise capital through the issuance of common stock, either refinance or restructure its Term Loan Facility and Revolving Credit Facility (as such terms are defined, and further described, in Note 6), restructure its Revenue Interest Obligation (as such term is defined, and further described, in Note 7), or pursue asset sale transactions. However, such transactions may not be successful and the Company may not be able to raise additional equity, refinance or restructure its debt instruments or Revenue Interest Obligation, or sell assets on acceptable terms, or at all. As such, based on its current operating plans, even after the recent debt refinancing described in Note 12, the Company believes there is uncertainty as to whether its future cash flows along with its existing cash, availability under the SWK Loan Facility (described in Note 12) and cash generated from expected future sales will be sufficient to meet the Company’s anticipated operating needs through twelve months from the financial statement issuance date. Due to these factors, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance of the financial statements. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. That is, the accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions relating to inventory, receivables, long-lived assets, the valuation of stock-based awards, the valuation of the Revenue Interest Obligation and deferred income taxes are made at the end of each financial reporting period by management. Management continually re-evaluates its estimates, judgments and assumptions, and management's evaluation could change. Actual results could differ from those estimates. Impact of COVID-19 The Company continues to closely monitor the impact of the COVID-19 pandemic and its variants on its business. In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended various containment and mitigation measures worldwide. Since that time, the number of procedures performed using the Company's products has intermittently decreased, as governmental authorities in the United States have recommended, and in certain cases required, that elective, specialty and other non-emergency procedures and appointments be suspended or canceled in order to avoid patient exposure to medical environments and the risk of potential infection with COVID-19, and to focus limited resources and personnel capacity on the treatment of COVID-19 patients. As a result, beginning in March 2020, a significant number of procedures using the Company's products have intermittently been postponed or cancelled, which has negatively impacted sales of its products. These measures and challenges will likely continue for the duration of the pandemic, which is uncertain, and may reduce the Company's net sales in the future and negatively impact its business, financial condition and results of operations while the pandemic continues. Net Loss per Share Attributable to Common Stockholders Our common stock has a dual class structure, consisting of Class A common stock and Class B common stock. Other than voting rights, the Class B common stock has the same rights as the Class A common stock, and therefore both are treated as the same class of stock for purposes of the earnings per share calculation. Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average shares outstanding during the period. For purposes of the diluted net income (loss) per share attributable to common stockholders calculation, stock options and restricted stock units are considered to be common stock equivalents. All common stock equivalents have been excluded from the calculation of diluted net loss per share attributable to common stockholders, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share were the same for both periods presented. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: Level 1 - Level 2 - Level 3 - The estimated fair value of financial instruments disclosed in the financial statements has been determined by using available market information and appropriate valuation methodologies. The carrying value of all current assets and current liabilities approximates fair value because of their short-term nature. Cash and Restricted Cash The Company maintains its cash balances at banks and financial institutions. The balances are insured up to the legal limit. The Company maintains cash balances that may, at times, exceed this insured limit. Under the provisions of the Revolving Credit Facility (see Note 6), the Company has a lockbox arrangement with the banking institution whereby daily lockbox receipts are contractually utilized to pay down outstanding balances on the Revolving Credit Facility debt. Lockbox receipts that have not yet been applied to the Revolving Credit Facility are classified as restricted cash in the accompanying condensed consolidated balance sheets. The following table provides a reconciliation of cash and restricted cash included in the condensed consolidated balance sheets to the amounts included in the statements of cash flows (in thousands). June 30, 2022 2021 Cash $ 16,489 $ 28,302 Restricted cash 22 66 Total cash and restricted cash shown in statements of cash flows $ 16,511 $ 28,368 Accounts Receivable and Allowances Accounts receivable in the accompanying balance sheets are presented net of allowances for doubtful accounts and other credits. The Company grants credit to customers in the normal course of business, but generally does not require collateral or any other security to support its receivables. The Company evaluates the collectability of accounts receivable based on a combination of factors. In circumstances where a specific customer is unable to meet its financial obligations to the Company, a provision to the allowance for doubtful accounts is recorded to reduce the net recognized receivable to the amount that is reasonably expected to be collected. For all other customers, a provision to the allowance for doubtful accounts is recorded based on factors including the length of time the receivables are past due, the current business environment and the Company’s historical experience. Provisions to the allowance for doubtful accounts are recorded to general and administrative expenses. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered. Inventory Inventory, consisting of purchased materials, direct labor and manufacturing overhead, is stated at the lower of cost or net realizable value, with cost determined generally using the average cost method. Inventory write-downs for unprocessed and certain processed donor tissue are recorded based on the estimated amount of inventory that will not pass the quality control process based on historical data. At each balance sheet date, the Company also evaluates inventory for excess quantities, obsolescence or shelf life expiration. This evaluation includes analysis of the Company’s current and future strategic plans, historical sales levels by product, projections of future demand, the risk of technological or competitive obsolescence for products, general market conditions and a review of the shelf life expiration dates for products. To the extent that management determines there is excess or obsolete inventory or quantities with a shelf life that is too near its expiration for the Company to reasonably expect that it can sell those products prior to their expiration, the Company adjusts the carrying value to estimated net realizable value. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the following estimated useful lives of the assets: Processing and research equipment 5 to 10 years Office equipment and furniture 3 to 5 years Computer hardware and software 3 years Leasehold improvements are amortized on the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Repairs and maintenance costs are expensed as incurred. Long-Lived Assets Purchased intangible assets with finite lives are carried at acquired fair value, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets. The Company periodically evaluates the period of depreciation or amortization for long-lived assets to determine whether current circumstances warrant revised estimates of useful lives. The Company reviews its property and equipment and intangible assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Impairment exists when the carrying value of the company’s asset exceeds the related estimated undiscounted future cash flows expected to be derived from the asset. If impairment exists, the carrying value of that asset is adjusted to its fair value. A discounted cash flow analysis is used to estimate an asset’s fair value, using assumptions that market participants would apply. The results of impairment tests are subject to management’s estimates and assumptions of projected cash flows and operating results. Changes in assumptions or market conditions could result in a change in estimated future cash flows and could result in a lower fair value and therefore an impairment, which could impact reported results. There were no impairment losses for the three and six months ended June 30, 2022 or 2021. Revenue Recognition The Company’s revenue is generated from contracts with customers in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606. The core principle of ASC 606 is that the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The ASC 606 revenue recognition model consists of the following five steps: (1) identify the contracts with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. As noted above, the Company enters into contracts to primarily sell and distribute products to healthcare providers or commercial partners, or are produced and sold under contract manufacturing arrangements with corporate customers which are billed under ship and bill contract terms. Revenue is recognized when the Company has met its performance obligations pursuant to its contracts with its customers in an amount that the Company expects to be entitled to in exchange for the transfer of control of the products to the Company’s customers. For all product sales, the Company has no further performance obligations and revenue is recognized at the point control transfers which occurs either when: (i) the product is shipped via common carrier; or (ii) the product is delivered to the customer or distributor, in accordance with the terms of the agreement. A portion of the Company’s product revenue is generated from consigned inventory maintained at hospitals and from inventory physically held by direct sales representatives. For these types of product sales, the Company retains control until the product has been used or implanted, at which time revenue is recognized. The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of the underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in sales and marketing costs. Contracts with customers state the final terms of the sale, including the description, quantity, and price of each implant distributed. The payment terms and conditions in the Company’s contracts vary; however, as a common business practice, payment terms are typically due in full within 30 to 60 days of delivery. The Company, at times, extends volume discounts to customers. The Company permits returns of its products in accordance with the terms of contractual agreements with customers. Allowances for returns are provided based upon analysis of the Company’s historical patterns of returns matched against the revenues from which they originated. The Company records estimated returns as a reduction of revenue in the same period revenue is recognized. Deferred Rent The Company recognizes rent expense by the straight-line method over the lease term. Funds received from the lessor used to reimburse the Company for the cost of leasehold improvements are recorded as a deferred credit resulting from a lease incentive and are amortized over the lease term as a reduction of rent expense. Stock-Based Compensation Plans The Company accounts for its stock-based compensation plans in accordance with FASB ASC 718, Accounting for Stock Compensation Research and Development Costs Research and development costs, which include mainly salaries, outside services and supplies, are expensed as incurred. Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. At June 30, 2022, the Company maintained $16.7 million in bank deposit accounts that are in excess of the $0.25 million insurance provided by the Federal Deposit Insurance Corporation in one federally insured financial institution. The Company has not experienced any losses in such accounts. Significant Customers The Company sells certain of its products under large contract manufacturing or distribution arrangements. The following table presents percentage of total revenues derived from the Company’s largest customers as well as their respective percentage of total accounts receivable: Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 Percent of revenues derived from: ACE Surgical Supply 11% 1% 10% 2% Surgalign Holdings 10% 11% 10% 11% Medtronic Sofamor Danek USA - 16% - 20% June 30, December 31, 2022 2021 Percent of accounts receivable derived from: ACE Surgical Supply 7% 3% Surgalign Holdings 13% 12% Comprehensive Income (Loss) Comprehensive income (loss) comprises net income (loss) and other changes in equity that are excluded from net income (loss). For the three and six months ended June 30, 2022 and 2021, the Company’s net loss equaled its comprehensive loss and accordingly, no additional disclosure is presented. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes are recorded to reflect the tax consequences on future years for differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to amounts that are more likely than not to be realized. The Company is subject to income taxes in the federal and state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In accordance with the authoritative guidance on accounting for uncertainty in income taxes, the Company recognizes tax liabilities for uncertain tax positions when it is more likely than not that a tax position will not be sustained upon examination and settlement with various taxing authorities. Liabilities for uncertain tax positions are measured based upon the largest amount of benefit that is more likely than not (greater than 50%) of being realized upon settlement. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. |
Recently Issued Accounting Stan
Recently Issued Accounting Standards | 6 Months Ended |
Jun. 30, 2022 | |
Recently Issued Accounting Standards | |
Recently Issued Accounting Standards | Note 3. Recently Issued Accounting Standards In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides temporary relief from some of the existing rules governing contract modifications when the modification is related to the replacement of the London Interbank Offered Rate (“LIBOR”) or other reference rates discontinued as a result of reference rate reform. The ASU specifically provides optional practical expedients for contract modification accounting related to contracts subject to ASC 310, Receivables, ASC 470, Debt, ASC 842, Leases, and ASC 815, Derivatives and Hedging. The ASU also establishes a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and certain elective hedge accounting expedients. For eligible contract modifications, the principle generally allows an entity to account for and present modifications as an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. That is, the modified contract is accounted for as a continuation of the existing contract. The standard was effective upon issuance on March 12, 2020, and the optional practical expedients can generally be applied to contract modifications made and hedging relationships entered into on or before December 31, 2024. Borrowings under the Company’s term loan facility and revolving line of credit bear interest based on LIBOR or an alternate rate. Provisions currently provide the Company with the ability to replace LIBOR with a different reference rate in the event that LIBOR ceases to exist. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivative and Hedging (Topic 815), and Leases (Topic 842), Effective Dates.” The FASB deferred the effective dates of the new credit losses standard for all entities except filers with the Securities and Exchange Commission (the “SEC”) that are not smaller reporting companies (“SRCs”) to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The FASB also aligned the effective dates of ASU 2017-04 on goodwill impairment with the new effective dates of the credit losses standard. The FASB deferred the effective dates of its new standards on hedging and leases for entities that are not public business entities (“PBEs”) (and for leases, for entities that are not non-for-profit (“NFP”) entities that have issues, or are conduit bond obligors for, certain securities; and are not employee benefit plans (“EBPs”) that file or furnish financial statements with or to the SEC) to fiscal years beginning after December 15, 2020, and interim periods in the following year. The FASB is also reconsidering its philosophy on establishing effective dates for major standards for private companies, NFPs, EBPs and smaller public companies. The FASB has developed a two-bucket approach that would give these entities more time to implement major new standards. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases. The standard requires that lessees recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability subject to certain adjustments. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). In November 2019, the FASB issued 2019-10 which extended the adoption of ASU 2016-02 for the Company to be effective for periods ending after December 15, 2022. While early adoption is permitted, the Company intends to adopt in the fourth quarter of 2022 for the full 2022 year. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2022 | |
Stock-Based Compensation | |
Stock-Based Compensation | Note 4. Stock-Based Compensation In 2015, the Company established the Aziyo Biologics, Inc. 2015 Stock Option/Stock Issuance Plan, as amended (the “2015 Plan”) which provided for the granting of incentive and non-qualified stock options to employees, directors and consultants of the Company. On October 7, 2020, in connection with the Company’s initial public offering (“IPO”), the Company adopted the Aziyo Biologics, Inc. 2020 Incentive Award Plan (the “2020 Plan”), which authorizes the grant of incentive and non-qualified stock options, restricted stock, restricted stock units and stock appreciation rights to employees, directors and consultants. Shares of Class A common stock totaling 1,636,000 were initially reserved for issuance pursuant to the 2020 Plan. In addition, the shares reserved for issuance under the 2020 Plan will also include shares reserved but not issued under the 2015 Plan as well as an annual increase as set forth in the 2020 Plan. As of June 30, 2022, the Company had essentially no shares of Class A common stock available for issuance under the 2020 Plan. On June 21, 2022, C. Randal Mills, Ph.D., a member of the Board of Directors (the “Board”) of the Company, was appointed as the Company’s Interim President and Chief Executive Officer and succeeds Ronald Lloyd, who stepped down as the Company’s President and Chief Executive Officer and as a member of the Board. In connection with his resignation as President and Chief Executive Officer, Mr. Lloyd and the Company have entered into a separation agreement. In connection therewith, Mr. Lloyd will remain a full-time, non-officer employee of the Company through September 30, 2022 to assist with the transition of his duties to his successor. On September 30, 2022, Mr. Lloyd will be eligible to receive: (i) cash severance in an amount equal to his base salary for a period of 12 months and 100% of his annual target bonus; (ii) an additional cash payment in an amount equal to the difference, if any, between (a) $279,656 and (b) the Fair Market Value (as defined in the Company’s 2020 Incentive Award Plan) as of September 8, 2022 of the 39,894 restricted stock units that will have vested in accordance with their terms on such date, payable in a lump sum; (iii) subject to Mr. Lloyd’s achievement of certain performance goals, an additional cash bonus of up to $1,000,000; and (iv) the COBRA benefits, during the 12-month period following the September 30, 2022. The Company will recognize Mr. Lloyd’s severance costs over the period from June 21, 2022 through September 30, 2022. As of June 30, 2022, the Company has recognized $0.1 million of expense related to such severance and recorded such expense in Accrued Expenses in the accompanying condensed consolidated balance sheet as of June 30, 2022. In connection with his appointment as Interim President and Chief Executive Officer, Dr. Mills and the Company have entered into an employment agreement (the “Mills Employment Agreement”), pursuant to which Dr. Mills’ employment commenced on June 21, 2022 (the “Mills Effective Date”) and ends on the 90-day one In connection with his service as Interim President and Chief Executive Officer, Dr. Mills (1) has received a stock option award to purchase 456,278 shares of common stock of the Company (the “Option Grant”), three-fifths two-fifths three-fifths One-third two-thirds One-third two-thirds twenty Accounting for Stock Based Compensation On August 9, 2022, Dr. Mills was appointed to the role of President and Chief Executive Officer, thereby ending the Interim Period described above. Stock Options The Company’s policy is to grant stock options at an exercise price equal to 100% of the market value of a share of Class A common stock at closing on the date of the grant. The Company’s stock options have contractual terms of seven A summary of stock option activity under the Company’s 2015 Plan and 2020 Plan for the six months ended June 30, 2022 is as follows: Weighted- Average Weighted- Remaining Aggregate Average Contractual Intrinsic Exercise Term Value Number of Shares Price (years) (in thousands) Outstanding, December 31, 2021 1,386,811 $ 13.28 7.8 $ 179 Granted 1,075,858 $ 5.77 Exercised — $ — Forfeited (92,443) $ 10.55 Outstanding, June 30, 2022 2,370,226 $ 9.98 8.5 $ 1,677 Vested and exercisable, June 30, 2022 563,806 $ 11.09 5.9 $ 321 The weighted average grant date fair value of options granted during the six months ended June 30, 2022 was $3.15. As of June 30, 2022, there was approximately $8.1 million of total unrecognized compensation expense related to unvested stock options. These costs are expected to be recognized over a weighted-average period of 2.6 years. The Company uses the Black-Scholes model to value its time-based stock option grants and expenses the related compensation cost using the straight-line method over the vesting period. The fair value of stock options is determined on the grant date using assumptions for the estimated fair value of the underlying common stock, expected term, expected volatility, dividend yield, and the risk-free interest rate. Before the completion of the Company’s IPO, the Board determined the fair value of common stock considering the state of the business, input from management, third party valuations and other considerations. The Company uses the simplified method for estimating the expected term used to determine the fair value of options. The expected volatility of the Class A common stock is primarily based on the historical volatility of comparable companies in the industry whose share prices are publicly available. The Company uses a zero-dividend yield assumption as the Company has not paid dividends since inception nor does it anticipate paying dividends in the future. The risk-free interest rate approximates recent U.S. Treasury note auction results with a similar life to that of the option. The period expense is then determined based on the valuation of the options, and is recognized on a straight-line basis over the requisite service period for the entire award. The following weighted-average assumptions were used to determine the fair value of options granted during the six months ended June 30, 2022 and 2021: Six Months Ended June 30, 2022 2021 Expected term (years) 6.2 6.0 Risk-free interest rate 2.0 % 1.0 % Volatility factor 53 % 64 % Dividend yield — — For the Performance-Based Options granted as described above, the Company accounted for the awards as market condition awards and used an option pricing model, the Monte Carlo model, to determine the fair value of the respective equity instruments and an expense recognition term of approximately three years . Restricted Stock Units Restricted stock units (“RSUs”) represent rights to receive common shares at a future date. There is no exercise price and no monetary payment is required for receipt of restricted stock units or the shares issued in settlement of the award. A summary of the RSU activity under the Company’s 2020 Plan for the six months ended June 30, 2022 is as follows: Weighted- Average Number of Shares Grant Date Underlying RSUs Fair Value Unvested, December 31, 2021 235,985 $ 15.98 Granted 586,083 $ 4.08 Vested (19,347) $ 14.51 Forfeited (29,436) $ 6.05 Unvested, June 30, 2022 773,285 $ 7.38 The total fair value of the RSUs granted during the six months ended June 30, 2022 was $2.4 million. Of this total, $1.7 million was based on the fair market value of the Company's Class A common stock on the date of grant and such fair value at the time of the grant is amortized to expense on a straight-line basis over vesting periods of six months to four years. With respect to Performance-Based RSUs, during the six months ended June 30, 2022, the Company granted RSUs totaling (i) 199,388 and accounted for these awards as market condition awards and pursuant to which such RSUs will only vest if or when the Company’s Class A common stock closing price is at or exceeds $10 per share for 30 two Employee Stock Purchase Plan The Company makes shares of its Class A common stock available for purchase under the Aziyo Biologics, Inc. 2020 Employee Stock Purchase Plan (the “ESPP”). The ESPP provides for separate six-month offering periods that begin in March and September of each year. Under the ESPP, employees may purchase a limited number of shares of Aziyo Class A common stock at 85% of the fair market value on either the first day of the offering period or the purchase date, whichever is lower. The ESPP is considered compensatory for purposes of stock-based compensation expense. The number of shares reserved under the ESPP will automatically increase on the first day of each fiscal year through January 1, 2030, in an amount as set forth in the ESPP. As of June 30, 2022, the total shares of Class A common stock authorized for issuance under the ESPP was 380,997, of which 311,408 remained available for future issuance. During the six months ended June 30, 2022, 42,345 shares of Class A common stock were issued under the ESPP. Stock-Based Compensation Expense Stock-based compensation expense recognized during the three and six months ended June 30, 2022 and 2021 was comprised of the following (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 Sales and marketing $ 302 $ 175 $ 498 $ 303 General and administrative 903 524 1,585 935 Research and development 247 143 424 251 Cost of goods sold 18 43 68 73 Total stock-based compensation expense $ 1,470 $ 885 $ 2,575 $ 1,562 |
Inventory
Inventory | 6 Months Ended |
Jun. 30, 2022 | |
Inventory | |
Inventory | Note 5. Inventory Inventory was comprised of the following (in thousands): June 30, December 31, 2022 2021 Raw materials $ 1,913 $ 1,880 Work in process 576 834 Finished goods 7,210 6,840 Total $ 9,699 $ 9,554 |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Jun. 30, 2022 | |
Long-Term Debt | |
Long-Term Debt | Note 6. Long-Term Debt On May 31, 2017, in connection with the Company’s acquisition of CorMatrix described in Note 7, Aziyo entered into a $12 million term loan facility (the “Term Loan Facility”) and an $8.0 million asset-backed revolving line of credit (the “Revolving Credit Facility”), under which the Company’s borrowing capacity is limited by certain qualifying assets, with a financial institution (the “May 2017 Financing”). As of June 30, 2022 and December 31, 2021, the Company’s borrowing capacity under its Revolving Credit Facility was $7.5 million and $6.9 million, respectively. The Term Loan Facility was amended in December 2017, February 2018 and July 2019 (all amendments being considered modifications) such that an additional $1.5 million, $3.0 million, and $3.5 million, respectively were received by the Company bringing the total aggregate principal amount outstanding under the Term Loan Facility to $20 million. Borrowings under the Term Loan Facility, as amended, bear interest at a rate per annum equal to the sum of (x) the greater of (i) 2.25% and (ii) the applicable London Interbank Offered Rate for U.S. dollar deposits divided by 1.00 minus the maximum effective reserve percentage for Eurocurrency funding (“LIBOR”) plus (y) 7.25%. The weighted average interest rate on Term Loan Facility borrowings was 9.5% for both the three and six months ended June 30, 2022 and 2021. The agreement governing the Term Loan Facility provides for interest only payments through January 2021 and interest and equal monthly principal payments from February 2021 through maturity in July 2024. However, the Term Loan Facility also provides that if certain conditions were satisfied prior to December 1, 2020 (including the completion of a qualified initial public offering and no continuing default or event of default), interest only payments may, upon the Company’s request, be extended to August 1, 2021. Accordingly, based on the Company’s successful completion of its IPO, Aziyo exercised this interest-only period extension right and as such, interest and equal principal payments commenced on August 1, 2021 and will continue through maturity in July 2024. The agreement that governs the Term Loan Facility, as amended, requires certain mandatory prepayments, subject to certain exceptions, with: (1) 100% of any net casualty proceeds in excess of $250,000 with respect to assets upon which the agent maintains a lien and (2) 100% of the net cash proceeds of non-ordinary course asset sales or sales pertaining to collateral upon which the borrowing base of the Revolving Credit Facility is calculated. In addition, the Company is required to prepay all outstanding obligations under the Term Loan Facility upon the termination of all commitments under the Revolving Credit Facility and the repayment of the outstanding borrowings thereunder. No such mandatory prepayments were required during the three and six months ended June 30, 2022 and 2021. The agreement governing the Term Loan Facility also includes an exit fee of 6.5% of the aggregate principal amount and prepayment penalties which, based on an amendment to the Term Loan Facility executed in January 2022, shall be equal to the amount prepaid multiplied by 3.0% until January 21, 2023 and 2.0% thereafter. Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to the sum of (x) the greater of (i) 2.25% and (ii) LIBOR plus (y) 4.95%. The agreement governing the Revolving Credit Facility includes an unused line fee in an amount equal to 0.5% per annum of the unused borrowing capacity and based on an amendment to the Revolving Credit Facility executed in January 2022, prepayment penalties equal to $8.0 million multiplied by 3.0% until January 21, 2023 and 2.0% thereafter. The weighted average interest rate on Revolving Credit Facility borrowings was 7.2% for the three and six months ended June 30, 2022 and 2021. Both debt instruments contain events of default, including, most significantly, a failure to timely pay interest or principal, insolvency, or an action by the United States Food and Drug Administration or such other material adverse event impacting the operations of Aziyo. The debt instruments also include a financial covenant based on cumulative minimum net product revenue, as defined, restrictions as to payment of dividends, and are secured by all assets of the Company. As of June 30, 2022, Aziyo was in compliance with this financial covenant. During 2017, the Company restructured certain of its liabilities with a tissue supplier and entered into an unsecured promissory note totaling $2.1 million. The note bears interest at 5% and includes quarterly interest-only payments in 2017 and quarterly interest and principal payments from March 31, 2018 through August 31, 2021. The notes are subordinated in payment to the Term Loan Facility and Revolving Credit Facility and in both 2022 and 2021, the Company’s senior lender restricted payment of the amounts due. In May 2020, Aziyo entered into a promissory note with Silicon Valley Bank that provided for the receipt by the Company of loan proceeds totaling approximately $3.0 million (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). In June 2021, Aziyo was notified by the U.S. Small Business Administration that the entire balance of the Company’s PPP Loan and all related accrued interest was forgiven. Such forgiveness resulted in a gain to the Company of approximately $3.0 million which has been recorded as other income in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2021. Long-term debt was comprised of the following (in thousands): June 30, December 31, 2022 2021 Term Loan Facility, net of unamortized discount and deferred financing costs $ 13,773 $ 17,077 Note to Tissue Supplier 1,392 1,392 Total 15,165 18,469 Current Portion (8,059) (8,059) Long-Term Debt $ 7,106 $ 10,410 The fair value of all debt instruments, which is based on inputs considered to be Level 2 under the fair value hierarchy, approximates the respective carrying values as of June 30, 2022 and December 31, 2021. Refer to Note 12 for discussion of the repayment of the Term Loan Facility, Revolving Credit Facility and tissue supplier promissory note subsequent to June 30, 2022. |
Revenue Interest Obligation
Revenue Interest Obligation | 6 Months Ended |
Jun. 30, 2022 | |
Revenue Interest Obligation | |
Revenue Interest Obligation | Note 7. Revenue Interest Obligation On May 31, 2017, the Company completed an asset purchase agreement with CorMatrix Cardiovascular, Inc. ("CorMatrix") and acquired all CorMatrix commercial assets and related intellectual property (the "CorMatrix Acquisition"). As part of the CorMatrix Acquisition, the Company assumed a restructured, long-term obligation (the “Revenue Interest Obligation”) to Ligand Pharmaceuticals (“Ligand”) with an estimated present value on the acquisition date of $27.7 million. Subject to annual minimum payments of $2.75 million per year, the terms of the Revenue Interest Obligation require Aziyo to pay Ligand, 5% of future sales of the products Aziyo acquired from CorMatrix, including CanGaroo, ProxiCor, Tyke and VasCure, as well as products substantially similar to those products, such as the version of CanGaroo Aziyo is currently developing that is designed to include antibiotics. Furthermore, a $5.0 million payment will be due to Ligand if cumulative sales of these products exceed $100 million and a second $5.0 million will be due if cumulative sales exceed $300 million during the ten-year term of the agreement which expires on May 31, 2027. The Company recorded the present value of the estimated total future payments under the Revenue Interest Obligation as a long-term obligation, with the annual minimum payments, along with the expected payment timing of the first $5.0 million sales milestone payment noted above, serving to establish the short-term portion. At each reporting period, the value of the Revenue Interest Obligation is re-measured based on current estimates of future payments, with changes to be recorded in the condensed consolidated statements of operations using the catch-up method. There was no change to estimated future payments during the three and six months ended June 30, 2022 and 2021, and thus, no re-measurement gain or loss was recognized. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2022 | |
Commitments and Contingencies. | |
Commitments and Contingencies | Note 8. Commitments and Contingencies Operating Leases The Company leases two production facilities and one administrative and research facility under non-cancelable operating lease arrangements that expire through November 2025. All leases contain renewal options and escalation clauses based upon increases in the lessors’ operating expenses and other charges. The Company records rent expense on a straight-line basis over the life of the lease and the difference between the average rent expense and cash payments for rent is recorded as deferred rent and is included in other current and long-term liabilities on the balance sheet. Rent expense was approximately $0.3 million for both the three months ended June 30, 2022 and 2021, and was approximately $0.6 million for both the six months ended June 30, 2022 and 2021, and is included as a component of either cost of goods sold or general and administrative expenses. Cook Biotech License and Supply Agreements Aziyo has entered into a license agreement with Cook Biotech (“Cook”) for an exclusive, worldwide license to the porcine tissue for use in the Company’s Cardiac Patch and CanGaroo products, subject to certain co-exclusive rights retained by Cook. The term of such license is through the date of the last to expire of the licensed Cook patents, which is anticipated to be July 2031. Along with this license agreement, Aziyo entered into a supply agreement whereby Cook would be the exclusive supplier to Aziyo of the licensed porcine tissue. Under certain limited circumstances, Aziyo has the right to manufacture the licensed product and pay Cook a royalty of 3% of sales of the Aziyo-manufactured tissue. The supply agreement expires on the same date as the related license agreement. No royalties were paid to Cook during the three and six months ended June 30, 2022 or 2021. Aziyo has also entered into an amendment to the Cook license agreement (the “Cook Amendment”) in order to add fields of exclusive use. Specifically, the Cook Amendment provides for a worldwide exclusive license to the porcine tissue for use with neuromodulation devices in addition to cardiovascular devices. The Cook Amendment includes license fee payments of $0.1 million per year in each of the years 2021 through 2026. Such license payments would accelerate if a change in control, as defined, occurs within Aziyo. The Company, in its sole discretion, can terminate the license agreement at any time. Legal Proceedings From time to time, the Company may be involved in claims and proceedings arising in the course of the Company’s business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. The Company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. In June 2021, the Company announced a voluntary recall of a single lot of FiberCel fiber viable bone matrix. Between June 21, 2021 and July 19, 2022, fifty-one lawsuits in Indiana, Delaware, Florida, Maryland, Colorado, Michigan, Ohio, Kentucky, Oregon, North Carolina and Louisiana have been filed against Aziyo Biologics Inc., certain Medtronic entities, and others alleging that the plaintiffs contracted tuberculosis and/or suffered substantial symptoms and complications following the implantation of FiberCel during spinal fusion operations. Twenty-one lawsuits were filed in Indiana state court, captioned, respectively: (1) John Dukes and Kimberly Smith v. Aziyo Biologics, Inc., et al., Case No. 49D02-2109-CT-032234 (case dismissed without prejudice on 09/16/2021 and re-filed on 09/24/2021); (2) Tamara and Richard Marksberry v. Aziyo Biologics, Inc., et al., Case No. 49D04-2106- CT-021649 (consolidated); (3) Ramon Cabello v. Aziyo Biologics, Inc., et al., Case No. 49D13-2106-CT-021650 (consolidated); (4) Luis Caban v. Aziyo Biologics, Inc., Case No. 49D13-2107-CT-022413 (consolidated); (5) Machell and Samuel Hargrave v. Aziyo Biologics, Inc., et al., Case No. 49D01-2106-CT-021275 (consolidated); (6) Georgia Flinn as Personal Representative of the Estate of Gregory Flinn v. Aziyo Biologics, Inc., et al., Case No. 49D12-2107-CT-024051 (consolidated); (7) Ruth and William Flynn v. v. Aziyo Biologics, Inc., et al., Case No. 49D12-2107-CT-024624 (consolidated); (8) Tracy Warner and Kristin Foate v. v. Aziyo Biologics, Inc., et al., Case No. 49D04-2107-CT-024631 (consolidated); (9) Donna Schilling v. v. Aziyo Biologics, Inc., et al., Case No. 49D04-2107-CT-024443 (consolidated); (10) Robby and Stephanie Anderson v. v. Aziyo Biologics, Inc., et al., Case No. 49D13-2107-CT-025221 (consolidated); (11) Max Shepard v. v. Aziyo Biologics, Inc., et al., Case No. 49D11-2108-CT-025984 (consolidated); (12) Leon Chew v. Aziyo Biologics, Inc., et al., Case No. 49D12-2108-CT-025967 (consolidated); (13) Candace Kozor, Kenneth Largin and Anthony Young v. Aziyo Biologics, Inc., et al., Case No. 49D04-2107-CT-024626 (consolidated); (14) James and Lauri Ann Jackson v. v. Aziyo Biologics, Inc., et al., Case No. 49D02-2108-CT-028321 (re-filed in state court and consolidated); (15) James and Kathy Shaw v. Aziyo Biologics, Inc., et al, Case No. 49D11-2108-CT-028669 (consolidated); (16) Larry Szynski v. Aziyo Biologics, Inc., et al., Case No. 49D05-2108-CT-029225 (consolidated); (17) Jerrold Jenkins v. Aziyo Biologics, Inc., et al., Case No. 49D03-2108-CT-029367 (consolidated; (18) Hon Vien v. Aziyo Biologics, Inc., et al., Case No. 49D01-2202-CT-004812; (19) Jayson Hartman v. Aziyo Biologics, Inc., et al., Case No. 49D12-2202-CT-004835; (20) Randy Smith v. Aziyo Biologics, Inc., et al., Case No. 49D01-2202-CT-005184; and (21) Jason and Sherry Haywood v. Aziyo Biologics, Inc., et al., Case No. 49D11-206-CT-021446 (collectively, the “Indiana State Complaints”). Fifteen lawsuits were filed in the Superior Court of the State of Delaware, captioned respectively: (1) Richard Williams v. Aziyo, Biologics Inc., et al., C.A. No. N21C-06-166 EMD; (2) Jean and Shante Georges v. Aziyo, Biologics Inc., et al., C.A. No. N21C-06-256-DJB; (3) Marjorie Hitchens v. Aziyo, Biologics Inc., et al., C.A. No. N21C-06-214-DJB; (4) Larry and Joanne Fortner v. Aziyo, Biologics Inc., et al., C.A. No. N21C-06-215-DJB; (5) Nancy and John Smith v. Aziyo, Biologics Inc., et al., C.A. No. N21C-06-219-DJB; (6) Joan Trincia v. Aziyo, Biologics Inc., et al., C.A. No. N21C-06-220-DJB; (7) Bernadette Burgess v. Aziyo, Biologics Inc., et al., C.A. No. N21C-06-264-DJB; (8) Summer Fitzhugh v. Aziyo, Biologics Inc., et al., C.A. No. N21C-06-221-DJB; (9) Linda Shields v. Aziyo, Biologics Inc., et al., C.A. No. N21C-06-166-DJB; (10) Sharon Riddick v. Aziyo, Biologics Inc., et al., C.A. No. N21C-07-005-EMD; (11) Carl Stevens v. Aziyo, Biologics Inc., et al., C.A. No. N21C-08-149-DJB; (12) Joel and Melissa Stanton v. Aziyo, Biologics Inc., et al., C.A. No. N21C-08-212-AML; (13) Bruce and Beverly Carroll v. Aziyo, Biologics Inc., et al., C.A. No. N21C-08-130-DJB; (14) Margaret Cook v. Aziyo, Biologics Inc., et al., C.A. No. N21C-08-131-DJB; and (15) Robert Jr. and Kelly Aspinall v. Aziyo, Biologics Inc., et al., C.A. No. N21C-09-065-DJB (collectively, the “Delaware State Complaints”). Two lawsuits were filed in the Circuit Court of Maryland, captioned: (1) (previously filed on 07/21/2021 and dismissed without prejudice on 08/12/2021 in the U.S. District Court of Maryland), Diana and James Hanson v. Aziyo Biologics, Inc., et al., Case No. C-02-CV-21-001094 and (2) John Christensen v. Aziyo Biologics, Inc., et al., Case No. C-15-CV-22-002044 (collectively, the “Maryland State Complaints”). One lawsuit has been filed in the Court of Common Pleas of Ohio, captioned: Michelle and Charles Weethee v. Aziyo, Biologics Inc., et al., Case No. 2021 CV 03621 (“Ohio State Complaint”). One lawsuit was filed in the Northern District of Ohio, captioned: Heath Raker and Neal Raker v. Aziyo Biologics, Inc., et al., Case No. 1:22-cv-54 (“Ohio Federal Complaint”). One lawsuit filed in the Superior Court of North Carolina, captioned: Aurelia and Belvin Sherrill v. Aziyo Biologics, Inc., et al., Case No. 21-cvs-2797 has since been removed to the U.S. District Court for the Western District of North Carolina (“North Carolina Federal Complaint”). One lawsuit has been filed in the U.S. District Court for the Northern District of Florida, captioned Deborah Rice v. Aziyo Biologics, Inc., et al., Case No. 5:21-cv-00135-MW-MJF (“Florida Federal Complaint”). Two lawsuits were filed in the U.S. District Court for the Eastern District of Michigan, captioned: (1) Karrold Dudley v. Aziyo, Biologics Inc., et al., Case No. 2:21-cv-11813-GAD-EAS and (2) Diane Parron v. Aziyo Biologics Inc., et al., Case No. 2:22-cv-10522-NGE-EAS. A third lawsuit originally filed in the Circuit Court of Michigan, captioned: (3) Ilona and Christian Hildebrandt v. Aziyo Biologics, Inc., Case No. 2021-003804-NP has since been removed to the Eastern District of Michigan (collectively “Michigan Federal Complaints.”). One lawsuit has been filed in the U.S. District Court for the District of Colorado, captioned Christopher and Julie Buri v. Aziyo Biologics, Inc., et al., Case No. 1:21-cv-02789-SKC (“Colorado Federal Complaint”). One lawsuit has been filed in the U.S. District Court for the District of Oregon, captioned Christy Bryant v. Aziyo Biologics, Inc., et al., Case No. 1:21-cv-01759-AA (“Oregon Federal Complaint”). Two lawsuits have been filed in Fayette, Kentucky Circuit Court, captioned: (1) Earl Wesley Robinson and Joyce Ann Robinson v. Aziyo Biologics, Inc., Case No. 21-CI-03842 and (2) Horace B. Nelson, Sr. v. Aziyo Biologics, Inc., et al., Case No. 22-CI-00895 (the “Nelson suit”). The Nelson suit was subsequently removed to the U.S. District Court for the Eastern District of Kentucky (collectively, “Kentucky Complaints.”). One lawsuit has been filed in the U.S. District Court for the Western District of Louisiana, captioned Freddie J. Smith and Loretta D. Smith v. Aziyo Biologics, Inc., et al., Case No. 5:22-cv-01288-EEF-KDM (“Louisiana Federal Complaint”). Lastly, two lawsuits have been dismissed: (1) in the state court of Maryland, captioned Tracey and Stan Gearhart v. Aziyo Biologics, Inc., et al., Case No. C-02-CV-21-000997(dismissed without prejudice on 09/14/2021), and (2) in the U.S. District Court for the Northern District of Indiana, captioned: David Hahn v. Aziyo Biologics, Inc., et al., Case No. 2:21-cv-00265-PPS-JEM (dismissed without prejudice on 09/30/2021). Plaintiffs in the Indiana State Complaints allege a cause of action under Indiana’s Product Liability Act, citing manufacturing defects, defective design and failure to properly warn and instruct, and several of the complaints allege loss of consortium. Plaintiffs in these actions assert that the defendants are strictly liable or have breached the duty of care owed to plaintiffs by failing to exercise reasonable care in designing, manufacturing, marketing and labeling FiberCel and are seeking various types of damages, including economic damages, non-economic damages and loss of consortium. Plaintiffs in one of the Indiana State Complaints allege causes of action for product liability, negligence, breach of express and implied warranties, and punitive damages. Each of the plaintiffs in the Delaware State Complaints allege negligence, breach of implied warranty, breach of express warranty, medical monitoring and punitive damages, and two also allege loss of consortium. Plaintiffs in the Delaware State Complaints are seeking economic, consequential, and punitive damages. The Maryland Complaint asserts claims of negligence, breach of implied warranty, breach of express warranty, medical monitoring, and loss of consortium. The Florida Federal Complaint contains three strict liability claims for defective design, defective manufacture, and failure to warn. A claim for punitive damages is also pled. The Ohio State Complaint alleges causes of action for product liability and negligence and seeks compensatory damages. The Colorado Federal Complaint asserts causes of action for strict product liability, misrepresentation, negligence, breach of express warranty, and breach of implied warranty of merchantability. The Michigan Federal Complaints assert causes of action for negligence, gross negligence breach of implied warranty, breach of express warranty, intentional infliction of emotional distress, and liability under the res ipsa loquitur doctrine. The Michigan Federal Complaints seek compensatory damages and punitive damages. The North Carolina Federal Complaint alleges causes of action for negligence, defective design, breach of implied warranty, breach of express warranty, and loss of consortium, and seeks both compensatory and punitive damages. The Oregon Federal Complaint asserts strict liability claims for defective design, defective manufacture, and failure to warn, and seeks compensatory damages. The Ohio Federal Complaint asserts strict liability claims for defective manufacturing, inadequate warning, nonconformance with representations, and also alleges loss of consortium and seeks compensatory damages. The Kentucky Complaints assert strict liability claims based on manufacturing defect, design defect, failure to warn, negligence, breach of implied warranty, breach of express warranty, and seek recovery for medical monitoring, loss of consortium, compensatory damages, and punitive damages. The Louisiana Federal Complaint asserts claims of violation of the Louisiana products liability act, negligence and gross negligence, breach of implied warranty, breach of express warranty and seek recovery for medical monitoring. In addition to the above, there have been forty-three claims related to the FiberCel recall, which have not yet resulted in a lawsuit. The Company refers to all of the aforementioned litigation, or claim notices, collectively as the “FiberCel Litigation.” In order to reasonably estimate a loss or range of loss for the FiberCel Litigation, the Company must assess a variety of factors, including, (i) what claims, if any, will survive dispositive motion practice, (ii) the extent of the claims, particularly when damages are not specified or are indeterminate, (iii) how the discovery process will affect the litigation, (iv) the settlement posture of the other parties to the litigation and (v) any other factors that may have a material effect on the litigation. At present, it is not possible for Aziyo to estimate a range of probable loss in the FiberCel Litigation; however, while unknown, the probable loss could have a material effect on the Company’s financial position and results of operations. Should Aziyo be required to pay claims related to the FiberCel Litigation, the Company believes that certain settlements and judgments, as well as legal defense costs, may be covered in whole or in part under the Company’s insurance policies. In certain circumstances, insurance carriers reserve their rights to contest or deny coverage. The Company intends to contest vigorously any disputes with its insurance carriers and to enforce its rights under the terms of its insurance policies. Accordingly, the Company will record receivables with respect to amounts due under these policies only when the realization of the potential claim for recovery is considered probable. Amounts recovered under the Company’s insurance policies could be materially less than stated coverage limits and may not be adequate to cover damages, other relief and/or costs relating to claims. In addition, there is no guarantee that insurers will pay claims or that coverage will otherwise be available. As of both June 30, 2022 and December 31, 2021, the Company was not a party to, or aware of, any material legal matters or claims except for the FiberCel Litigation. |
Net Loss Per Share Attributable
Net Loss Per Share Attributable to Common Stockholders | 6 Months Ended |
Jun. 30, 2022 | |
Net Loss Per Share Attributable to Common Stockholders | |
Net Loss Per Share Attributable to Common Stockholders | Note 9. Net Loss Per Share Attributable to Common Stockholders Three Months Ended Six Months Ended (in thousands, except share and per share data) June 30, June 30, 2022 2021 2022 2021 Numerator: Net loss attributable to common stockholders $ (9,398) $ (2,385) $ (17,547) $ (7,452) Denominator: Weighted average number of common shares, basic and diluted 13,620,196 10,228,296 13,597,243 10,227,240 Net loss per common share attributable to common stockholders, basic and diluted $ (0.69) $ (0.23) $ (1.29) $ (0.73) The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be anti-dilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at period end, from the computation of diluted net loss per share attributable to common stockholders: June 30, 2022 2021 Options to purchase common stock 2,370,226 1,303,456 Restricted stock units 773,285 233,798 Total 3,143,511 1,537,254 |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2022 | |
Related Party Transactions | |
Related Party Transactions | Note 10. Related Party Transactions As part of the contribution of assets transacted from Tissue Banks International, now KeraLink International (“KeraLink”), to Aziyo upon formation of the Company, a provision existed which guaranteed a certain level of working capital, as defined, on the opening balance sheet of Aziyo. Such guarantee was largely finalized in 2016; however, an additional $0.4 million was received by the Company in connection with a settlement reached in 2018. Furthermore, as part of the 2018 settlement, it was agreed that when KeraLink sells its Aziyo common shares for net proceeds greater than $550,000, KeraLink is obligated to pay Aziyo $550,000 within three days of such cash being received. In May 2021, KeraLink sold Aziyo common shares for proceeds in excess of $550,000, and as such, remitted $550,000 to Aziyo in full satisfaction of the 2018 settlement. Amounts received in connection with this settlement were recorded as other income in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2021. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2022 | |
Segment Information | |
Segment Information | Note The Company operates as one segment, regenerative medicines. The segment is based on financial information that is utilized by the Company’s Chief Operating Decision Maker (“CODM”), who is the Company’s Chief Executive Officer, to assess performance and allocate resources. For the three and six months ended June 30, 2022 and 2021, the Company’s net sales disaggregated by the major sources - Core Products and Non-Core Products (see Note 1) - were as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 Sales by product Core Products $ 9,052 $ 9,979 $ 17,192 $ 20,642 Non-Core Products 3,586 2,181 6,941 4,402 Total Net Sales $ 12,638 $ 12,160 $ 24,133 $ 25,044 |
Subsequent Event
Subsequent Event | 6 Months Ended |
Jun. 30, 2022 | |
Subsequent Event | |
Subsequent Event | Note On August 10, 2022 (the “Closing Date”), the Company entered into a term loan facility agreement with SWK Funding LLC (the “SWK Loan Facility”) for principal amount of $25 million, with $21 million funded at closing and $4 million that becomes available, subject to the achievement of specified operational and financial metrics by September 30, 2023 (the “Additional Term Loan”). The SWK Loan Facility allows for the establishment of a new asset-based revolving loan facility of up to $8 million. The SWK Loan Facility matures on August 10, 2027 and accrues interest, payable quarterly in arrears. The SWK Loan Facility also includes both revenue and liquidity covenants, as defined. All of the SWK Loan Facility borrowings take the form of Secured Overnight Financing Rate (“SOFR”) loans and will bear interest at a rate per annum equal to the sum of an applicable margin of (i) 8.75% and the “Term SOFR Rate” (based upon an interest period of 3 months), or (ii) if the Company has elected the PIK Interest option (as defined below), 4.75% and the “Term SOFR Rate.” The Company may elect a portion of the interest due, to be paid in-kind at a rate per annum of 4.5% (“PIK Interest”), and such election may be made (x) until November 15, 2024 if the conditions to draw the Additional Term Loan have not been met, or (y) if such conditions to draw the Additional Term Loan have been satisfied, until November 17, 2025. The “Term SOFR Rate” is subject to a floor of 2.75%. On August 10, 2022, the Company issued to SWK Funding LLC a warrant (the “Warrant”) to purchase, in the aggregate, up to 187,969 shares of Class A common stock of the Company, $0.001 par value per share (the “Common Stock”) at an exercise price of $6.65 per share. The Warrant is immediately exercisable for up to 157,894 shares of Common Stock from time to time on or after the Closing Date. Subject to and effective upon the borrowing by the Borrower of the Additional Term Loan, the Warrant will be exercisable for up to an additional 30,075 shares of Common Stock. The exercise price and number of shares of Common Stock issuable upon exercise of the Warrant are subject to adjustment in the event of stock dividends, stock splits and certain other events affecting the Common Stock. Unless earlier exercised or terminated in accordance with its terms, the Warrant will expire on the seventh anniversary of the Closing Date. The Company used $16 million of the proceeds of the SWK Loan Facility to prepay all of the remaining outstanding principal and accrued interest and pay all associated payoff fees on the $20 million Term Loan Facility and $8 million Revolving Credit Facility. Such payments included $12.8 million to prepay all outstanding principal and accrued interest as well as $1.7 million to pay the required prepayment and exit fees on the Term Loan Facility and $1.2 million to repay the outstanding balance and accrued interest as well as $0.3 million to pay the required exit fees on the Revolving Credit Facility. The Company also used $1.4 million of the proceeds to repay the remaining balance on the promissory note with a tissue supplier. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2022 | |
Summary of Significant Accounting Policies | |
Basis of Presentation and Liquidity | Basis of Presentation and Liquidity The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements and accompanying notes included in the Company's annual report on Form 10-K (“Annual Report”) for the fiscal year ended December 31, 2021. The financial information as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 is unaudited, but in the opinion of management, all adjustments considered necessary for a fair statement of the results for these interim periods have been included. The condensed consolidated balance sheet data as of December 31, 2021 was derived from audited financial statements but does not include all disclosures required by GAAP. The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or any future year or period. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) In order to mitigate the current and potential future liquidity issues caused by the matters noted above, the Company may seek to raise capital through the issuance of common stock, either refinance or restructure its Term Loan Facility and Revolving Credit Facility (as such terms are defined, and further described, in Note 6), restructure its Revenue Interest Obligation (as such term is defined, and further described, in Note 7), or pursue asset sale transactions. However, such transactions may not be successful and the Company may not be able to raise additional equity, refinance or restructure its debt instruments or Revenue Interest Obligation, or sell assets on acceptable terms, or at all. As such, based on its current operating plans, even after the recent debt refinancing described in Note 12, the Company believes there is uncertainty as to whether its future cash flows along with its existing cash, availability under the SWK Loan Facility (described in Note 12) and cash generated from expected future sales will be sufficient to meet the Company’s anticipated operating needs through twelve months from the financial statement issuance date. Due to these factors, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance of the financial statements. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. That is, the accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions relating to inventory, receivables, long-lived assets, the valuation of stock-based awards, the valuation of the Revenue Interest Obligation and deferred income taxes are made at the end of each financial reporting period by management. Management continually re-evaluates its estimates, judgments and assumptions, and management's evaluation could change. Actual results could differ from those estimates. |
Impact of COVID-19 | Impact of COVID-19 The Company continues to closely monitor the impact of the COVID-19 pandemic and its variants on its business. In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended various containment and mitigation measures worldwide. Since that time, the number of procedures performed using the Company's products has intermittently decreased, as governmental authorities in the United States have recommended, and in certain cases required, that elective, specialty and other non-emergency procedures and appointments be suspended or canceled in order to avoid patient exposure to medical environments and the risk of potential infection with COVID-19, and to focus limited resources and personnel capacity on the treatment of COVID-19 patients. As a result, beginning in March 2020, a significant number of procedures using the Company's products have intermittently been postponed or cancelled, which has negatively impacted sales of its products. These measures and challenges will likely continue for the duration of the pandemic, which is uncertain, and may reduce the Company's net sales in the future and negatively impact its business, financial condition and results of operations while the pandemic continues. |
Net Loss per Share Attributable to Common Stockholders | Net Loss per Share Attributable to Common Stockholders Our common stock has a dual class structure, consisting of Class A common stock and Class B common stock. Other than voting rights, the Class B common stock has the same rights as the Class A common stock, and therefore both are treated as the same class of stock for purposes of the earnings per share calculation. Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average shares outstanding during the period. For purposes of the diluted net income (loss) per share attributable to common stockholders calculation, stock options and restricted stock units are considered to be common stock equivalents. All common stock equivalents have been excluded from the calculation of diluted net loss per share attributable to common stockholders, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share were the same for both periods presented. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: Level 1 - Level 2 - Level 3 - The estimated fair value of financial instruments disclosed in the financial statements has been determined by using available market information and appropriate valuation methodologies. The carrying value of all current assets and current liabilities approximates fair value because of their short-term nature. |
Cash and Restricted Cash | Cash and Restricted Cash The Company maintains its cash balances at banks and financial institutions. The balances are insured up to the legal limit. The Company maintains cash balances that may, at times, exceed this insured limit. Under the provisions of the Revolving Credit Facility (see Note 6), the Company has a lockbox arrangement with the banking institution whereby daily lockbox receipts are contractually utilized to pay down outstanding balances on the Revolving Credit Facility debt. Lockbox receipts that have not yet been applied to the Revolving Credit Facility are classified as restricted cash in the accompanying condensed consolidated balance sheets. The following table provides a reconciliation of cash and restricted cash included in the condensed consolidated balance sheets to the amounts included in the statements of cash flows (in thousands). June 30, 2022 2021 Cash $ 16,489 $ 28,302 Restricted cash 22 66 Total cash and restricted cash shown in statements of cash flows $ 16,511 $ 28,368 |
Accounts Receivable and Allowances | Accounts Receivable and Allowances Accounts receivable in the accompanying balance sheets are presented net of allowances for doubtful accounts and other credits. The Company grants credit to customers in the normal course of business, but generally does not require collateral or any other security to support its receivables. The Company evaluates the collectability of accounts receivable based on a combination of factors. In circumstances where a specific customer is unable to meet its financial obligations to the Company, a provision to the allowance for doubtful accounts is recorded to reduce the net recognized receivable to the amount that is reasonably expected to be collected. For all other customers, a provision to the allowance for doubtful accounts is recorded based on factors including the length of time the receivables are past due, the current business environment and the Company’s historical experience. Provisions to the allowance for doubtful accounts are recorded to general and administrative expenses. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered. |
Inventory | Inventory Inventory, consisting of purchased materials, direct labor and manufacturing overhead, is stated at the lower of cost or net realizable value, with cost determined generally using the average cost method. Inventory write-downs for unprocessed and certain processed donor tissue are recorded based on the estimated amount of inventory that will not pass the quality control process based on historical data. At each balance sheet date, the Company also evaluates inventory for excess quantities, obsolescence or shelf life expiration. This evaluation includes analysis of the Company’s current and future strategic plans, historical sales levels by product, projections of future demand, the risk of technological or competitive obsolescence for products, general market conditions and a review of the shelf life expiration dates for products. To the extent that management determines there is excess or obsolete inventory or quantities with a shelf life that is too near its expiration for the Company to reasonably expect that it can sell those products prior to their expiration, the Company adjusts the carrying value to estimated net realizable value. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the following estimated useful lives of the assets: Processing and research equipment 5 to 10 years Office equipment and furniture 3 to 5 years Computer hardware and software 3 years Leasehold improvements are amortized on the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Repairs and maintenance costs are expensed as incurred. |
Long-Lived Assets | Long-Lived Assets Purchased intangible assets with finite lives are carried at acquired fair value, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets. The Company periodically evaluates the period of depreciation or amortization for long-lived assets to determine whether current circumstances warrant revised estimates of useful lives. The Company reviews its property and equipment and intangible assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Impairment exists when the carrying value of the company’s asset exceeds the related estimated undiscounted future cash flows expected to be derived from the asset. If impairment exists, the carrying value of that asset is adjusted to its fair value. A discounted cash flow analysis is used to estimate an asset’s fair value, using assumptions that market participants would apply. The results of impairment tests are subject to management’s estimates and assumptions of projected cash flows and operating results. Changes in assumptions or market conditions could result in a change in estimated future cash flows and could result in a lower fair value and therefore an impairment, which could impact reported results. There were no impairment losses for the three and six months ended June 30, 2022 or 2021. |
Revenue Recognition | Revenue Recognition The Company’s revenue is generated from contracts with customers in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606. The core principle of ASC 606 is that the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The ASC 606 revenue recognition model consists of the following five steps: (1) identify the contracts with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. As noted above, the Company enters into contracts to primarily sell and distribute products to healthcare providers or commercial partners, or are produced and sold under contract manufacturing arrangements with corporate customers which are billed under ship and bill contract terms. Revenue is recognized when the Company has met its performance obligations pursuant to its contracts with its customers in an amount that the Company expects to be entitled to in exchange for the transfer of control of the products to the Company’s customers. For all product sales, the Company has no further performance obligations and revenue is recognized at the point control transfers which occurs either when: (i) the product is shipped via common carrier; or (ii) the product is delivered to the customer or distributor, in accordance with the terms of the agreement. A portion of the Company’s product revenue is generated from consigned inventory maintained at hospitals and from inventory physically held by direct sales representatives. For these types of product sales, the Company retains control until the product has been used or implanted, at which time revenue is recognized. The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of the underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in sales and marketing costs. Contracts with customers state the final terms of the sale, including the description, quantity, and price of each implant distributed. The payment terms and conditions in the Company’s contracts vary; however, as a common business practice, payment terms are typically due in full within 30 to 60 days of delivery. The Company, at times, extends volume discounts to customers. The Company permits returns of its products in accordance with the terms of contractual agreements with customers. Allowances for returns are provided based upon analysis of the Company’s historical patterns of returns matched against the revenues from which they originated. The Company records estimated returns as a reduction of revenue in the same period revenue is recognized. |
Deferred Rent | Deferred Rent The Company recognizes rent expense by the straight-line method over the lease term. Funds received from the lessor used to reimburse the Company for the cost of leasehold improvements are recorded as a deferred credit resulting from a lease incentive and are amortized over the lease term as a reduction of rent expense. |
Stock-Based Compensation Plans | Stock-Based Compensation Plans The Company accounts for its stock-based compensation plans in accordance with FASB ASC 718, Accounting for Stock Compensation |
Research and Development Costs | Research and Development Costs Research and development costs, which include mainly salaries, outside services and supplies, are expensed as incurred. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. At June 30, 2022, the Company maintained $16.7 million in bank deposit accounts that are in excess of the $0.25 million insurance provided by the Federal Deposit Insurance Corporation in one federally insured financial institution. The Company has not experienced any losses in such accounts. |
Significant Customers | Significant Customers The Company sells certain of its products under large contract manufacturing or distribution arrangements. The following table presents percentage of total revenues derived from the Company’s largest customers as well as their respective percentage of total accounts receivable: Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 Percent of revenues derived from: ACE Surgical Supply 11% 1% 10% 2% Surgalign Holdings 10% 11% 10% 11% Medtronic Sofamor Danek USA - 16% - 20% June 30, December 31, 2022 2021 Percent of accounts receivable derived from: ACE Surgical Supply 7% 3% Surgalign Holdings 13% 12% |
Comprehensive Income (Loss) | Comprehensive Income (Loss) Comprehensive income (loss) comprises net income (loss) and other changes in equity that are excluded from net income (loss). For the three and six months ended June 30, 2022 and 2021, the Company’s net loss equaled its comprehensive loss and accordingly, no additional disclosure is presented. |
Income Taxes | Income Taxes The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes are recorded to reflect the tax consequences on future years for differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to amounts that are more likely than not to be realized. The Company is subject to income taxes in the federal and state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In accordance with the authoritative guidance on accounting for uncertainty in income taxes, the Company recognizes tax liabilities for uncertain tax positions when it is more likely than not that a tax position will not be sustained upon examination and settlement with various taxing authorities. Liabilities for uncertain tax positions are measured based upon the largest amount of benefit that is more likely than not (greater than 50%) of being realized upon settlement. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Summary of Significant Accounting Policies | |
Summary of reconciliation of cash and restricted cash included in the consolidated balance sheets | The following table provides a reconciliation of cash and restricted cash included in the condensed consolidated balance sheets to the amounts included in the statements of cash flows (in thousands). June 30, 2022 2021 Cash $ 16,489 $ 28,302 Restricted cash 22 66 Total cash and restricted cash shown in statements of cash flows $ 16,511 $ 28,368 |
Summary of estimated useful lives of the assets | Processing and research equipment 5 to 10 years Office equipment and furniture 3 to 5 years Computer hardware and software 3 years |
Schedule of largest customers as well as their respective percentage of total accounts receivable | Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 Percent of revenues derived from: ACE Surgical Supply 11% 1% 10% 2% Surgalign Holdings 10% 11% 10% 11% Medtronic Sofamor Danek USA - 16% - 20% June 30, December 31, 2022 2021 Percent of accounts receivable derived from: ACE Surgical Supply 7% 3% Surgalign Holdings 13% 12% |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Stock-Based Compensation | |
Summary of stock options outstanding, exercisable and vested or expected to vest | Weighted- Average Weighted- Remaining Aggregate Average Contractual Intrinsic Exercise Term Value Number of Shares Price (years) (in thousands) Outstanding, December 31, 2021 1,386,811 $ 13.28 7.8 $ 179 Granted 1,075,858 $ 5.77 Exercised — $ — Forfeited (92,443) $ 10.55 Outstanding, June 30, 2022 2,370,226 $ 9.98 8.5 $ 1,677 Vested and exercisable, June 30, 2022 563,806 $ 11.09 5.9 $ 321 |
Schedule of RSU activity | Weighted- Average Number of Shares Grant Date Underlying RSUs Fair Value Unvested, December 31, 2021 235,985 $ 15.98 Granted 586,083 $ 4.08 Vested (19,347) $ 14.51 Forfeited (29,436) $ 6.05 Unvested, June 30, 2022 773,285 $ 7.38 |
Schedule of stock-based compensation expense recognized | Stock-based compensation expense recognized during the three and six months ended June 30, 2022 and 2021 was comprised of the following (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 Sales and marketing $ 302 $ 175 $ 498 $ 303 General and administrative 903 524 1,585 935 Research and development 247 143 424 251 Cost of goods sold 18 43 68 73 Total stock-based compensation expense $ 1,470 $ 885 $ 2,575 $ 1,562 |
Summary of weighted-average assumptions were used to determine the fair value of options | Six Months Ended June 30, 2022 2021 Expected term (years) 6.2 6.0 Risk-free interest rate 2.0 % 1.0 % Volatility factor 53 % 64 % Dividend yield — — |
Inventory (Tables)
Inventory (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Inventory | |
Summary of inventory | Inventory was comprised of the following (in thousands): June 30, December 31, 2022 2021 Raw materials $ 1,913 $ 1,880 Work in process 576 834 Finished goods 7,210 6,840 Total $ 9,699 $ 9,554 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Long-Term Debt | |
Summary of PPP loan recorded within long-term debt | Long-term debt was comprised of the following (in thousands): June 30, December 31, 2022 2021 Term Loan Facility, net of unamortized discount and deferred financing costs $ 13,773 $ 17,077 Note to Tissue Supplier 1,392 1,392 Total 15,165 18,469 Current Portion (8,059) (8,059) Long-Term Debt $ 7,106 $ 10,410 |
Net Loss Per Share Attributab_2
Net Loss Per Share Attributable to Common Stockholders (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Net Loss Per Share Attributable to Common Stockholders | |
Schedule of net loss per share attributable to common stockholders | Three Months Ended Six Months Ended (in thousands, except share and per share data) June 30, June 30, 2022 2021 2022 2021 Numerator: Net loss attributable to common stockholders $ (9,398) $ (2,385) $ (17,547) $ (7,452) Denominator: Weighted average number of common shares, basic and diluted 13,620,196 10,228,296 13,597,243 10,227,240 Net loss per common share attributable to common stockholders, basic and diluted $ (0.69) $ (0.23) $ (1.29) $ (0.73) |
Schedule of potential common shares excluded from calculation, presented based on amounts outstanding at period end, from the computation of diluted net loss per share attributable to common stockholders | June 30, 2022 2021 Options to purchase common stock 2,370,226 1,303,456 Restricted stock units 773,285 233,798 Total 3,143,511 1,537,254 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2022 | |
Segment Information | |
Schedule of sales information | For the three and six months ended June 30, 2022 and 2021, the Company’s net sales disaggregated by the major sources - Core Products and Non-Core Products (see Note 1) - were as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 Sales by product Core Products $ 9,052 $ 9,979 $ 17,192 $ 20,642 Non-Core Products 3,586 2,181 6,941 4,402 Total Net Sales $ 12,638 $ 12,160 $ 24,133 $ 25,044 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Basis of Presentation (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | |
Summary of Significant Accounting Policies | |||||
Net loss | $ (9,398) | $ (2,385) | $ (17,547) | $ (7,452) | |
Accumulated deficit | (122,638) | (122,638) | $ (105,091) | ||
Cash used in operating activities | 10,700 | 10,674 | 5,961 | ||
Cash used in financing activities | $ 3,000 | $ 2,954 | $ 4,956 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Cash and Restricted Cash (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Dec. 31, 2021 | Jun. 30, 2021 | Dec. 31, 2020 |
Cash and Restricted Cash | ||||
Cash | $ 16,489 | $ 30,393 | $ 28,302 | |
Restricted cash | 22 | 35 | 66 | |
Total cash and restricted cash shown in statements of cash flows | $ 16,511 | $ 30,428 | $ 28,368 | $ 39,532 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Property and Equipment (Details) | 6 Months Ended |
Jun. 30, 2022 | |
Computer hardware and software | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 3 years |
Minimum | Processing and research equipment | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 5 years |
Minimum | Office equipment and furniture | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 3 years |
Maximum | Processing and research equipment | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 10 years |
Maximum | Office equipment and furniture | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 5 years |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Long-Lived Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Long-Lived Assets | ||||
Impairment losses | $ 0 | $ 0 | $ 0 | $ 0 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Revenue Recognition (Details) | 6 Months Ended |
Jun. 30, 2022 | |
Minimum | |
Disaggregation of Revenue [Line Items] | |
Term of payment | 30 days |
Maximum | |
Disaggregation of Revenue [Line Items] | |
Term of payment | 60 days |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Concentration of Credit risk (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | |
Concentration Risk [Line Items] | |||||
Bank deposit accounts | $ 16.7 | $ 16.7 | |||
Revenues | Customer concentration risk | ACE Surgical Supply | |||||
Concentration Risk [Line Items] | |||||
Concentration risk (as a percent) | 11% | 1% | 10% | 2% | |
Revenues | Customer concentration risk | Surgalign Holdings | |||||
Concentration Risk [Line Items] | |||||
Concentration risk (as a percent) | 10% | 11% | 10% | 11% | |
Revenues | Customer concentration risk | Medtronic Sofamor Danek USA | |||||
Concentration Risk [Line Items] | |||||
Concentration risk (as a percent) | 16% | 20% | |||
Accounts Receivable | Customer concentration risk | ACE Surgical Supply | |||||
Concentration Risk [Line Items] | |||||
Concentration risk (as a percent) | 7% | 3% | |||
Accounts Receivable | Customer concentration risk | Surgalign Holdings | |||||
Concentration Risk [Line Items] | |||||
Concentration risk (as a percent) | 13% | 12% |
Stock-Based Compensation - 2020
Stock-Based Compensation - 2020 Plan (Details) | 6 Months Ended | |||
Sep. 30, 2022 USD ($) shares | Jun. 21, 2022 period $ / shares shares | Jun. 30, 2022 USD ($) shares | Oct. 07, 2020 shares | |
Mr. Lloyd | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Period of base salary taken for cash severance | 12 months | |||
Percentage of eligible target bonus | 100% | |||
Additional cash payment | $ | $ 279,656 | |||
Number of restricted stock units for additional cash payment | 39,894 | |||
Cash bonus on achievement of performance goals | $ | $ 1,000,000 | |||
Severance costs in accrued liabilities | $ | $ 100,000 | |||
Automatical renewal employment period | 1 year | |||
Dr. Mills | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Period before anniversary when employment ends | 90 days | |||
Options to purchase common stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting term | 4 years | |||
Exercise price as a percentage of market value of share of common stock at closing on the date of the grant | 100% | |||
Options to purchase common stock | Dr. Mills | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Grant of equity awards authorized | 456,278 | |||
Time-based awards percentage | 60% | |||
Performance-based awards percentage | 40% | |||
Options to purchase common stock | Minimum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Contractual term | 7 years | |||
Options to purchase common stock | Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Contractual term | 10 years | |||
Time Based Options | Dr. Mills | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Percentage of awards that vest end of interim period | 33.33% | |||
Awards that vest on first anniversary | 25% | |||
Time Based Options | Dr. Mills | Tranche Two | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Percentage of vesting | 66.66% | |||
Vesting term | 4 years | |||
Time Based Options | Dr. Mills | Tranche Four | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of quarter of vesting | period | 12 | |||
Restricted stock units | Dr. Mills | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Grant of equity awards authorized | 224,734 | |||
Time-based awards percentage | 60% | |||
Performance Restricted Stock Unit | Dr. Mills | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share Based Compensation, Performance Based, Share Price, Period | 20 days | |||
Share price threshold period | 20 days | |||
Time-Based RSU | Dr. Mills | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Percentage of awards that vest end of interim period | 33.33% | |||
Time-Based RSU | Dr. Mills | Tranche Two | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Percentage of vesting | 66.66% | |||
Vesting term | 4 years | |||
Employee Stock Purchase Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Grant of equity awards authorized | 380,997 | |||
Performance Shares | Dr. Mills | Tranche one | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share price threshold (in dollar per share) | $ / shares | $ 12.50 | |||
Performance Shares | Dr. Mills | Tranche Two | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share price threshold (in dollar per share) | $ / shares | 17 | |||
Performance Shares | Dr. Mills | Tranche Three | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share price threshold (in dollar per share) | $ / shares | 25 | |||
Performance Shares | Dr. Mills | Tranche Four | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share price threshold (in dollar per share) | $ / shares | $ 37 | |||
2020 Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares reserved for future issuance | 0 | 1,636,000 | ||
2020 Plan | Restricted stock units | Minimum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting term | 2 years | |||
2020 Plan | Restricted stock units | Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting term | 3 years |
Stock-Based Compensation - Outs
Stock-Based Compensation - Outstanding (Details) - USD ($) $ / shares in Units, $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2022 | Dec. 31, 2021 | |
Number of Shares | ||
Outstanding at the beginning | 1,386,811 | |
Granted | 1,075,858 | |
Forfeited | (92,443) | |
Outstanding at the end | 2,370,226 | 1,386,811 |
Vested and exercisable at the end | 563,806 | |
Weighted- Average Exercise Price | ||
Outstanding at the beginning (in dollars per share) | $ 13.28 | |
Granted (in dollars per share) | 5.77 | |
Forfeited (in dollars per share) | 10.55 | |
Outstanding at the end (in dollars per share) | 9.98 | $ 13.28 |
Vested and exercisable at the end (in dollars per share) | $ 11.09 | |
Weighted-Average Remaining Contractual Term (years) | ||
Outstanding (in years) | 8 years 6 months | 7 years 9 months 18 days |
Vested and exercisable (in years) | 5 years 10 months 24 days | |
Aggregate Intrinsic Value | ||
Aggregate Intrinsic Value (in dollars) | $ 1,677 | $ 179 |
Vested and exercisable at the end (in dollars) | 321 | |
Other Disclosures | ||
Total unrecognized compensation expense | $ 8,100 | |
Weighted-average period | 2 years 7 months 6 days | |
Weighted average grant date fair value of options granted | $ 3.15 |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted Stock Units (Details) $ / shares in Units, $ in Thousands | 6 Months Ended |
Jun. 30, 2022 USD ($) $ / shares shares | |
Weighted-Average Grant Date Fair Value | |
Shares issued in settlement of the award | $ | $ 192 |
Unrecognized compensation costs | $ | $ 8,100 |
Weighted-average period | 2 years 7 months 6 days |
Restricted stock units | |
Weighted-Average Grant Date Fair Value | |
Exercise price | $ / shares | $ 0 |
Shares issued in settlement of the award | $ | $ 0 |
Restricted stock units | Class A Common stock | |
Weighted-Average Grant Date Fair Value | |
Total fair value of the restricted stock units granted | $ | $ 1,700 |
Restricted stock units | 2020 Plan | |
Number of Shares Underlying RSUs | |
Unvested at the beginning | shares | 235,985 |
Granted | shares | 586,083 |
Vested | shares | (19,347) |
Forfeited | shares | (29,436) |
Outstanding at the end | shares | 773,285 |
Weighted-Average Grant Date Fair Value | |
Unvested at the beginning (in dollars per share) | $ / shares | $ 15.98 |
Granted (in dollars per share) | $ / shares | 4.08 |
Vested (in dollars per share) | $ / shares | 14.51 |
Forfeited (in dollars per share) | $ / shares | 6.05 |
Unvested at the ending (in dollars per share) | $ / shares | $ 7.38 |
Total fair value of the restricted stock units granted | $ | $ 2,400 |
Unrecognized compensation costs | $ | $ 3,600 |
Weighted-average period | 2 years |
Restricted stock units | 2020 Plan | Dr. Mills | |
Weighted-Average Grant Date Fair Value | |
Total fair value of the restricted stock units granted | $ | $ 700 |
Restricted stock units | 2020 Plan | Scenario, Closing Price of Common Stock Exceeds 10 per Share | |
Number of Shares Underlying RSUs | |
Granted | shares | 199,388 |
Restricted stock units | 2020 Plan | Scenario, Closing Price of Common Stock Exceeds 10 per Share | Class A Common stock | |
Weighted-Average Grant Date Fair Value | |
Share Price | $ / shares | $ 10 |
Period over which price must exceed $10 for awards to vest | 30 days |
Restricted stock units | 2020 Plan | Scenario, Closing Price of Common Stock Exceeds 10 per Share | Dr. Mills | |
Number of Shares Underlying RSUs | |
Granted | shares | 89,894 |
Restricted stock units | 2020 Plan | Minimum | |
Weighted-Average Grant Date Fair Value | |
Vesting period | 2 years |
Restricted stock units | 2020 Plan | Minimum | Class A Common stock | |
Weighted-Average Grant Date Fair Value | |
Vesting period | 6 months |
Restricted stock units | 2020 Plan | Maximum | |
Weighted-Average Grant Date Fair Value | |
Vesting period | 3 years |
Restricted stock units | 2020 Plan | Maximum | Class A Common stock | |
Weighted-Average Grant Date Fair Value | |
Vesting period | 4 years |
Stock-Based Compensation - Empl
Stock-Based Compensation - Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan | 6 Months Ended |
Jun. 30, 2022 shares | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |
Offering period | 6 months |
Price of the common stock purchased as percentage of fair market value of common stock | 85% |
Grant of equity awards authorized | 380,997 |
Stock options available for grant | 311,408 |
Shares issued under ESPP | 42,345 |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total | $ 1,470 | $ 885 | $ 2,575 | $ 1,562 |
Sales and marketing | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total | 302 | 175 | 498 | 303 |
General and administrative | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total | 903 | 524 | 1,585 | 935 |
Research and development | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total | 247 | 143 | 424 | 251 |
Cost of goods sold | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total | $ 18 | $ 43 | $ 68 | $ 73 |
Stock-Based Compensation - Assu
Stock-Based Compensation - Assumption (Details) | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Options to purchase common stock | ||
Weighted-average assumptions were used to determine the fair value of options | ||
Dividend yield assumption to estimate fair value | 0% | 0% |
Expected term (years) | 6 years 2 months 12 days | 6 years |
Risk-free interest rate | 2% | 1% |
Volatility factor | 53% | 64% |
Dividend yield | 0% | 0% |
Performance Based Options | ||
Weighted-average assumptions were used to determine the fair value of options | ||
Expected term (years) | 3 years |
Inventory (Details)
Inventory (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Dec. 31, 2021 |
Inventory | ||
Raw materials | $ 1,913 | $ 1,880 |
Work in process | 576 | 834 |
Finished goods | 7,210 | 6,840 |
Total | $ 9,699 | $ 9,554 |
Long-Term Debt - Term Loan Faci
Long-Term Debt - Term Loan Facility and Revolving Credit (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||||
May 31, 2017 | Jul. 31, 2019 | Feb. 28, 2018 | Dec. 31, 2017 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | Dec. 31, 2021 | |
Revolving Credit Facility | |||||||||
Long-Term Debt | |||||||||
Maximum borrowing capacity | $ 8,000,000 | ||||||||
Borrowing capacity | $ 7,500,000 | $ 7,500,000 | $ 6,900,000 | ||||||
Interest rate | 2.25% | ||||||||
Weighted average interest rate | 7.20% | 7.20% | 7.20% | 7.20% | |||||
Prepayment penalties until January 21, 2023 (as a percent) | 3% | ||||||||
Prepayment penalties after January 21, 2023 (as a percent) | 2% | ||||||||
Unused line fee (as a percent) | 0.50% | ||||||||
LIBOR | Revolving Credit Facility | |||||||||
Long-Term Debt | |||||||||
Basis spread on variable rate | 4.95% | ||||||||
Term Loan Facility | |||||||||
Long-Term Debt | |||||||||
Face amount of debt | $ 12,000,000 | ||||||||
Proceeds from Issuance of Debt | $ 3,500,000 | $ 3,000,000 | $ 1,500,000 | ||||||
Total amount outstanding | $ 20,000,000 | ||||||||
Interest rate | 2.25% | ||||||||
Weighted average interest rate | 9.50% | 9.50% | 9.50% | 9.50% | |||||
Percentage of casualty proceeds in excess of $250,000 to redeem loan balance | 100% | ||||||||
Casualty proceeds threshold amount in excess of which is used to redeem loan balance | $ 250,000 | ||||||||
Percentage of cash proceeds of non-ordinary course asset sale or sale of borrowing base assets required to redeem loan balance | 100% | ||||||||
Exit fee (as a percent) | 6.50% | ||||||||
Prepayment penalties until January 21, 2023 (as a percent) | 3% | ||||||||
Prepayment penalties after January 21, 2023 (as a percent) | 2% | ||||||||
Term Loan Facility | LIBOR | |||||||||
Long-Term Debt | |||||||||
Variable rate divider | 1% | ||||||||
Basis spread on variable rate | 7.25% |
Long-Term Debt - Unsecured Prom
Long-Term Debt - Unsecured Promissory Notes (Details) - Unsecured promissory note two $ in Millions | Dec. 31, 2017 USD ($) |
Debt Instrument [Line Items] | |
Face amount of debt | $ 2.1 |
Interest rate | 5% |
Long-Term Debt - Long-Term Debt
Long-Term Debt - Long-Term Debt (Details) - USD ($) $ in Thousands | Jun. 30, 2022 | Dec. 31, 2021 |
Contractual maturities of the long-term debt | ||
Total, net | $ 15,165 | $ 18,469 |
Current Portion | (8,059) | (8,059) |
Long-term debt | 7,106 | 10,410 |
Term Loan Facility | ||
Contractual maturities of the long-term debt | ||
Total, net | 13,773 | 17,077 |
Note to Tissue Supplier | ||
Contractual maturities of the long-term debt | ||
Total, net | $ 1,392 | $ 1,392 |
Long-Term Debt - Paycheck Prote
Long-Term Debt - Paycheck Protection Program, CARES Act (Details) - USD ($) $ in Thousands | 1 Months Ended | 6 Months Ended | |
Jun. 30, 2021 | May 31, 2020 | Jun. 30, 2021 | |
Debt Instrument [Line Items] | |||
Gain on forgiveness of debt | $ 3,029 | ||
PPP loan | |||
Debt Instrument [Line Items] | |||
Proceeds from issuance of debt | $ 3,000 | ||
Gain on forgiveness of debt | $ 3,000 |
Revenue Interest Obligation - (
Revenue Interest Obligation - (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
May 31, 2017 | May 17, 2017 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Debt Instrument [Line Items] | ||||||
Revenue based on milestone | $ 5,000 | |||||
Revenue Interest Obligation. | ||||||
Debt Instrument [Line Items] | ||||||
Interest expense related to revenue interest obligation | $ 700 | $ 700 | $ 1,300 | $ 1,300 | ||
Ligand Pharmaceuticals | ||||||
Debt Instrument [Line Items] | ||||||
Estimated present value on the acquisition date | $ 27,700 | |||||
Annual minimum sale | $ 2,750 | |||||
Percentage of future sales | 5% | |||||
Term of agreement | 10 years | |||||
Cumulative sales of products exceed $100.0 | Ligand Pharmaceuticals | ||||||
Debt Instrument [Line Items] | ||||||
Payments due based on cumulative sales | $ 5,000 | |||||
Cumulative sales | 100,000 | |||||
Cumulative sales of products exceed $300.0 | Ligand Pharmaceuticals | ||||||
Debt Instrument [Line Items] | ||||||
Payments due based on cumulative sales | 5,000 | |||||
Cumulative sales | $ 300,000 |
Commitments and Contingencies -
Commitments and Contingencies - Operating Leases (Details) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 USD ($) | Jun. 30, 2021 USD ($) | Jun. 30, 2022 USD ($) product | Jun. 30, 2021 USD ($) | |
Commitments and Contingencies. | ||||
Number of production facilities under operating lease | 2 | |||
Number of administrative and research facility under operating lease | 1 | |||
Rent expense | $ | $ 0.3 | $ 0.3 | $ 0.6 | $ 0.6 |
Commitments and Contingencies_2
Commitments and Contingencies - License and Supply (Details) - License agreement with Cook Biotech - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Cook Biotech License and Supply Agreements | ||||
Percentage of royalty on sales | 3% | |||
Royalty expense | $ 0 | $ 0 | $ 0 | $ 0 |
Payment of license fee per year | $ 100 | $ 100 |
Commitments and Contingencies_3
Commitments and Contingencies - Legal Proceedings (Details) | 6 Months Ended | |
Jun. 30, 2022 lawsuit | Jun. 30, 2022 claim lawsuit | |
Legal Proceedings | ||
Number of lawsuits filed | 51 | |
Number of claims not resulted lawsuit yet | 43 | 43 |
INDIANA | ||
Legal Proceedings | ||
Number of lawsuits filed | 21 | |
INDIANA | Product Lability | ||
Legal Proceedings | ||
Number of lawsuits filed | 1 | |
DELAWARE | ||
Legal Proceedings | ||
Number of lawsuits filed | 15 | |
DELAWARE | Product Lability | ||
Legal Proceedings | ||
Number of lawsuits filed | 2 | |
MARYLAND | ||
Legal Proceedings | ||
Number of lawsuits filed | 2 | |
Lawsuits dismissed | 2 | 2 |
OHIO | ||
Legal Proceedings | ||
Number of lawsuits filed | 1 | |
NORTH CAROLINA | ||
Legal Proceedings | ||
Number of lawsuits filed | 1 | |
FLORIDA | ||
Legal Proceedings | ||
Number of lawsuits filed | 1 | 3 |
MICHIGAN | ||
Legal Proceedings | ||
Number of lawsuits filed | 2 | |
COLORADO | ||
Legal Proceedings | ||
Number of lawsuits filed | 1 | |
OREGON | ||
Legal Proceedings | ||
Number of lawsuits filed | 1 | |
KENTUCKY | ||
Legal Proceedings | ||
Number of lawsuits filed | 2 |
Net Loss Per Share Attributab_3
Net Loss Per Share Attributable to Common Stockholders (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Jun. 30, 2021 | |
Numerator: | ||||
Net loss attributable to common stockholders | $ (9,398) | $ (2,385) | $ (17,547) | $ (7,452) |
Denominator: | ||||
Weighted average common shares outstanding - basic | 13,620,196 | 10,228,296 | 13,597,243 | 10,227,240 |
Weighted average number of common shares, diluted | 13,620,196 | 10,228,296 | 13,597,243 | 10,227,240 |
Net loss per common share attributable to common stockholders, basic (in dollar per share) | $ (0.69) | $ (0.23) | $ (1.29) | $ (0.73) |
Net loss per common share attributable to common stockholders, diluted (in dollar per share) | $ (0.69) | $ (0.23) | $ (1.29) | $ (0.73) |
Net Loss Per Share Attributab_4
Net Loss Per Share Attributable to Common Stockholders - Anti-dilutive securities (Details) - shares | 6 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities | 3,143,511 | 1,537,254 |
Options to purchase common stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities | 2,370,226 | 1,303,456 |
Restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive securities | 773,285 | 233,798 |
Related Party Transactions (Det
Related Party Transactions (Details) - KeraLink International - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | May 31, 2021 | |
Related Party Transaction [Line Items] | ||
Amount of settlement received | $ 400,000 | |
Shares sale proceeds over which Keralink to pay Aziyo | 550,000 | $ 550,000 |
Amount to receive from KeraLink upon sale of shares over $550,000 | $ 550,000 | |
Amount remitted from sale of shares | $ 550,000 | |
Period for Keralink to pay Aziyo | 3 days |
Segment Information (Details)
Segment Information (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2022 USD ($) | Jun. 30, 2021 USD ($) | Jun. 30, 2022 USD ($) segment | Jun. 30, 2021 USD ($) | |
Segment Reporting Information [Line Items] | ||||
Number of operating segments | segment | 1 | |||
Total sales | $ 12,638 | $ 12,160 | $ 24,133 | $ 25,044 |
Core Products | ||||
Segment Reporting Information [Line Items] | ||||
Total sales | 9,052 | 9,979 | 17,192 | 20,642 |
Non-Core Products | ||||
Segment Reporting Information [Line Items] | ||||
Total sales | $ 3,586 | $ 2,181 | $ 6,941 | $ 4,402 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Thousands | 6 Months Ended | |||
Aug. 10, 2022 | Jun. 30, 2021 | Jun. 30, 2022 | Dec. 31, 2021 | |
Subsequent Event [Line Items] | ||||
Gain (loss) on early extinguishment of debt | $ 3,029 | |||
Class A Common stock | ||||
Subsequent Event [Line Items] | ||||
Common stock, par value (in dollar per share) | $ 0.001 | $ 0.001 | ||
SWK Loan Facility | ||||
Subsequent Event [Line Items] | ||||
Maximum borrowing capacity | $ 25,000 | |||
Proceeds from loan facility | 21,000 | |||
Borrowing capacity available | 4,000 | |||
New Asset-Based Revolving Loan Facility | ||||
Subsequent Event [Line Items] | ||||
Maximum borrowing capacity | $ 8,000 | |||
Subsequent Events | ||||
Subsequent Event [Line Items] | ||||
Warrants issued | 187,969 | |||
Common stock, par value (in dollar per share) | $ 0.001 | |||
Exercise price (in dollar per share) | $ 6.65 | |||
Maximum shares issuable at closing | 157,894 | |||
Maximum shares issuable at closing | 30,075 | |||
Subsequent Events | SWK Loan Facility | SOFR | ||||
Subsequent Event [Line Items] | ||||
Basis spread on variable rate | 8.75% | |||
Interest in-kind spread basis | 4.75% | |||
In-kind interest rate | 4.50% | |||
Subsequent Events | SWK Loan Facility | SOFR | Interest Rate Floor | ||||
Subsequent Event [Line Items] | ||||
Interest rate | 2.75% | |||
Subsequent Events | Term Loan Facility and Revolving Credit Facility | ||||
Subsequent Event [Line Items] | ||||
Prepayment amount of loan | $ 16,000 | |||
Subsequent Events | Term Loan Facility | ||||
Subsequent Event [Line Items] | ||||
Face amount of debt | 20,000 | |||
Prepayment of principal and interest | 12,800 | |||
Exit fee | 1,700 | |||
Subsequent Events | Revolving Credit Facility | ||||
Subsequent Event [Line Items] | ||||
Face amount of debt | 8,000 | |||
Prepayment of principal and interest | 1,200 | |||
Exit fee | 300 | |||
Subsequent Events | Unsecured promissory note two | ||||
Subsequent Event [Line Items] | ||||
Prepayment amount of loan | $ 1,400 |