Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May. 04, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | AxoGen, Inc. | |
Entity Central Index Key | 805,928 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 30,084,217 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 20,948,752 | $ 25,909,500 |
Accounts receivable, net of allowance for doubtful accounts of approximately $273,000 and $192,000, respectively | 5,290,581 | 4,782,989 |
Inventory | 4,515,940 | 3,933,960 |
Prepaid expenses and other | 699,039 | 424,925 |
Total current assets | 31,454,312 | 35,051,374 |
Property and equipment, net | 1,294,941 | 970,870 |
Intangible assets | 747,482 | 678,082 |
Total Assets | 33,496,735 | 36,700,326 |
Current liabilities: | ||
Accounts payable and accrued expenses | 3,750,606 | 3,695,127 |
Current deferred revenue | 14,118 | 14,118 |
Total current liabilities | 3,764,724 | 3,709,245 |
Note Payable - Revenue Interest Purchase Agreement | 24,804,453 | 24,701,693 |
Long Term Deferred Revenue | 88,401 | 93,797 |
Total liabilities | 28,657,578 | 28,504,735 |
Shareholders' equity (deficit): | ||
Common stock, $.01 par value; 50,000,000 shares authorized; 30,035,576 and 29,984,591 shares issued and outstanding | 300,356 | 299,846 |
Additional paid-in capital | 111,687,571 | 111,368,424 |
Accumulated deficit | (107,148,770) | (103,472,679) |
Total shareholders' equity (deficit) | 4,839,157 | 8,195,591 |
Total Liabilities and Shareholders' equity | $ 33,496,735 | $ 36,700,326 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Condensed Consolidated Balance Sheets | ||
Accounts receivable, allowance for doubtful accounts | $ 273,000 | $ 192,000 |
Common stock, Par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 30,035,576 | 29,984,591 |
Common stock, shares outstanding | 30,035,576 | 29,984,591 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Condensed Consolidated Statements of Operations | ||
Revenues | $ 8,111,759 | $ 4,951,316 |
Cost of goods sold | 1,405,591 | 982,881 |
Gross profit | 6,706,168 | 3,968,435 |
Costs and expenses: | ||
Sales and marketing | 6,205,875 | 3,932,522 |
Research and development | 978,340 | 671,036 |
General and administrative | 2,144,757 | 1,908,581 |
Total costs and expenses | 9,328,972 | 6,512,139 |
Loss from operations | (2,622,804) | (2,543,704) |
Other income (expense): | ||
Interest expense | (1,003,027) | (994,748) |
Interest expense-deferred financing costs | (30,810) | (33,746) |
Other income (expense) | (19,450) | (3,003) |
Total other income (expense) | (1,053,287) | (1,031,497) |
Net Loss | $ (3,676,091) | $ (3,575,201) |
Weighted Average Common Shares outstanding - basic and diluted | 29,994,066 | 22,517,361 |
Loss Per Common share - basic and diluted (in dollars per share) | $ (0.12) | $ (0.16) |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (3,676,091) | $ (3,575,201) |
Adjustments to reconcile net loss to net cash used for operating activities: | ||
Depreciation and amortization | 78,856 | 41,898 |
Amortization of intangible assets | 16,016 | 11,772 |
Amortization of deferred financing costs | 30,810 | 33,746 |
Provision for bad debt | 80,651 | |
Stock-based compensation | 182,955 | 368,249 |
Interest added to note payable | 71,950 | 183,273 |
Change in assets and liabilities: | ||
Accounts receivable | (588,243) | (289,280) |
Inventory | (581,980) | (124,278) |
Prepaid expenses and other | (274,114) | (150,579) |
Accounts payable and accrued expenses | 55,479 | 992,078 |
Deferred revenue | (5,396) | (5,396) |
Net cash used for operating activities | (4,609,107) | (2,513,718) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (402,927) | (6,288) |
Acquisition of intangible assets | (85,416) | (32,051) |
Net cash used for investing activities | (488,343) | (38,339) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock | 13,772,133 | |
Debt issuance costs | (180,142) | |
Proceeds from exercise of stock options | 136,702 | |
Net cash provided by (used in) financing activities | 136,702 | 13,591,991 |
Net increase / (decrease) in cash and cash equivalents | (4,960,748) | 11,039,934 |
Cash and cash equivalents, beginning of year | 25,909,500 | 8,215,791 |
Cash and cash equivalents, end of period | 20,948,752 | 19,255,725 |
Supplemental disclosures of cash flow activity: | ||
Cash paid for interest | $ 900,410 | $ 803,607 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2016 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation The accompanying condensed consolidated financial statements include the accounts of AxoGen, Inc. (the “Company” or “AxoGen”) and its wholly owned subsidiary AxoGen Corporation (“AC”) as of March 31, 2016 and December 31, 2015 and for the three month periods ended March 31, 2016 and 2015. The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2015, which are included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2015. The interim condensed consolidated financial statements are unaudited and in the opinion of management, reflect all adjustments necessary for a fair presentation of results for the periods presented. Results for interim periods are not necessarily indicative of results for the full year. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Organization and Business
Organization and Business | 3 Months Ended |
Mar. 31, 2016 | |
Organization and Business | |
Organization and Business | 2. Organization and Business Business Summary We are a leading medical technology company dedicated to peripheral nerve repair. We provide products and education to improve surgical treatment algorithms for peripheral nerve injuries. Our portfolio of regenerative medicine products is available in the United States, Canada and several other countries and includes (i) Avance ® Nerve Graft, an off-the-shelf processed human nerve allograft for bridging severed nerves without the comorbidities associated with a second surgical site, (ii) AxoGuard ® Nerve Connector, a porcine submucosa extracellular matrix (“ECM”) coaptation aid for tensionless repair of severed nerves, and (iii) AxoGuard ® Nerve Protector, a porcine submucosa ECM product used to wrap and protect injured peripheral nerves and reinforce the nerve reconstruction while preventing soft tissue attachments. Along with these core surgical products, we also offer the AxoTouch TM Two-Point Discriminator and AcroVal™ Neurosensory and Motor Testing System. These evaluation and measurement tools assist healthcare professionals in detecting changes in sensation, assessing return of sensory, grip and pinch function, evaluating effective treatment interventions, and providing feedback to patients. Avance ® Nerve Graft is processed in the United States by AxoGen. AxoGuard ® Nerve Connector and AxoGuard ® Nerve Protector are manufactured in the United States by Cook Biotech Incorporated and are distributed worldwide exclusively by AxoGen. The AcroVal™ Neurosensory and Motor Testing System and AxoTouch™ Two Point Discriminator are contract manufactured by Viron Technologies, LLC. (formerly Cybernetics Research Laboratories) (“Viron”), Tucson, Arizona. Viron supplies the AcroVal™ and AxoTouch™ unpackaged and they are packaged at AxoGen’s distribution facility in Burleson, Texas. AxoGen maintains its corporate offices in Alachua, Florida and is the parent company of its wholly owned operating subsidiary, AC. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies Revenue Recognition Revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed and determinable, delivery has occurred and there is a reasonable assurance of collection of the sales proceeds. Revenues for manufactured products and products sold to a customer or under a distribution agreement are recognized when the product is shipped to the customer or distributor, at which time title passes to the customer or distributor. Once a product is shipped, the Company has no further performance obligations. Shipped product is defined as shipment to a customer location or segregation of product into a contracted distribution location. At such time, this product cannot be sold to any other customer. Fees charged to customers for shipping are recognized as revenues when products are shipped to the customer, distributor or end user. In the case of revenues from consigned sales, revenue is determined when the product is utilized in a surgical procedure. Revenues from research grants are recognized in the period the associated costs are incurred. Cash and Cash Equivalents and Concentration For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances and does not believe it is exposed to any significant credit risk on cash and cash equivalents. Accounts Receivable and Concentration of Credit Risk Accounts receivable are carried at the original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. We regularly review all accounts that exceed 60 days from the invoice date and based on an assessment of current credit worthiness, estimate the portion, if any, of the balance that will not be collected. The analysis excludes certain government related receivables due to our past successful experience in collectability. Specific accounts that are deemed uncollectible are reserved at 100% of their outstanding balance. The remaining balances outstanding over 60 days have a percentage applied by aging category ( 5% for balances 61 - 90 days and 20% for balances over 90 days aged), based on a historical valuation that allows us to calculate the total reserve required. The reserve balance was determined by applying a percentage to the cumulative balance between 60 and 90 days and a higher percentage to the balance over 90 days. In the event that we exhaust all collection efforts and deem an account uncollectible, we would subsequently write off the account. The write off process involves approval by senior management based on the write off amount. The allowance for doubtful accounts reserve balance was approximately $273,000 and $192,000 at March 31, 2016 and December 31, 2015, respectively. Concentrations of credit risk with respect to accounts receivable are limited because a large number of geographically diverse customers make up the Company’s customer base, thus spreading the trade credit risk. The Company also controls credit risk through credit approvals, credit limits and monitoring procedures. Inventories Inventories are comprised of implantable tissue, nerve grafts, Avance ® Nerve Graft, AxoGuard ® Nerve Connector, AxoGuard ® Nerve Protector, and supplies that are valued at the lower of cost (first-in, first-out) or market and consist of the following: March 31, December 31, 2016 2015 Finished goods $ $ Work in process Raw materials $ $ Inventories were net of reserve of approximately $828,000 and $711,000 at March 31, 2016 and December 31, 2015, respectively. Income Taxes The Company has not recorded current income tax expense due to the generation of net operating losses. Deferred income taxes are accounted for using the balance sheet approach which requires recognition of deferred tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized. A full valuation allowance has been established on the deferred tax asset as it is more likely than not that future tax benefit will not be realized. In addition, future utilization of the available net operating loss carryforward may be limited under Internal Revenue Code Section 382 as a result of changes in ownership. The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company’s remaining open tax years subject to examination by the Internal Revenue Service include the years ended December 31, 2012 through 2015; there currently are no examinations in process. Fair Value of Financial Instruments The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, accounts receivable, accounts payable and accrued expenses. The fair value of the Company’s long-term debt approximates its carrying value based upon current rates available to the Company. Share-Based Compensation Stock-based compensation cost related to stock options granted under the AC 2002 Stock Option Plan and AxoGen 2010 Stock Incentive Plan (see Note 8) is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. The Company estimates the fair value of each option award issued under the Plan on the date of grant using a Black-Scholes-Merton option-pricing model that uses the assumptions noted in the table below. The Company estimates the volatility of its common stock at the date of grant based on the volatility of comparable peer companies which are publicly traded, for the periods prior to there being a market for the Company’s common stock, and based on the Company’s common stock for periods subsequent to having an established market for the stock. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. The Company uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. The Company has never paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. The Company used the following weighted-average assumptions for options granted during the three months ended March 31: Three months ended March 31, 2016 2015 Expected term (in years) Expected volatility % % Risk free rate % % Expected dividends — % — % The Company estimates forfeitures when recognizing compensation expense and this estimate of forfeitures is adjusted over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment, which is recognized in the period of change, and also impact the amount of unamortized compensation expense to be recognized in future periods. The Company did not apply a forfeiture allocation to its unvested options outstanding during the three months ended March 31, 2016 and 2015 as they were deemed insignificant. 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 and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB issued a new standard on revenue recognition which outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is designed to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures. The guidance became effective for fiscal years, and interim periods within those years, beginning after December 15, 2016; however, on July 9, 2015, the FASB decided to delay the effective date of the new revenue standard by one year. The proposed deferral may permit early adoption, but would not allow adoption any earlier than the original effective date of the standard. We are currently evaluating the impact this standard will have on our consolidated financial statements. In June 2014, the FASB issued updated guidance related to stock compensation. The amendment requires that a performance target that affects vesting and that could be achieved after the requisite period, be treated as a performance condition. The updated guidance became effective for annual reporting periods and interim periods within those annual periods beginning after December 15, 2015. The Company has one such stock option grant that is based on quarterly performance conditions and the vesting and compensation expense is measured subsequent to the end of each quarter over a two year period. If the performance condition is met the vesting and compensation expense is recognized on the measurement date. In April 2015, the FASB issued Accounting Standard Update (“ASU”) No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs" ("ASU 2015-03") which changes the presentation of debt issuance costs in financial statements to present such costs as a direct deduction from the related debt liability rather than as an asset. ASU 2015-03 became effective for public companies during interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company adopted this standard in the first quarter of 2016 on a retrospective basis. (See note 7) In November 2015, the FASB issued an ASU to simplify the presentation of deferred income taxes. The amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in these ASU may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented and are effective for interim and annual reporting periods beginning after December 15, 2016. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. We are currently evaluating the method of adoption and the impact of the provisions of the ASU. January 2016, the FASB, issued ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities,” which requires that most equity instruments be measured at fair value, with subsequent changes in fair value recognized in net income. The pronouncement also impacts the financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The ASU does not apply to equity method investments or investments in consolidated subsidiaries. The new standard will be effective for us for the year ended December 31, 2018, with early adoption permitted and amendments to be applied as a cumulative-effect adjustment to the balance sheet in the year of adoption. We are currently in the process of assessing the impact of the ASU on our consolidated financial statements and disclosures. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. This update will increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This update is effective for annual and interim reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2016-02 on its financial position, results of operations and liquidity. The Company’s management has reviewed and considered all other recent accounting pronouncements and believe there are none that could potentially have a material impact on the Company’s consolidated financial condition, results of operations, or disclosures. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2016 | |
Property and Equipment | |
Property and Equipment | 4. Property and Equipment Property and equipment consist of the following: March 31, December 31, 2016 2015 Furniture and equipment $ $ Leasehold improvements Processing equipment Less: accumulated depreciation and amortization Property and equipment $ $ |
Intangible Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2016 | |
Intangible Assets | |
Intangible Assets | 5. Intangible Assets The Company’s intangible assets consist of the following: March 31, December 31, 2016 2015 License agreements $ $ Patents Less: accumulated amortization Intangible assets, net $ $ License agreements are being amortized over periods ranging from 17 - 20 years. Patent costs were being amortized over three years. As of March 31, 2016, the patents were fully amortized, and the remaining patents of $256,946 were pending patent costs and were not amortizable. Amortization expense was approximately $16,000 and $12,000 for the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, future amortization of license agreements for the remainder of this year and the next five years is expected to be $48,000 for the remainder of 2016 and $64,000 for 2017 through 2022 and $42,000 for 2023 . License Agreements The Company has entered into multiple license agreements (the “License Agreements”) with the University of Florida Research Foundation and the University of Texas at Austin. Under the terms of the License Agreements, the Company acquired exclusive worldwide licenses for underlying technology used in repairing and regenerating nerves. The licensed technologies include the rights to issued patents and patents pending in the United States and international markets. The effective term of the License Agreements extends through the term of the related patents and the agreements may be terminated by the Company with 60 days prior written notice. Additionally, in the event of default, licensors may terminate an agreement if the Company fails to cure a breach after written notice. The License Agreements contain the key terms listed below: · AxoGen pays royalty fees ranging from 1% to 3% under the License Agreements based on net sales of licensed products. One of the agreements also contains a minimum royalty of $12,500 per quarter, which may include a credit in future quarters in the same calendar year for the amount the minimum royalty exceeds the royalty fees. Also, when AxoGen pays royalties to more than one licensor for sales of the same product, a royalty stack cap applies, capping total royalties at 3.75%; · If AxoGen sublicenses technologies covered by the License Agreements to third parties, AxoGen would pay a percentage of sublicense fees received from the third party to the licensor. Currently, AxoGen does not sublicense any technologies covered by License Agreements. The Company is not considered a sub-licensee under the License Agreements and does not owe any sublicensee fees for its own use of the technologies; · AxoGen reimburses the licensors for certain legal expenses incurred for patent prosecution and defense of the technologies covered by the License Agreements; and · Currently, under one of the License Agreements, AxoGen would owe a $15,000 milestone fee upon receiving a Phase II Small Business Innovation Research or Phase II Small Business Technology Transfer grant involving the licensed technology. The Company has not received either grant and does not owe such a milestone fee. Other milestone fees are due if AxoGen develops certain pharmaceutical or medical device products under the License Agreements. No such products are currently under development. Royalty fees were approximately $153,000 and $96,000 during the three months ended March 31, 2016 and 2015, respectively, and are included in sales and marketing expense on the accompanying condensed consolidated statements of operations. |
Accounts Payable and Accrued Ex
Accounts Payable and Accrued Expenses | 3 Months Ended |
Mar. 31, 2016 | |
Accounts Payable and Accrued Expenses | |
Accounts Payable and Accrued Expenses | 6. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consists of the following: March 31, December 31, 2016 2015 Accounts payable $ $ Miscellaneous accruals Accrued compensation Accounts Payable and Accrued Expenses $ $ |
Term Loan Agreement
Term Loan Agreement | 3 Months Ended |
Mar. 31, 2016 | |
Term Loan Agreement | |
Term Loan Agreement | 7. Term Loan Agreement Term Loan Agreement consists of the following: March 31, December 31, 2016 2015 Term Loan and Revenue Interest Agreement with Three Peaks Capital S.a.r.l. for a total term loan amount of $25,000,000 which has a six year term and requires interest only payments and a final principal payment due at the end of the term. Interest is payable quarterly at 9.00% per annum plus the greater of LIBOR or 1.0% which as of March 31, 2016 and December 31, 2015 resulted in a 10% rate. The Revenue Interest Agreement is for a period of ten years. Royalty payments are based on a royalty rate of 3.75% of revenues up to a maximum of $30 million in revenues in any 12 month period. $ $ Long-term portion $ $ In the first quarter of 2016, the Company adopted ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 requires debt issuance costs related to recognized debt liabilities to be presented in the balance sheet as a direct deduction from the debt liability rather than an asset. Accordingly, as of March 31, 2016, approximately $815,000 of deferred debt issuance costs were presented as a direct deduction within Long-Term Debt on the Company’s Condensed Consolidated Balance Sheets. Furthermore, the Company reclassified approximately $846,000 of deferred debt issuance costs from Other Assets – Deferred Financing Costs to Long-Term Debt as of December 31, 2015. Term Loan Agreement and Revenue Interest Agreement On November 12, 2014 (the “Signing Date”), AxoGen, as borrower, and AC, as guarantor, entered into a term loan agreement (the “Term Loan Agreement”) with the lenders party thereto and Three Peaks Capital S.a.r.l. (“Three Peaks”), an indirect wholly-owned subsidiary of Oberland Capital Healthcare Master Fund LP (“Oberland”), as administrative and collateral agent for the lenders thereto. Under the Term Loan Agreement, Three Peaks has agreed to lend to AxoGen a term loan of $25 million (the “Initial Term Loan”) which has a six year term and requires interest only payments and a final principal payment due at the end of the term. Interest is payable quarterly at 9.00% per annum plus the greater of LIBOR or 1.0% which as of November 13, 2014 (“the Initial Closing Date”) resulted in a 10% interest rate. Under certain conditions, AxoGen has the option to draw an additional $7 million (the “Subsequent Borrowing” and, together with the Initial Term Loan, the “Term Loan”) during the period of April 1, 2016 through June 29, 2016 (the closing date of each such Subsequent Borrowing, a (“Subsequent Closing Date” and, together with the Initial Closing Date, the “Closing Dates”) under similar terms and conditions. AxoGen has to maintain certain covenants including limiting new indebtedness, restriction of the payment of dividends and maintain certain levels of revenue. Three Peaks has a first perfected security interest in the assets of AxoGen. In addition, AxoGen entered into a 10 year Revenue Interest Agreement (the “Revenue Interest Agreement”) with Three Peaks. Royalty payments are based on a royalty rate of 3.75% of AxoGen’s revenues up to a maximum of $30 million in revenues in any 12 month period. In the event the Subsequent Borrowing is drawn, the royalty rate increases proportionally up to a maximum of 4.80% AxoGen has to maintain certain covenants including those covenants under the Term Loan. Under the Term Loan Agreement, AxoGen has the option at any time to prepay the Term Loan, in whole or in part, and the Royalty Interest Agreement, defined below, by making the following payment, and Three Peaks has the right to demand the following payment upon a change of control of AxoGen, sale of the majority of AxoGen’s assets or a material adverse change to AxoGen: (i) on or prior to the first anniversary of the applicable Closing Date, 120% of the outstanding principal amount of the Term Loan or any portion being prepaid; (ii) after the first anniversary but no later than the second anniversary of the applicable Closing Date, 135% of the outstanding principal amount of the Term Loan or any portion being prepaid; (iii) after the second anniversary but no later than the third anniversary of the applicable Closing Date, 150% of the outstanding principal amount of the Term Loan or any portion being prepaid; or (iv) after the third anniversary of the applicable Closing Date, an amount generating an internal rate of return of 16.25% of the outstanding principal amount of the Term Loan or any portion being prepaid. In all cases, the amount due is reduced by the sum of interest and principal previously paid and all amounts received under the Revenue Interest Agreement. In each such case AxoGen will also owe an additional 3% of the originally advanced Term Loan amount. Upon payment to Three Peaks, AxoGen would have no further obligations to Three Peaks under the Term Loan or the Revenue Interest Agreement. In connection with the Term Loan Agreement, on the Signing Date, the Company and AC, its wholly owned subsidiary, entered into a Security Agreement (the “Security Agreement”) with Three Peaks, pursuant to which each of the Company and AC grants to Three Peaks a security interest in certain collateral as specified in the Security Agreement to guarantee the payment in full when due of the secured obligations. In the event of default per the terms of the Term Loan Agreement, Three Peaks would have the ability to foreclose on the pledged collateral and the Company and AC would not be able to continue its current business if such foreclosure occurred. Also in connection with the above transaction, the Company sold 1,375,969 shares of Common Stock to Three Peaks for a total of $3.55 million (“Three Peaks Equity Sale”) at a price of $2.58 per share. Pursuant to the equity purchase provisions in the Three Peaks Term Loan Agreement, in the event that, prior to November 12, 2016, we sell our securities at a lower price per share than the $2.58 per share paid by Three Peaks, or where the terms of such subsequent sale are otherwise more favorable, then in such case we have agreed to match the more favorable terms of such subsequent sale with respect to the shares purchased by Three Peaks. A subsequent sale does not include the issuance of securities or options to our employees, officers, directors or consultants pursuant to our approved employee option pool or any other employee stock purchase or option plan existing as of November 12, 2014. The Company records interest using its best estimate of the effective interest rate. This estimate takes into account both the rate on the Term Loan Agreement and the rate associated with the 10 year Revenue Interest Agreement with Three Peaks. The effective interest rate is based on actual payments to date, projected future revenues and the projected royalty payments and the quarterly interest payments due on the Term Loan Agreement. From time to time, AxoGen will reevaluate the expected cash flows and may adjust the effective interest rate. Determining the effective interest rate requires judgment and is based on significant assumptions related to estimates of the amounts and timing of future revenue streams. Determination of these assumptions is highly subjective and different assumptions could lead to materially different outcomes. |
Stock Options
Stock Options | 3 Months Ended |
Mar. 31, 2016 | |
Stock Options. | |
Stock Options | 8. Stock Options The Company granted stock options to purchase 465,500 shares of Common Stock pursuant to the AxoGen Plan for the three months ended March 31, 2016. Stock-based compensation expense was $182,955 and $368,249 for the three months ended March 31, 2016 and 2015, respectively. During the quarter ended March 31, 2016, the Company granted stock options to purchase 260,500 shares of Common Stock that are contingent upon certain future events. No stock compensation expense has been recorded for these options due to the uncertainty of those future events. Total future stock compensation expense related to nonvested awards is expected to be approximately $3,434,000 at March 31, 2016. |
Public Offering of Common Stock
Public Offering of Common Stock | 3 Months Ended |
Mar. 31, 2016 | |
Shareholders' Equity (Deficit) and Temporary Equity | |
Public Offering of Common Stock | 9. Public Offering of Common Stock On February 5, 2015, AxoGen entered into an underwriting agreement with Wedbush Securities Inc. (the “Underwriter”) in connection with the offering, issuance and sale (the “February 2015 Offering”) of 4,728,000 shares of Common Stock, at a price to the public of $2.75 per share. The Company also granted to the Underwriter a 30 -day option to purchase up to an aggregate of 709,200 additional shares of Common Stock to cover over-allotments, if any. As of February 13, 2015, the February 2015 Offering was completed with the sale of 5,437,200 shares of common stock, which included the full exercise of the over-allotment option, at $2.75 per share, resulting in gross proceeds to AxoGen from the February 2015 Offering of approximately $15.0 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by AxoGen estimated at approximately $1.4 million. The shares of common stock were listed on the NASDAQ Capital Market. The February 2015 Offering was made pursuant to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-195588) previously filed with the SEC on April 30, 2014, and pursuant to the prospectus supplement and the accompanying prospectus describing the terms of the February 2015 Offering, dated February 5, 2015. On August 26, 2015, the Company entered into the Purchase Agreement with Essex Woodlands Fund IX, L.P. for the purchase of 4,861,111 shares of common stock at a public offering price of $3.60 per share, raising approximately $17.5 million in gross proceeds (the “August 2015 Offering”). The expenses directly related to the August 2015 Offering were approximately $300,000 and were all paid as of December 31, 2015 by the Company. Such expenses include the Company’s legal and accounting fees, printing expenses, transfer agent fees and miscellaneous fees and costs related to the August 2015 Offering. Proceeds from the August 2015 Offering will be used for sales and marketing and general working capital purposes. The Company has provided certain demand and “piggy-back” registration rights in connection with this sale of common stock. The August 2015 Offering was made pursuant to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-195588) previously filed with the SEC on April 30, 2014 and pursuant to the prospectus supplement and the accompanying prospectus describing the terms of the August 2015 Offering, dated August 26, 2015. The August 2015 Offering was made pursuant to the Company’s effective shelf registration statement on Form S-3 (Registration No. 333-195588) previously filed with the SEC on April 30, 2014, and pursuant to the prospectus supplement and the accompanying prospectus describing the terms of the Offering, dated August 26, 2015. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies. | |
Commitments and Contingencies | 10. Commitments and Contingencies Commercial Lease On March 16, 2016, AC entered into the Fourth Amendment to Lease (“Fourth Amendment”) with SNH Medical Office Properties Trust, a Maryland real estate investment trust (“SNH”). SNH is the landlord of AC’s currently leased 11,761 square foot corporate headquarters facility in Alachua, Florida (the “Current Premises”) pursuant to that certain lease dated as of February 6, 2007, as amended (the “Lease”). The Fourth Amendment expands the Current Premises by 7,050 square feet (the “Expansion Premises”). The Fourth Amendment also provides that the Expiration Date (as defined in the Fourth Amendment) of the Lease will be extended to approximately five years from the Occupancy Date (as defined in the Fourth Amendment) of the Expansion Premises, which Occupancy Date is anticipated to occur in June 2016. The original expiration date of the Current Premises remains unchanged; provided, however, that AC shall have the right to extend the Current Premises Term (as defined in the Fourth Amendment) for three additional periods (the “Current Premises Extended Term”), the first such Current Premises Extended Term to commence on November 1, 2018 and end on October 31, 2019, the second such Current Premises Extended Term to commence on November 1, 2019 and end on October 31, 2020, and the third such Current Premises Extended Term to commence on November 1, 2020 and end on the Expiration Date. AC also has the right to extend the term of the then current Leased Premises (as defined in the Fourth Amendment) for an additional period of five years commencing on the day immediately after the Expiration Date. AC’s additional annual cost of the Expansion Premises will be approximately $123,000 , $127,000 , $131,000 , $135,000 and $139,000 for years one through five, respectively, of the Lease, with year one commencing on the Occupancy Date. Processing Agreement Until February 2016, the Company was party to that certain Amended and Restated Nerve Tissue Processing Agreement (the “LifeNet Agreement”) with LifeNet Health (“LifeNet”), whereby the Company processed and packaged Avance ® Nerve Graft using its employees and equipment located at LifeNet in Virginia Beach, Virginia (the “Virginia Beach Facility”). As a result of business requirements of LifeNet and their need for additional space, on April 16, 2015 LifeNet notified the Company that it would need to transition out of the Virginia Beach Facility and the LifeNet Agreement was terminated effective February 27, 2016. A s a result of the termination of the LifeNet Agreement, on August 6, 2015 the Company entered into a License and Services Agreement (the “CTS Agreement”) with Community Blood Center (d/b/a Community Tissue Services) (“CTS”) whose headquarters are located in Dayton, Ohio. The CTS facility and CTS Agreement provides the Company a cost effective, quality controlled and licensed facility to process and package its Avance ® Nerve Graft using the Company’s employees and processing equipment. The processing that was performed at the Virginia Beach Facility has been transferred in its entirety to the CTS facility. The CTS Agreement is for a five -year term, subject to earlier termination by either party for cause, or after the two -year anniversary of the CTS Agreement without cause, upon 18 months notice. Under the CTS Agreement, the Company pays CTS a facility fee for clean room/processing, storage and office space and CTS provides services in support of the Company’s processing such as routine sterilization of daily supplies, providing disposable supplies, microbial services and office support. The service fee is based on a per donor batch rate. However, AxoGen could reproduce a manufacturing space that would meet its needs if it no longer continued its relationship with CTS. AxoGen’s processing methods and process controls have been developed and validated to ensure product uniformity and quality. Pursuant to the CTS Agreement, AxoGen pays license fees on a monthly basis to CTS which total an annual amount of approximately $416,000 . |
Retirement Plan
Retirement Plan | 3 Months Ended |
Mar. 31, 2016 | |
Retirement Plan | |
Retirement Plan | 11. Retirement Plan AxoGen 401(k) Plan The Company adopted the AxoGen 401(k) plan (the “401(k) Plan”) in December 2015 with contributions starting in January 2016. All full-time employees who have attained the age of 18 are eligible to participate in the 401(k) Plan. Eligibility is immediate upon employment and enrollment is available any time during employment. Participating employees may make annual pretax contributions to their accounts up to a maximum amount as limited by law. The 401(k) Plan requires the Company to make matching contributions of 3% on the first 3% of the employee’s annual salary and 1% of the next 2% of the employee’s annual salary as long as the employee participates in the 401(k) Plan and contributes at least 5% of the annual salary. Both employee contributions and Company contributions vest immediately. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies | |
Revenue Recognition | Revenue Recognition Revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed and determinable, delivery has occurred and there is a reasonable assurance of collection of the sales proceeds. Revenues for manufactured products and products sold to a customer or under a distribution agreement are recognized when the product is shipped to the customer or distributor, at which time title passes to the customer or distributor. Once a product is shipped, the Company has no further performance obligations. Shipped product is defined as shipment to a customer location or segregation of product into a contracted distribution location. At such time, this product cannot be sold to any other customer. Fees charged to customers for shipping are recognized as revenues when products are shipped to the customer, distributor or end user. In the case of revenues from consigned sales, revenue is determined when the product is utilized in a surgical procedure. Revenues from research grants are recognized in the period the associated costs are incurred. |
Cash and Cash Equivalents and Concentration | Cash and Cash Equivalents and Concentration For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances and does not believe it is exposed to any significant credit risk on cash and cash equivalents. |
Accounts Receivable and Concentration of Credit Risk | Accounts Receivable and Concentration of Credit Risk Accounts receivable are carried at the original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. We regularly review all accounts that exceed 60 days from the invoice date and based on an assessment of current credit worthiness, estimate the portion, if any, of the balance that will not be collected. The analysis excludes certain government related receivables due to our past successful experience in collectability. Specific accounts that are deemed uncollectible are reserved at 100% of their outstanding balance. The remaining balances outstanding over 60 days have a percentage applied by aging category ( 5% for balances 61 - 90 days and 20% for balances over 90 days aged), based on a historical valuation that allows us to calculate the total reserve required. The reserve balance was determined by applying a percentage to the cumulative balance between 60 and 90 days and a higher percentage to the balance over 90 days. In the event that we exhaust all collection efforts and deem an account uncollectible, we would subsequently write off the account. The write off process involves approval by senior management based on the write off amount. The allowance for doubtful accounts reserve balance was approximately $273,000 and $192,000 at March 31, 2016 and December 31, 2015, respectively. Concentrations of credit risk with respect to accounts receivable are limited because a large number of geographically diverse customers make up the Company’s customer base, thus spreading the trade credit risk. The Company also controls credit risk through credit approvals, credit limits and monitoring procedures. |
Inventories | Inventories Inventories are comprised of implantable tissue, nerve grafts, Avance ® Nerve Graft, AxoGuard ® Nerve Connector, AxoGuard ® Nerve Protector, and supplies that are valued at the lower of cost (first-in, first-out) or market and consist of the following: March 31, December 31, 2016 2015 Finished goods $ $ Work in process Raw materials $ $ Inventories were net of reserve of approximately $828,000 and $711,000 at March 31, 2016 and December 31, 2015, respectively. |
Income Taxes | Income Taxes The Company has not recorded current income tax expense due to the generation of net operating losses. Deferred income taxes are accounted for using the balance sheet approach which requires recognition of deferred tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. A valuation allowance is provided when it is more likely than not that a deferred tax asset will not be realized. A full valuation allowance has been established on the deferred tax asset as it is more likely than not that future tax benefit will not be realized. In addition, future utilization of the available net operating loss carryforward may be limited under Internal Revenue Code Section 382 as a result of changes in ownership. The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company’s remaining open tax years subject to examination by the Internal Revenue Service include the years ended December 31, 2012 through 2015; there currently are no examinations in process. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, accounts receivable, accounts payable and accrued expenses. The fair value of the Company’s long-term debt approximates its carrying value based upon current rates available to the Company. |
Share-Based Compensation | Share-Based Compensation Stock-based compensation cost related to stock options granted under the AC 2002 Stock Option Plan and AxoGen 2010 Stock Incentive Plan (see Note 8) is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. The Company estimates the fair value of each option award issued under the Plan on the date of grant using a Black-Scholes-Merton option-pricing model that uses the assumptions noted in the table below. The Company estimates the volatility of its common stock at the date of grant based on the volatility of comparable peer companies which are publicly traded, for the periods prior to there being a market for the Company’s common stock, and based on the Company’s common stock for periods subsequent to having an established market for the stock. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. The Company uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. The Company has never paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. The Company used the following weighted-average assumptions for options granted during the three months ended March 31: Three months ended March 31, 2016 2015 Expected term (in years) Expected volatility % % Risk free rate % % Expected dividends — % — % The Company estimates forfeitures when recognizing compensation expense and this estimate of forfeitures is adjusted over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment, which is recognized in the period of change, and also impact the amount of unamortized compensation expense to be recognized in future periods. The Company did not apply a forfeiture allocation to its unvested options outstanding during the three months ended March 31, 2016 and 2015 as they were deemed insignificant. |
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 and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB issued a new standard on revenue recognition which outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is designed to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures. The guidance became effective for fiscal years, and interim periods within those years, beginning after December 15, 2016; however, on July 9, 2015, the FASB decided to delay the effective date of the new revenue standard by one year. The proposed deferral may permit early adoption, but would not allow adoption any earlier than the original effective date of the standard. We are currently evaluating the impact this standard will have on our consolidated financial statements. In June 2014, the FASB issued updated guidance related to stock compensation. The amendment requires that a performance target that affects vesting and that could be achieved after the requisite period, be treated as a performance condition. The updated guidance became effective for annual reporting periods and interim periods within those annual periods beginning after December 15, 2015. The Company has one such stock option grant that is based on quarterly performance conditions and the vesting and compensation expense is measured subsequent to the end of each quarter over a two year period. If the performance condition is met the vesting and compensation expense is recognized on the measurement date. In April 2015, the FASB issued Accounting Standard Update (“ASU”) No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs" ("ASU 2015-03") which changes the presentation of debt issuance costs in financial statements to present such costs as a direct deduction from the related debt liability rather than as an asset. ASU 2015-03 became effective for public companies during interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company adopted this standard in the first quarter of 2016 on a retrospective basis. (See note 7) In November 2015, the FASB issued an ASU to simplify the presentation of deferred income taxes. The amendments in this ASU require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in these ASU may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented and are effective for interim and annual reporting periods beginning after December 15, 2016. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. We are currently evaluating the method of adoption and the impact of the provisions of the ASU. January 2016, the FASB, issued ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities,” which requires that most equity instruments be measured at fair value, with subsequent changes in fair value recognized in net income. The pronouncement also impacts the financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. The ASU does not apply to equity method investments or investments in consolidated subsidiaries. The new standard will be effective for us for the year ended December 31, 2018, with early adoption permitted and amendments to be applied as a cumulative-effect adjustment to the balance sheet in the year of adoption. We are currently in the process of assessing the impact of the ASU on our consolidated financial statements and disclosures. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. This update will increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This update is effective for annual and interim reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2016-02 on its financial position, results of operations and liquidity. The Company’s management has reviewed and considered all other recent accounting pronouncements and believe there are none that could potentially have a material impact on the Company’s consolidated financial condition, results of operations, or disclosures. |
Summary of Significant Accoun18
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies | |
Schedule of inventories | March 31, December 31, 2016 2015 Finished goods $ $ Work in process Raw materials $ $ |
Schedule of weighted-average assumptions for options granted | Three months ended March 31, 2016 2015 Expected term (in years) Expected volatility % % Risk free rate % % Expected dividends — % — % |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Property and Equipment | |
Schedule of Property and equipment | March 31, December 31, 2016 2015 Furniture and equipment $ $ Leasehold improvements Processing equipment Less: accumulated depreciation and amortization Property and equipment $ $ |
Intangible Assets (Tables)
Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Intangible Assets | |
Schedule of intangible assets | March 31, December 31, 2016 2015 License agreements $ $ Patents Less: accumulated amortization Intangible assets, net $ $ |
Accounts Payable and Accrued 21
Accounts Payable and Accrued Expenses (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Accounts Payable and Accrued Expenses | |
Schedule of accounts payable and accrued expenses | March 31, December 31, 2016 2015 Accounts payable $ $ Miscellaneous accruals Accrued compensation Accounts Payable and Accrued Expenses $ $ |
Term Loan Agreement (Tables)
Term Loan Agreement (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Term Loan Agreement | |
Schedule of Term Loan Agreement | March 31, December 31, 2016 2015 Term Loan and Revenue Interest Agreement with Three Peaks Capital S.a.r.l. for a total term loan amount of $25,000,000 which has a six year term and requires interest only payments and a final principal payment due at the end of the term. Interest is payable quarterly at 9.00% per annum plus the greater of LIBOR or 1.0% which as of March 31, 2016 and December 31, 2015 resulted in a 10% rate. The Revenue Interest Agreement is for a period of ten years. Royalty payments are based on a royalty rate of 3.75% of revenues up to a maximum of $30 million in revenues in any 12 month period. $ $ Long-term portion $ $ |
Summary of Significant Accoun23
Summary of Significant Accounting Policies - Accounts Receivable and Concentration of Credit Risk (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | |
Accounts Receivable and Concentration of Credit Risk | ||
Reserve for accounts deemed uncollectible (as a percent) | 100.00% | |
Allowance for doubtful accounts reserve balance | $ 273,000 | $ 192,000 |
Minimum | ||
Accounts Receivable and Concentration of Credit Risk | ||
Age of doubtful accounts | 60 days | |
Age 61 to 90 Days | ||
Accounts Receivable and Concentration of Credit Risk | ||
Reserve for doubtful accounts (as a percent) | 5.00% | |
Age 61 to 90 Days | Minimum | ||
Accounts Receivable and Concentration of Credit Risk | ||
Age of doubtful accounts | 61 days | |
Age 61 to 90 Days | Maximum | ||
Accounts Receivable and Concentration of Credit Risk | ||
Age of doubtful accounts | 90 days | |
Age Over 90 Days | ||
Accounts Receivable and Concentration of Credit Risk | ||
Reserve for doubtful accounts (as a percent) | 20.00% | |
Age Over 90 Days | Minimum | ||
Accounts Receivable and Concentration of Credit Risk | ||
Age of doubtful accounts | 90 days |
Summary of Significant Accoun24
Summary of Significant Accounting Policies - Inventories (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Summary of Significant Accounting Policies | ||
Finished goods | $ 3,183,263 | $ 2,732,823 |
Work in process | 252,354 | 237,108 |
Raw materials | 1,080,323 | 964,029 |
Inventory, Net | 4,515,940 | 3,933,960 |
Inventory valuation reserves | $ 828,000 | $ 711,000 |
Summary of Significant Accoun25
Summary of Significant Accounting Policies - Stock-Based Compensation (Details) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Summary of Significant Accounting Policies | ||
Expected term | 4 years | 4 years |
Expected volatility (as a percent) | 62.00% | 76.32% |
Risk free rate (as a percent) | 1.24% | 1.28% |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Property and equipment | ||
Less: accumulated depreciation and amortization | $ (2,017,201) | $ (1,938,346) |
Property and equipment | 1,294,941 | 970,870 |
Furniture and Office Equipment | ||
Property and equipment | ||
Property and equipment, Gross | 1,303,305 | 1,186,815 |
Leasehold Improvements | ||
Property and equipment | ||
Property and equipment, Gross | 473,327 | 346,642 |
Processing equipment | ||
Property and equipment | ||
Property and equipment, Gross | $ 1,535,510 | $ 1,375,759 |
Intangible Assets - Components
Intangible Assets - Components of Intangible Assets (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Intangible assets consist of: | |||
Less: accumulated amortization | $ (415,525) | $ (399,509) | |
Intangible assets, net | 747,482 | 678,082 | |
Amortization of Intangible Assets | 16,016 | $ 11,772 | |
Licensing Agreements | |||
Intangible assets consist of: | |||
Finite-lived intangible assets, gross | $ 906,061 | 897,594 | |
Licensing Agreements | Minimum | |||
Intangible assets consist of: | |||
Amortization period of intangible assets | 17 years | ||
Licensing Agreements | Maximum | |||
Intangible assets consist of: | |||
Amortization period of intangible assets | 20 years | ||
Patents | |||
Intangible assets consist of: | |||
Finite-lived intangible assets, gross | $ 256,946 | $ 179,997 | |
Amortization period of intangible assets | 3 years | ||
Non-amortizable pending costs | $ 256,946 |
Intangible Assets - Future Amor
Intangible Assets - Future Amortization Expense (Details) | Mar. 31, 2016USD ($) |
Future amortization of license and patent agreements | |
Remainder of 2016 | $ 48,000 |
2,017 | 64,000 |
2,018 | 64,000 |
2,019 | 64,000 |
2,020 | 64,000 |
2,021 | 64,000 |
2,022 | 64,000 |
2,023 | $ 42,000 |
Intangible Assets - License Agr
Intangible Assets - License Agreements (Details) | 3 Months Ended | |
Mar. 31, 2016USD ($)product | Mar. 31, 2015USD ($) | |
Sales and Marketing Expense | ||
Intangible assets | ||
Royalty fees included in sales and marketing expense | $ 153,000 | $ 96,000 |
Licensing Agreements | ||
Intangible assets | ||
License agreements extended period | 60 days | |
Minimum royalty of agreements | $ 12,500 | |
Milestone fee upon receiving a Phase II Small Business Innovation Research | $ 15,000 | |
Number of products under development | product | 0 | |
Licensing Agreements | Minimum | ||
Intangible assets | ||
Royalty fees range under the license agreements | 1.00% | |
Licensing Agreements | Maximum | ||
Intangible assets | ||
Royalty fees range under the license agreements | 3.00% | |
Royalty stack cap for royalties paid to more than one licensor for sales of the same product | 3.75% |
Accounts Payable and Accrued 30
Accounts Payable and Accrued Expenses (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Accounts Payable and Accrued Liabilities | ||
Accounts payable | $ 2,004,029 | $ 2,090,874 |
Miscellaneous accruals | 410,517 | 15,183 |
Accrued compensation | 1,336,060 | 1,589,070 |
Accounts Payable and Accrued Expenses | $ 3,750,606 | $ 3,695,127 |
Term Loan Agreement - Long-term
Term Loan Agreement - Long-term Portion (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Note Payable | ||
Total Debt | $ 24,804,453 | $ 24,701,693 |
Long-term Debt. | ASU 2015-03 | ||
Note Payable | ||
Deferred financing costs | 815,000 | 846,000 |
Other Assets | ASU 2015-03 | ||
Note Payable | ||
Deferred financing costs | (846,000) | |
Term Loan And Revenue Interest Purchase Agreement | ||
Note Payable | ||
Long-term Notes Payable | 24,804,453 | 24,701,693 |
Three Peaks | Term Loan | ||
Note Payable | ||
Long-term Notes Payable | $ 24,804,453 | $ 24,701,693 |
Note Payable and Term Loan Agre
Note Payable and Term Loan Agreement - Term Loan Agreement and Revenue Interest Agreement (Details) - USD ($) | Nov. 12, 2014 | Mar. 31, 2016 | Dec. 31, 2015 | Nov. 13, 2014 |
Debt Instrument [Line Items] | ||||
Shares of common stock sold | 30,035,576 | 29,984,591 | ||
Value of common stock sold | $ 300,356 | $ 299,846 | ||
Three Peaks | ||||
Debt Instrument [Line Items] | ||||
Shares of common stock sold | 1,375,969 | |||
Value of common stock sold | $ 3,550,000 | |||
Public offering price (in dollars per share) | $ 2.58 | |||
Term Loan | Three Peaks | ||||
Debt Instrument [Line Items] | ||||
Term | 6 years | |||
Interest payable | 9.00% | |||
Face amount | $ 25,000,000 | |||
Basis spread on fixed rate, option 1 | LIBOR | |||
Basis spread on fixed rate, option 2 | 1.00% | |||
Effective interest rate (as a percent) | 10.00% | 10.00% | 10.00% | |
Optional future additional borrowing | $ 7,000,000 | |||
Upon certain events, the percentage of outstanding principal amount of the Term Loan the Company has the option to prepay and the lender has a right to demand payment for on or prior to the first anniversary of the applicable Closing Date | 120.00% | |||
Upon certain events, the percentage of outstanding principal amount of the Term Loan the Company has the option to prepay and the lender has a right to demand payment for after the first anniversary but before the second anniversary of the applicable Closing Date | 135.00% | |||
Upon certain events, the percentage of outstanding principal amount of the Term Loan the Company has the option to prepay and the lender has a right to demand payment for after the second anniversary but before the third anniversary of the applicable Closing Date | 150.00% | |||
Upon certain events, the internal rate of return of the outstanding principal amount of the Term Loan the Company has the option to prepay and the lender has a right to demand after the third anniversary of the applicable Closing Date | 16.25% | |||
Upon certain events, the additional percentage of the originally advanced Term Loan amount owed | 3.00% | |||
Revenue Interest Purchase Agreement | Three Peaks | ||||
Debt Instrument [Line Items] | ||||
Term | 10 years | |||
Royalty percentage on net revenue | 3.75% | |||
Revenue Interest Purchase Agreement | Three Peaks | Maximum | ||||
Debt Instrument [Line Items] | ||||
Royalty percentage on net revenue | 4.80% | |||
Royalty revenue per year | $ 30,000,000 |
Stock Options (Details)
Stock Options (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Stock-based compensation | $ 182,955 | $ 368,249 |
Total future stock compensation expense related to nonvested awards | $ 3,434,000 | |
Stock Options | ||
Stock options granted (in shares) | 465,500 | |
Stock Options, Contingent Upon Certain Future Events [Member] | ||
Stock options granted (in shares) | 260,500 | |
Stock-based compensation | $ 0 |
Public Offering of Common Sto34
Public Offering of Common Stock (Details) - USD ($) | Aug. 26, 2015 | Feb. 13, 2015 | Feb. 05, 2015 | Mar. 31, 2016 | Dec. 31, 2015 |
Shares of common stock sold | 30,035,576 | 29,984,591 | |||
Par value of common stock | $ 0.01 | $ 0.01 | |||
Offering | |||||
Shares of common stock sold | 4,728,000 | ||||
Public offering price (in dollars per share) | $ 2.75 | ||||
Underwriting Agreement | |||||
Shares of common stock sold | 709,200 | ||||
Number of days to underwriter to sell additional common shares | 30 days | ||||
Offering inclusive of over-allotment option | |||||
Shares of common stock sold | 5,437,200 | ||||
Public offering price (in dollars per share) | $ 2.75 | ||||
Gross proceeds from issuance of common stock | $ 15,000,000 | ||||
Underwriting discounts, commissions and other estimated offering expenses | $ 1,400,000 | ||||
Securities Purchase Agreement | |||||
Offering expenses | $ 300,000 | ||||
ESSEX | Securities Purchase Agreement | |||||
Shares of common stock sold | 4,861,111 | ||||
Public offering price (in dollars per share) | $ 3.60 | ||||
Gross proceeds from issuance of common stock | $ 17,500,000 |
Commitments and Contingencies (
Commitments and Contingencies (Details) | Mar. 16, 2016ft² | Aug. 06, 2015 | Mar. 31, 2016USD ($) |
SNH | |||
Commitments and Contingencies | |||
Additional leased office space in square feet | ft² | 7,050 | ||
Leased office space in square feet | ft² | 11,761 | ||
Additional term of agreement, if extended | 3 years | ||
Additional extension term after expiration date | 5 years | ||
Estimated future minimum rental payments on the leases | |||
Year 1 | $ 123,000 | ||
Year 2 | 127,000 | ||
Year 3 | 131,000 | ||
Year 4 | 135,000 | ||
Year 5 | 139,000 | ||
License and Services Agreement | |||
Commitments and Contingencies | |||
Term of agreement | 5 years | ||
Number of anniversary after which the agreement could be terminated | 2 years | ||
Notice period for termination of contract | 18 months | ||
Estimated future minimum rental payments on the leases | |||
License fee | $ 416,000 |
Retirement Plan (Details)
Retirement Plan (Details) | 3 Months Ended |
Mar. 31, 2016item | |
AxoGen 401K Plan | |
Defined Benefit Plan | |
Age limit for eligibility to participate in the plan | 18 |
Required minimum contribution | 5.00% |
Axogen 401K Plan, employee's contribution of first 3% of annual salary | |
Defined Benefit Plan | |
Matching contributions | 3.00% |
Employee contribution matched, percent | 3.00% |
Axogen 401K Plan, employee's contribution of next 2% of annual salary | |
Defined Benefit Plan | |
Matching contributions | 1.00% |
Employee contribution matched, percent | 2.00% |