Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Oct. 27, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-36046 | |
Entity Registrant Name | Axogen, Inc. | |
Entity Incorporation, State or Country Code | MN | |
Entity Tax Identification Number | 41-1301878 | |
Entity Address, Address Line One | 13631 Progress Blvd., Suite 400 | |
Entity Address, City or Town | Alachua | |
Entity Address, State or Province | FL | |
Entity Address, Postal Zip Code | 32615 | |
City Area Code | 386 | |
Local Phone Number | 462-6800 | |
Title of 12(b) Security | Common Stock, $0.01 par value | |
Trading Symbol | AXGN | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 40,126,253 | |
Entity Central Index Key | 0000805928 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 60,002 | $ 35,724 |
Restricted cash | 7,607 | 6,000 |
Investments | 39,126 | 60,786 |
Accounts receivable, net of allowance for doubtful accounts of $478 and $1,092, respectively | 18,758 | 16,944 |
Inventory | 11,929 | 13,861 |
Prepaid expenses and other | 2,551 | 1,706 |
Total current assets | 139,973 | 135,021 |
Property and equipment, net | 36,110 | 14,887 |
Operating lease right-of-use assets | 15,987 | 3,133 |
Finance lease right-of-use assets | 70 | 87 |
Intangible assets | 1,797 | 1,515 |
Total assets | 193,937 | 154,643 |
Current liabilities: | ||
Accounts payable and accrued expenses | 16,279 | 19,130 |
Current maturities of long-term lease obligations | 2,499 | 1,736 |
Contract liabilities, current | 14 | 14 |
Total current liabilities | 18,792 | 20,880 |
Long-term Debt, net of financing fees | 31,817 | |
Debt derivative liability | 2,450 | |
Common stock derivative option liability | 183 | |
Long-term lease obligations | 18,976 | 1,595 |
Long-term contract liabilities | 6 | 15 |
Total liabilities | 72,224 | 22,490 |
Commitments and Contingencies - see Note 13 | ||
Shareholders' equity: | ||
Common stock, $0.01 par value per share; 100,000,000 shares authorized; 40,123,841 and 39,589,755 shares issued and outstanding | 401 | 396 |
Additional paid-in capital | 318,949 | 311,618 |
Accumulated deficit | (197,637) | (179,861) |
Total shareholders' equity | 121,713 | 132,153 |
Total liabilities and shareholders' equity | $ 193,937 | $ 154,643 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Condensed Consolidated Balance Sheets | ||
Accounts receivable, allowance for doubtful accounts | $ 478 | $ 1,092 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 40,123,841 | 39,589,755 |
Common stock, shares outstanding | 40,123,841 | 39,589,755 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Condensed Consolidated Statements of Operations | ||||
Revenues | $ 33,428 | $ 28,564 | $ 79,805 | $ 78,550 |
Cost of goods sold | 5,697 | 4,510 | 16,118 | 12,468 |
Gross profit | 27,731 | 24,054 | 63,687 | 66,082 |
Costs and expenses: | ||||
Sales and marketing | 17,726 | 18,245 | 49,854 | 53,146 |
Research and development | 4,230 | 4,181 | 12,915 | 12,602 |
General and administrative | 6,820 | 7,740 | 18,726 | 24,321 |
Total costs and expenses | 28,776 | 30,166 | 81,495 | 90,069 |
Loss from operations | (1,045) | (6,112) | (17,808) | (23,987) |
Other income (expense): | ||||
Investment income | 28 | 555 | 576 | 1,925 |
Interest expense | (397) | (7) | (459) | (32) |
Change in fair value of derivatives | (71) | (71) | ||
Other (expense)/income | 6 | (7) | (14) | (3) |
Total other income (expense), net | (434) | 541 | 32 | 1,890 |
Net Loss | $ (1,479) | $ (5,571) | $ (17,776) | $ (22,097) |
Weighted average common shares outstanding - basic and diluted | 40,093,588 | 39,340,492 | 39,873,167 | 39,151,218 |
Loss per common share - basic and diluted | $ (0.04) | $ (0.14) | $ (0.45) | $ (0.56) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (17,776) | $ (22,097) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 993 | 631 |
Amortization of right-of-use assets | 1,282 | 1,352 |
Amortization of intangible assets | 111 | 89 |
Amortization of deferred financing fees | 22 | |
Provision for bad debt | (115) | (150) |
Provision for inventory write-down | 2,108 | (44) |
Changes in fair value of derivatives | 71 | |
Changes in investment gains and losses | (29) | (957) |
Share-based compensation | 5,725 | 7,384 |
Change in operating assets and liabilities: | ||
Accounts receivable | (1,700) | 20 |
Inventory | (176) | (1,657) |
Prepaid expenses and other | (844) | (1,099) |
Accounts payable and accrued expenses | (911) | 1,288 |
Operating lease obligations | (1,213) | (1,276) |
Cash paid for interest portion of finance leases | (2) | (3) |
Contract and other liabilities | (9) | (23) |
Net cash used in operating activities | (12,463) | (16,542) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (18,907) | (3,676) |
Purchase of investments | (41,794) | (104,314) |
Proceeds from sale of investments | 63,483 | 122,071 |
Cash payments for intangible assets | (393) | (396) |
Net cash provided by investing activities | 2,389 | 13,685 |
Cash flows from financing activities: | ||
Proceeds from the issuance of long-term debt | 35,000 | |
Proceeds from the paycheck protection program | 7,820 | |
Repayment of paycheck protection program | (7,820) | |
Payments for debt issuance costs | (642) | |
Payments of employee tax withholding in exchange of common stock awards | (665) | |
Cash paid for debt portion of finance leases | (10) | (24) |
Proceeds from exercise of stock options | 2,276 | 3,142 |
Net cash provided by financing activities | 35,959 | 3,118 |
Net increase in cash, cash equivalents, and restricted cash | 25,885 | 261 |
Cash, cash equivalents, and restricted cash, beginning of period | 41,724 | 30,294 |
Cash, cash equivalents and restricted cash, end of period | 67,609 | 30,555 |
Supplemental disclosures of cash flow activity: | ||
Cash paid for interest | 379 | 31 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Acquisition of fixed assets in accounts payable and accrued expenses | 1,271 | 684 |
Obtaining a right-of-use asset in exchange for a lease liability | 14,119 | $ 26 |
Embedded derivative associated with the long-term debt | $ 2,562 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock [Member] | Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Beginning Balance at Dec. 31, 2018 | $ 389 | $ 297,319 | $ (150,726) | $ 146,982 |
Beginning Balance (in shares) at Dec. 31, 2018 | 38,900,875 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Net Loss | (22,097) | (22,097) | ||
Stock-based compensation | 7,384 | 7,384 | ||
Issuance of restricted and performance stock units (in shares) | 41,340 | |||
Exercise of stock options and employee stock purchase plan | $ 6 | 3,136 | 3,142 | |
Exercise of stock options and employee stock purchase plan (in shares) | 519,103 | |||
Ending Balance at Sep. 30, 2019 | $ 395 | 307,839 | (172,823) | 135,411 |
Ending Balance (in shares) at Sep. 30, 2019 | 39,461,318 | |||
Beginning Balance at Jun. 30, 2019 | $ 393 | 304,819 | (167,252) | 137,960 |
Beginning Balance (in shares) at Jun. 30, 2019 | 39,252,294 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Net Loss | (5,571) | (5,571) | ||
Stock-based compensation | 2,397 | 2,397 | ||
Issuance of restricted and performance stock units (in shares) | 3,312 | |||
Exercise of stock options and employee stock purchase plan | $ 2 | 623 | 625 | |
Exercise of stock options and employee stock purchase plan (in shares) | 205,712 | |||
Ending Balance at Sep. 30, 2019 | $ 395 | 307,839 | (172,823) | 135,411 |
Ending Balance (in shares) at Sep. 30, 2019 | 39,461,318 | |||
Beginning Balance at Dec. 31, 2019 | $ 396 | 311,618 | (179,861) | $ 132,153 |
Beginning Balance (in shares) at Dec. 31, 2019 | 39,589,755 | 39,589,755 | ||
Increase (Decrease) in Stockholders' Equity | ||||
Net Loss | (17,776) | $ (17,776) | ||
Stock-based compensation | 5,725 | 5,725 | ||
Issuance of restricted and performance stock units | $ 2 | (2) | ||
Issuance of restricted and performance stock units (in shares) | 168,311 | |||
Shares surrendered by employees to pay tax withholdings | $ (1) | (664) | (665) | |
Shares surrendered by employees to pay tax withholdings (in shares) | (38,086) | |||
Exercise of stock options and employee stock purchase plan | $ 4 | 2,272 | 2,276 | |
Exercise of stock options and employee stock purchase plan (in shares) | 403,861 | |||
Ending Balance at Sep. 30, 2020 | $ 401 | 318,949 | (197,637) | $ 121,713 |
Ending Balance (in shares) at Sep. 30, 2020 | 40,123,841 | 40,123,841 | ||
Beginning Balance at Jun. 30, 2020 | $ 400 | 315,518 | (196,158) | $ 119,760 |
Beginning Balance (in shares) at Jun. 30, 2020 | 40,022,499 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Net Loss | (1,479) | (1,479) | ||
Stock-based compensation | 2,947 | 2,947 | ||
Issuance of restricted and performance stock units (in shares) | 22,529 | |||
Shares surrendered by employees to pay tax withholdings | (8) | (8) | ||
Shares surrendered by employees to pay tax withholdings (in shares) | (1,230) | |||
Exercise of stock options and employee stock purchase plan | $ 1 | 492 | 493 | |
Exercise of stock options and employee stock purchase plan (in shares) | 80,043 | |||
Ending Balance at Sep. 30, 2020 | $ 401 | $ 318,949 | $ (197,637) | $ 121,713 |
Ending Balance (in shares) at Sep. 30, 2020 | 40,123,841 | 40,123,841 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2020 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company as of September 30, 2020 and December 31, 2019 and for the three and nine-month periods ended September 30, 2020 and 2019. The Company’s condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and therefore, do not include all information and footnotes necessary for a fair presentation of consolidated financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2019, which are included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2019, as amended on Form 10-K/A. The interim condensed consolidated financial statements are unaudited and in the opinion of management, reflect all adjustments, consisting only of normal recurring 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 intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and nine-months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full fiscal year due primarily to the impact of the continued uncertainty of general economic conditions that may impact our markets for the remainder of fiscal year 2020. Specifically, we are uncertain of the extent to which the Coronavirus Disease 2019 (“COVID-19”) pandemic will affect our sales channels, supply chain, manufacturing, distribution capabilities, clinical trials, employee availability and productivity and capital expenditures. The Company’s access to healthcare facilities has improved each month, although restrictions remain and supporting customers remotely continues to be an important learned capability. There can be no assurances that resurgences of COVID-19 will not affect our future results. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Credit Losses On January 1, 2020, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for loans and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaces the multiple existing impairment models previously used under U.S. generally accepted accounting principles, which generally require that a loss be incurred before it is recognized. The new standard also applies to financial assets arising from revenue transactions such as contract assets and accounts receivables. The adoption did not have a material impact on our condensed consolidated financial statements. Credit losses for trade receivables is determined based on historical information, current information and reasonable and supportable forecasts. We have concluded that the adoption of the standard was not material as the composition of the trade receivables at the reporting date is consistent with that used in developing the historical credit-loss percentages. Further, the risk characteristics of the Company’s customer and composition of the portfolio have not changed significantly over time. Fair Value Measurements On January 1, 2020, the Company adopted ASU 2018-13, Fair Value Measurements (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 changes the fair value measurement disclosure requirements of ASC 820, “Fair Value Measurement” by adding, eliminating, and modifying certain disclosure requirements. The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements. Cloud Based Arrangements On January 1, 2020, the Company adopted ASU No. 2018-15, Guidance on Cloud Computing Arrangements. ASU 2018-15 provides guidance on implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract and aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. More specifically, the ASU 2018-15 provides guidance on accounting for implementation, set-up and other upfront costs incurred in a CCA hosted by a vendor. As of January 1, 2020, this standard did not have a material impact on the Company’s consolidated financial statements. Reference Rate Reform On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (ASC 848). The ASU also establishes (1) a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and (2) certain elective hedge accounting expedients. The elective contract modification guidance in the ASU applies to “contracts or other transactions that reference [LIBOR] or a reference rate that is expected to be discontinued as a result of reference rate reform” (an “affected rate”). The optional amendments are effective for all entities as of March 12, 2020 through December 31, 2020. As of September 30, 2020, this standard did not have a material impact on the Company’s consolidated financial statements. Derivative Instruments Company analyzes all financial instruments with features under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. The Company records liability classified equity contracts at fair value at the issuance and recorded as a liability. The Company also reviews debt agreements for embedded features. If these features are not clearly and closely related to the debt host, they meet the definition of a derivative and require bifurcation from the host. All derivative instruments are recorded on the balance sheet at their respective fair values. The Company will adjust the carrying value of the derivative liability to fair value at each subsequent reporting date. The changes in the value of the derivatives are recorded in the consolidated statement of operations in the period in which they occur. Revenue Recognition The Company enters into contracts to sell and distribute products and services to hospitals and surgical facilities for use in caring for patients with peripheral nerve damage or transection. 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 and services to the Company’s customers. In the case of products or services sold to a customer under an international distribution or purchase agreement, the distributors are granted exclusive distribution rights to sell the products or services in an international territory defined by the contract. These international distributor agreements contain provisions that allow the Company to terminate the distribution agreement with the distributor, and upon termination, the right to repurchase inventory from the distributor at the distributor’s cost. The Company has determined that its contractual rights to repurchase international distributor inventory upon termination of such distributor agreement are not substantive and do not impact the timing of when control transfers; and, therefore, the Company has determined it is appropriate to recognize revenue when: i) the product is shipped via common carrier; or ii) the product is delivered to the customer or distributor, depending on the terms of the agreement. Determining the timing of revenue recognition for such contracts is subject to significant judgment, because an evaluation must be made regarding the international distributor’s ability to direct the use of, and obtain substantially all of the remaining benefits from, the implants received from the Company. Changes in these assessments could have a significant impact on the timing of revenue recognition from sales to distributors. A portion of the Company's product revenue is generated from consigned inventory maintained at hospitals and domestic independent sales agencies, and also from inventory physically held by field 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 the cost of sales. The Company operates in a single reportable segment of peripheral nerve repair, offers similar products to its customers, and enters into consistently structured arrangements with similar types of customers. As such, the Company does not disaggregate revenue from contracts with customers as the nature, amount, timing and uncertainty of revenue and cash flows does not materially differ within and among the contracts with customers. The contract with the customer states 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. Since the customer agrees to a stated price in the contract that does not vary over the contract term, the contracts do not contain any material types of variable consideration, and contractual rights of return are not material. The Company has several contracts with distributors in international markets which include consideration paid to the customer in exchange for distinct marketing and other services. The Company records such consideration paid to the customer as a reduction to revenue from the contracts with those distributor customers. In connection with the Acroval ® The opening and closing balances of the Company’s contract receivables and liabilities are as follows: Contract Balances Net Receivables Contract Liabilities, Current Contract Liabilities, Long-Term Opening, January 1, 2019 $ 15,321 $ 18 $ 42 Closing, September 30, 2019 15,451 14 22 Increase (decrease) 130 (4) (20) Opening, January 1, 2020 $ 16,944 $ 14 $ 15 Closing, September 30, 2020 18,758 14 6 Increase (decrease) 1,814 - (9) Loss Per Share of Common Stock Basic and diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Since the Company has experienced net losses for all periods presented, options and awards of 5,496,833 and 4,584,991 shares which were outstanding as of September 30, 2020 and 2019, respectively, were not included in the computation of diluted net loss per share because they are anti-dilutive. |
Recently Issued Standards to be
Recently Issued Standards to be Adopted | 9 Months Ended |
Sep. 30, 2020 | |
Recently Issued Standards to be Adopted | |
Recently Issued Standards to be Adopted | 3. Recently Issued Standards to be Adopted In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs. The guidance is effective for fiscal years beginning after December 15, 2020. Early adoption is not permitted. We are currently evaluating the impact the standard may have on our consolidated financial statements and related disclosures. |
Inventory
Inventory | 9 Months Ended |
Sep. 30, 2020 | |
Inventory | |
Inventory | 4. Inventory Inventories are comprised of unprocessed tissue, work-in-process, Avance ® Nerve Graft, Axoguard ® Nerve Connector, Axoguard ® Nerve Protector, Axoguard ® Nerve Cap, Avive ® Soft Tissue Membrane, Acroval ® Neurosensory and Motor Testing System, Axotouch ® Two-Point Discriminator and supplies and are valued at the lower of cost (first-in, first-out) or net realizable value and consist of the following: September 30, December 31, 2020 2019 Finished goods $ 8,339 $ 10,403 Work in process 798 730 Raw materials 2,792 2,728 Inventories $ 11,929 $ 13,861 The Company monitors the shelf life of its products and historical expiration and spoilage trends and writes-down inventory based on the estimated amount of inventory that may not be distributed before expiration or spoilage. For the nine months ended September 30, 2020 and 2019, the Company had adjustments to the provision for inventory write downs of $2,108 and ($44) respectively. |
Fair Value Considerations
Fair Value Considerations | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Considerations | |
Fair Value Considerations | 5. Fair Value Considerations Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy defines a three-level valuation hierarchy for classification and disclosure of fair value measurements as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company classifies cash equivalents and investments according to the hierarchy of techniques used to determine fair value based on the types of inputs. The Company has elected the Fair Value Option for all investments in debt securities. On June 30, 2020, the Company entered into the Oberland Facility (see Note 10 Long Term Debt), concluding that the term debt instrument included certain embedded features that required separate accounting (the “Debt Derivative Liability”) and that the equity contract entered into concurrently was required to be classified as a liability and recorded at its fair value (the “Common Stock Derivative Option Liability”). These instruments were determined to be financial liabilities requiring Level 3 fair value measurements. Debt Derivative Liability The debt derivative liability was measured using a ‘with and without’ valuation model to compare the fair value of the Oberland Facility including the identified embedded derivative features and the fair value of a plain vanilla note with the same terms. The fair value of the Oberland Facility including the embedded derivative features was determined using a probability-weighted expected return model (“PWERM”) based on four potential settlement scenarios for the Oberland Facility due to a mandatory prepayment event between January 1, 2024 and June 30, 2027; (a) the prepayment of the Oberland Facility at the Company’s option; and (b) the repayment of the Oberland Facility at its maturity in accordance with the terms of the debt agreement. The estimated settlement value of each scenario, which would include any required make-whole payment (see Note 10 Long Term Debt) is then discounted to present value using a discount rate that is derived based on the initial terms of the Oberland Facility at issuance and corroborated utilizing a synthetic credit rating analysis. The significant inputs that are included in the valuation of the debt derivative liability include: September 30, 2020 Input Remaining term (years) 6.75 years Maturity date June 30, 2027 Coupon rate 9.50% Revenue participation payments Maximum each year Discount rate 10.03% (1) Probability of mandatory prepayment before 2024 5.0% (1) Estimated timing of mandatory prepayment event before 2024 December 31, 2023 (1) Probability of mandatory prepayment 2024 or after 15.0% (1) Estimated timing of mandatory prepayment event 2024 or after March 31, 2026 (1) Probability of optional prepayment event 5.0% (1) Estimated timing of optional prepayment event December 31, 2025 (1) (1) Represents a significant unobservable input Common Stock Derivative Option Liability The common stock option liability was measured using a Monte Carlo simulation model to simulate the future changes in the Company’s common stock price from the issuance date of the option agreement through the termination date of the option agreement. The 45-day volume weighted average price (“VWAP”) (see Note 10 Long Term Debt) is calculated for each simulation trial to determine the effective exercise price and number of common shares to be issued. The model assumes the holder will only exercise the option if the common stock is in the money on the exercise date. The value of the option is then determined based on the number of shares to be issued and the stock price on the date that the option is exercised. This option value is then discounted back to present value. The calculated present value of the option is then estimated using the average of 100,000 trials of the simulation model. The significant inputs that are included in the valuation of the common stock option liability include: September 30, 2020 Input Option term 6.75 years Company stock price $ 11.63 Risk free rate 0.45% Equity volatility 60% (1) Simulation trials 100,000 (1) Represents a significant unobservable input The following table represents the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2020: (Level 1) (Level 2) (Level 3) Total September 30, 2020 Assets: Money market funds $ 39,112 $ — $ — $ 39,112 U.S. government securities 4,520 — — 4,520 Corporate bonds — 6,441 — 6,441 Commercial paper — 28,165 — 28,165 Asset-backed securities — — — — Total assets $ 43,632 $ 34,606 $ — $ 78,238 Liabilities Debt derivative liability $ — $ — $ 2,450 $ 2,450 Common stock derivative option liability — — 183 183 Total liabilities $ — $ — $ 2,633 $ 2,633 (Level 1) (Level 2) (Level 3) Total December 31, 2019 Assets: Money market funds $ 26,812 $ — $ — $ 26,812 U.S. government securities 4,544 — — 4,544 Corporate bonds — 17,754 — 17,754 Commercial paper — 24,679 — 24,679 Asset-backed securities — 13,808 — 13,808 Total assets $ 31,356 $ 56,241 $ — $ 87,597 There were no changes in the levels or methodology of the measurement of financial assets or liabilities during the three and nine months ended September 30, 2020. The maturity date of the Company’s investments is less than one year. The following represents the rollforward of the fair value of instruments classified as Level 3 measurements for the three and nine months ended September 30, 2020: Quarter Ending September 30, 2020 Beginning Balance, July 1, 2020 $ 2,562 Change in fair value of option derivative 11 Change in fair value of debt derivative 60 Ending Balance, September 30, 2020 $ 2,633 Year Ending December 31, 2020 Beginning Balance $ — Option to purchase shares 183 Fair Value of Derivative Feature 2,450 Ending Balance, September 30, 2020 $ 2,633 |
Prepaid Expense and Other
Prepaid Expense and Other | 9 Months Ended |
Sep. 30, 2020 | |
Prepaid Expense and Other | |
Prepaid Expense and Other | 6. Prepaid Expense and Other Prepaid and other assets consist of the following: September 30, December 31, 2020 2019 Prepaid insurance $ 539 $ — Stock option receivable — 244 Litigation receivable 23 98 Prepaid events 493 110 Prepaid marketing 480 227 Prepaid software license 135 207 Prepaid professional fees 529 433 Other Prepaid items 352 387 Prepaid and Other Assets $ 2,551 $ 1,706 Our policy year for our insurance runs on a calendar year and as such a significant portion of the policy payment is made at the beginning of the new year and amortized to expense throughout the remaining year. |
Property and Equipment
Property and Equipment | 9 Months Ended |
Sep. 30, 2020 | |
Property and Equipment | |
Property and Equipment | 7. Property and Equipment Property and equipment consist of the following: September 30, December 31, 2020 2019 Furniture and equipment $ 2,236 $ 2,059 Leasehold improvements 12,223 2,203 Processing equipment 2,887 2,772 Land 731 731 Projects in process 22,790 10,886 Property and equipment, at cost 40,867 18,651 Less: accumulated depreciation and amortization (4,757) (3,764) Property and equipment, net $ 36,110 $ 14,887 Depreciation expense for the three months ended September 30, 2020 and 2019 was $374 and $192, respectively. Depreciation expense for the nine months ended September 30, 2020 and 2019 was $993 and $631, respectively. The significant increase in projects in process is related to our Axogen Processing Center (“APC”) facility (See Note 13 Commitments and Contingencies). On September 20, 2018, the Company entered into an agreement (the “Heights Agreement”) with Heights Union, LLC, a Florida limited liability company (“Heights Union”), for the lease of seventy-five thousand square feet of office space (the “Heights Union Premises”) in Tampa, Florida (See Note 13 Commitments and Contingencies) In May 2020, the Company entered into a construction escrow agreement (the “Escrow Agreement”) with Heights Union and Commonwealth Land Title Insurance Company (“Escrow Agent”) which provided for the establishment of a federally insured escrow bank account (the “Escrow Account”) to hold Company funds to be used for tenant improvements in excess of the tenant allowance as provided in the Heights Agreement. The Company deposited $6,289 into the Escrow Account for use in completing construction of the tenant improvements. The Escrow Agent will disburse the funds upon joint written instructions from Heights Union and the Company. During the three months and nine months ended September 30, 2020, $3,464 and $4,682, respectively, was disbursed from the Escrow Account and recorded in property and equipment account of the balance sheet. The Company anticipates depleting the Escrow Account by November 2020. As of September 30, 2020, $1,607 remained in the Escrow Account and is recorded as restricted cash in the condensed consolidated balance sheet. . |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2020 | |
Intangible Assets | |
Intangible Assets | 8. Intangible Assets The Company’s intangible assets consist of the following: September 30, 2020 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortized intangible assets Patents $ 1,201 $ (122) $ 1,079 $ 845 $ (84) $ 761 License agreements 1,089 (720) 369 1,067 (647) 420 Total amortizable intangible assets $ 2,290 $ (842) $ 1,448 $ 1,912 $ (731) $ 1,181 Unamortized intangible assets Trademarks $ 349 $ — $ 369 $ 334 $ — $ 334 Total intangible asset, net $ 2,639 $ (842) $ 1,797 $ 2,246 $ (731) $ 1,515 License agreements are being amortized over periods ranging from 17-20 years. Patent costs are being amortized over periods up to 20 years. Amortization expense was approximately $39 and $33 for the three months ended September 30, 2020 and 2019, respectively. Amortization was approximately $111 and $89 for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, future amortization of license agreements and patents are as follows: Year Ending December 31, 2020 (excluding nine months ended September 30, 2020) $ 40 2021 160 2022 160 2023 151 2024 67 Thereafter 870 TOTAL $ 1,448 License Agreements The Company has entered into multiple license agreements (together, 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 $12.5 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 sub-licensee 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 the University of Texas at Austin’s agreement, Axogen would owe a milestone fee of $15 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. A milestone fee to the University of Florida Research Foundation of $125 is due if Axogen receives FDA approval of its Avance Nerve Graft, a milestone fee of $25 is due upon the first commercial use of certain licensed technology to provide services to manufacture products for third parties and a milestone fee of $10 is due upon the first use to manufacture products that utilize certain technology that is not currently incorporated into Axogen products. Royalty fees were approximately $701 and $577 during the three months ended September 30, 2020 and 2019, respectively, and approximately $1,635 and $1,573 during the nine months ended September 30, 2020 and 2019, 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 | 9 Months Ended |
Sep. 30, 2020 | |
Accounts Payable and Accrued Expenses | |
Accounts Payable and Accrued Expenses | 9. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following: September 30, December 31, 2020 2019 Accounts payable $ 3,507 $ 8,262 Accrued expenses 3,091 3,237 Accrued compensation 9,681 7,631 Accounts Payable and Accrued Expenses $ 16,279 $ 19,130 |
Long Term Debt
Long Term Debt | 9 Months Ended |
Sep. 30, 2020 | |
Long Term Debt | |
Long Term Debt | 10. Long Term Debt On June 30, 2020, the Company entered into a seven-year financing agreement with Oberland Capital (the “Oberland Facility”) and obtained the first tranche of $35,000 at closing. The Oberland Facility provides for a total of $75,000 through two additional tranches that can be drawn by December 31, 2021 and requires interest-only payments for the duration of the term. A second tranche of $15,000 may be drawn at the Company’s option upon achieving two consecutive quarters with revenue of at least $20,000. Such second tranche may also be put to the Company at any time by Oberland Capital. A third tranche of $25,000 may be drawn at the Company’s option upon achieving two consecutive quarters with revenue of $28,000. The financing costs for this facility are approximately $642 and will be recorded as a contra liability to the debt facility. As of September 30, 2020, the Company has paid all The Oberland Facility requires quarterly interest payments for seven years. Interest is calculated as 7.5% plus the greater of LIBOR or 2.0% (9.5% as of September 30, 2020). Each tranche of the Oberland Facility, if and when issued, will have a term of seven years from the date of issuance (with the first tranche issued on June 30, 2020 maturing on June 30, 2027). In connection with the Oberland Facility, the Company entered into a revenue participation agreement with Oberland Capital, which provides that, among other things, an additional quarterly royalty payment as a percentage of the Company’s net revenues, up to $70 million in any given fiscal year, subject to certain limitations set forth therein, during the period commencing on the later of (i) April 1, 2021 and (ii) the date of funding of a tranche of the loan, and ending on the date upon which all amounts owed under the Oberland Facility have been paid in full (the “Revenue Participation Agreement”). Payments will commence on September 30, 2021. This royalty structure results in approximately 1.0% per year of additional interest payments on the outstanding loan amount. For the three months ended September 30, 2020, the Company paid $858 of interest to Oberland for this debt facility. The Company capitalized approximately $489 of the interest towards the costs to construct and retrofit its Axogen Processing Center in Vandalia, OH (See Note 13 Commitments and Contingency). The capitalized interest is recorded as part of property and equipment in the consolidated balance sheet. Additionally, Oberland Capital has the right to purchase up to $3,500 worth of Axogen common stock from Axogen in one transaction at any time after closing of the Oberland Facility until the later of (i) the date all amounts due under the Oberland Facility are repaid and (ii) June 30, 2027 (the “Oberland Option”). The purchase price of the common stock will be calculated based on the 45-day moving average of the closing stock price on the day prior to the purchase. In the event that Oberland Capital exercises the Oberland Option and is issued common stock, Oberland Capital will receive certain protective rights (including protection from down-round stock issuances) for a period of one year subsequent to the issuance. The Company is also required to register the shares underlying the Oberland Option on a ‘best-efforts’ basis. The amounts outstanding under the Oberland Facility may be accelerated upon certain events, including: (a) required mandatory prepayments upon an asset sale; (b) in the event Axogen is subject to (i) any litigation brought by a Governmental Authority (as defined in the Oberland Facility) including intervention after litigation is commenced by a Person (as defined in the Oberland Facility ), or (ii) any final administrative action by a Governmental Authority, in each case arising out of or in connection with any of the Company’s registry studies, payments made to doctors or training activities with respect to healthcare professionals (excluding certain final administrative action that have been fully and finally resolved by the parties pursuant to a settlement agreement) or (c) upon the occurrence of an event of default (either automatically or at the option of Oberland Capital depending on the nature of the event). In addition, the Company has the right to prepay any amounts outstanding under the Oberland Facility. Upon maturity or upon such earlier repayment of the Oberland Facility, the Company will repay the principal balance and provide a make-whole payment calculated to generate an internal rate of return (“IRR”) to Oberland Capital of at least 11.5%, less the total of all quarterly interest and royalty payments previously paid to Oberland Capital. Upon the occurrence of an event of default, the interest rate incurred on amounts outstanding under the Oberland Facility will be increased by 4%. The Oberland Facility includes a financial covenant requiring the Company to achieve revenue targets of $8,750 for the third and four quarters of 2020, $17,500 for the first and second quarter of 2021 and $20,000 for each quarter thereafter. In the event of a failure to meet such covenant the Company may avoid a default by electing to be subject to a liquidity covenant and meeting all of the obligations required by such covenant. Specifically, the liquidity covenant provides that the Company must maintain on deposit in a cash collateral account an amount not less than 1.1 times the aggregate outstanding principal balance of all outstanding loan amounts. The borrowings under the Oberland Facility are secured by substantially all of the assets of the Company. As of September 30, 2020, the Company was in compliance with the minimum revenue covenant. Accounting Considerations The Company assessed the accounting impact of the Oberland Facility and the related agreements entered into with Oberland Capital. The Company concluded that the Oberland Facility and the Revenue Participation Agreement should be assessed on a combined unit of account basis (with the Revenue Participation Agreement being considered as an embedded feature with the Oberland Facility), and that the Oberland Option should be considered as a separate freestanding instrument for analysis purposes. In relation to the Oberland Facility and Revenue Participation Agreement, the Company assessed the identified embedded features to determine if they would require separate accounting. In performing this assessment, the Company concluded the following embedded features met the definition of a derivative and would not be considered clearly and closely related to the debt instrument, requiring separate accounting as bifurcated derivatives: ● Mandatory prepayments upon an asset sale or litigation involving the government, including the make-whole payment (put rights) ● Optional or automatic prepayment upon an event of default (put rights) ● Payments under the Revenue Participation Agreement (contingent interest feature) ● Additional interest upon events of default (contingent interest feature) The Company considered these separable embedded features on a combined basis as a single derivative feature. The Company estimated the fair value of these features as $2,387 as of the date of issuance of the Oberland Facility (see Note 5 Fair Value Considerations) and recorded this value as a deduction to the carrying value of the Oberland Facility. In relation to the Oberland Option, the Company concluded that the equity contract met the definition of a derivative and did not qualify for an exception from derivative accounting. As such, the Company concluded that the Oberland Option should be classified as a liability. The Company estimated the fair value of the Oberland Option as $176 as of the date of issuance of the Oberland Facility (see Note 5 Fair Value Considerations) and recorded this value as a deduction to the carrying value of the Oberland Facility. As of September 30, 2020, the carrying amount of the long-term debt reported in the consolidated balance sheet approximates fair value using Level 2 inputs in the fair value hierarchy. Fair values are generally estimated based on quoted market prices for similar instruments. The following represents the components of the net carrying value of the Oberland Facility at September 30, 2020: September 30, 2020 Principal Balance Debt Discount Debt Issuance Costs, Net Long-term Debt, Net Oberland facility $ 35,000 $ (2,563) (620) 31,817 Other Long-Term Debt On April 23, 2020, the Company received a Small Business Administration (“SBA”) loan under the Paycheck Protection Program (“PPP”) in the amount of $7,820. The loan was obtained pursuant to the original guidance of the SBA to preserve positions in the Company by providing necessary economic relief during this period of reduced surgical procedures because of the negative business effects of COVID-19. The Company believed it correctly applied for the loan, met the initial intent of the PPP program to preserve jobs and believed it complied with the representations provided in the loan documents. However, subsequent to obtaining the loan, the United States Treasury Department issued guidance, which the Company believes contradicts the original intent and language of the PPP, providing that public companies are unlikely to be able to meet the standards for receiving the PPP loan. As a result of this change, the Company believed it was in its best business interests to repay the loan and did so on May 5, 2020. |
Stock Incentive Plan
Stock Incentive Plan | 9 Months Ended |
Sep. 30, 2020 | |
Stock Incentive Plan | |
Stock Incentive Plan | 11. Stock Incentive Plan At the 2019 Annual Meeting of Shareholders held on August 14, 2019, the shareholders approved the Axogen 2019 Long-Term Incentive Plan (the “New Axogen Plan”), which allows for issuance of incentive stock options, non-qualified stock options, performance stock units (“PSUs”) and restricted stock units (“RSUs”) to employees, directors and consultants at exercise prices not less than the fair market value at the date of grant. The number of shares of common stock authorized for issuance under the New Axogen Plan is (A) 3,385,482 shares, comprised of (i) 3,000,000 new authorized shares and (ii) 385,482 unallocated shares of common stock available for issuance as of August 14, 2019 pursuant to the Company’s 2010 Stock Incentive Plan, as amended and restated (the “Prior Axogen Plan”), that were not then subject to outstanding awards; plus (B) shares under the Prior Axogen Plan and the New Axogen Plan that are cancelled, forfeited, expired, unearned or settled in cash, in any such case that does not result in the issuance of common stock. Following shareholder approval of the New Axogen Plan, no future awards will be made under the Prior Axogen Plan. As of September 30, 2020, 1,807,299 shares of common stock were available for issuance under the New Axogen Plan. The options granted to employees prior to July 1, 2017 typically vest 25% one year after the grant date and 12.5% every six months thereafter for the remaining three-year period until fully vested after four years. The options granted to employees after July 1, 2017 typically vest 50% two years after the grant date and 12.5% every six months thereafter for the remaining two-year period until fully vested after four years. The options granted to directors and certain options granted from time to time to certain executive officers have vested ratably over three years, 25% per quarter over one year or had no vesting period. Options typically have terms ranging from seven Performance stock units generally have a requisite service period of three years and are subject to graded vesting conditions based on revenue goals of the Company. The Company expenses their fair value over the requisite service period. Restricted stock units have a requisite service period of four years. The Company expenses the fair value of restricted stock awards on a straight-line basis over the requisite service period. In February 2020, the Company issued PSUs relating to a 2017 grant with performance metrics tied to 2019 revenue. The award was issued at 72.3% of achievement and therefore, 27.7% of the stock compensation, or $536 relating to this grant was forfeited or reversed in the first quarter 2020. In addition, as a result of COVID-19 and the expected decline in revenue for 2020, it was determined that the 2018 PSU grant with performance metrics tied to 2020 revenue would not be awarded and therefore stock compensation related to these grants of $1,161 was forfeited. In June 2020, the Company concluded that the performance metrics relating to the 2020 PSU grant with performance metrics tied to 2021 revenue were no longer probable and therefore stock compensation related to these grants of $340 was also forfeited. The New Axogen Plan allows an immediate share repurchase feature for tax withholding. The Company has a statutory obligation to withhold taxes on the employee’s behalf and the tax withholding is limited to the maximum statutory tax rates in the employees’ applicable jurisdictions. In the nine months ended September 30, 2020, employees surrendered 38,086 shares of RSU and PSU to the Company. As a result, the Company paid $665 of tax withholdings for the employees. The Company also maintains the Axogen 2017 Employee Stock Purchase Plan (the “2017 ESPP”), which allows eligible employees to acquire shares of the Company’s common stock through payroll deductions at a discount to market price. A total of 600,000 shares of the Company’s common stock are authorized for issuance under the 2017 ESPP, and, as of September 30, 2020, 373,066 shares remained available for issuance. In June 2020, the employees purchased 77,239 shares at $7.85 through the 2017 ESPP plan. The Company recognized stock-based compensation expense, which consisted of compensation expense related to employee stock options, PSUs, RSUs and the 2017 ESPP based on the value of share-based payment awards that are ultimately expected to vest during the period, as well as the adjustment mention above, of approximately $2,947 and $2,395 for the three months ended September 30, 2020 and 2019, respectively and approximately $5,725 and $7,384 for the nine months ended September 30, 2020 and 2019, respectively. The Company estimates the fair value of each option award issued under such plans on the date of grant using a Multiple Point Black-Scholes option-pricing model which uses a weighted average of historical volatility and peer company volatility. The Company determines the expected life of each award 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. A summary of the stock option activity is as follows: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value (in thousands) Outstanding, December 31, 2019 3,420,181 $ 12.69 5.7 $ 26,074 Granted 647,090 $ 9.19 Exercised (326,622) $ 5.22 Cancelled (103,586) $ 20.18 Outstanding, September 30, 2020 3,637,063 $ 12.52 5.93 $ 10,901 Exercisable, September 30, 2020 2,127,093 $ 9.78 $ 9,125 The Company used the following weighted-average assumptions for options granted during the periods indicated: Nine months ended September 30, 2020 2019 Expected term (in years) 5.69 5.76 Expected volatility 59.25 % 56.03 % Risk free rate 0.35 % 1.54 % Expected dividends — % — % A summary of the status of non-vested RSUs/PSUs as of September 30, 2020 and the changes during the nine months then ended are presented below: Outstanding Stock Units Stock Units Weighted-Average Fair Value at Date of Grant per Share Weighted Average Remaining Vesting Life Aggregate Intrinsic Value (in thousands) Unvested December 31, 2019 1,113,696 $ 21.62 2.26 $ 19,800 Granted 995,940 $ 9.52 Released (168,311) $ 18.80 Forfeited (81,555) $ 18.91 Unvested September 30, 2020 1,859,770 $ 15.51 2.45 $ 21,572 Vested and Expected to Vest 1,859,770 $ 15.51 At September 30, 2020, the total future stock compensation expense related to non-vested awards is expected to be approximately $18,167. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Taxes | |
Income Taxes | 12. 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 a 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, 2017 through 2019. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies | |
Commitments and Contingencies | 13. Commitments and Contingencies Leases The Company determines whether or not a contract contains a lease at the inception date and determines the lease classification, recognition and measurement at commencement date. The Company classifies a lease based on whether the arrangement is effectively a purchase of the underlying asset. Leases that transfer the control of the underlying asset are classified as finance leases and all others are classified as an operating lease. Interest and amortization expense are recognized for operating leases on a straight-lined basis. If a change to the lease term leads to a reassessment of the lease classification and remeasurement, assumptions such as the discount rate and variable rents based on a rate or index will be updated as of the remeasurement date. If an arrangement is modified, the Company will reassess whether the arrangement contains a lease. Any subsequent changes in lease payments are recognized when incurred, unless the change requires a remeasurement of the lease liability. The Company made an accounting policy election to not recognize right-to-use assets and lease liabilities that arise from short term leases, which are defined as leases with a lease term of 12 months or less at the lease commencement date. We lease office space, medical lab and research space, a distribution center, a tissue processing center and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Certain of our leases include options for the Company to extend the lease term. None of the options were reasonably certain of exercise and therefore are not included in the measure of our lease obligations and right-to-use assets. Certain of our lease agreements include provisions for the Company to reimburse the lessor for common area maintenance, real estate taxes, and insurance, which the Company accounts for as variable lease costs. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company and Heights Union are parties to the Heights Agreement for the lease of seventy-five thousand square feet of office space in Tampa, Florida. Pursuant to the Heights Agreement, the Company will use the leased premises for general office, medical laboratory, training and meeting purposes. In September 2020, the Company began occupying the space. The lease includes a $5,250 lessor allowance to be used towards the hard and soft costs of the tenant improvements. The Company will bear the cost of any tenant improvement in excess of this allowance. Total costs of the tenant improvements were approximately $11,450. The Company concluded that it is the accounting owner of the tenant improvements. The lessor’s allowance of $5,250 for the construction of tenant improvements will be treated as an incentive. Because the Company is the accounting owner of the improvements, the lease incentive is accounted for as a reduction of the right-of-use asset and the total cost of the improvements of $11,539 is recognized on the balance sheet separate from the right-of-use asset as leasehold improvements. The improvements will be amortized over the life of the lease, which was determined to be the shorter of the useful life of the improvements or the lease term. The Company determined the commencement date of the lease was August 28, 2020 and valued the lease using a 10.6% incremental borrowing rate. The Company recorded a right-of-use asset of $13,323 and lease liability of $18,573 for the new office lease as of the commencement date. The components of total lease expense for the three and nine months ended September 30, 2020 were as follows: 2020 2019 For the Three months Ended September 30, Finance lease costs Amortization of right-to-use assets $ 6 $ 6 Interest on lease liabilities 1 1 Operating lease costs 707 483 Short term lease costs 43 12 Variable lease costs 4 1 Total lease cost $ 761 $ 501 For the Nine Months Ended September 30, Finance lease costs Amortization of right-to-use assets $ 17 $ 16 Interest on lease liabilities 2 3 Operating lease costs 1,683 1,447 Short term lease costs 104 28 Variable lease costs 14 16 Total lease cost $ 1,820 $ 1,510 The short-term lease cost shown above reasonably reflects the Company’s ongoing short-term lease commitment. Supplemental balance sheet information related to leases as of September 30, 2020 and December 31, 2019 was as follows: September 30, 2020 December 31, 2019 Finance Leases Finance lease right-of-use assets $ 70 $ 87 Current maturities of long-term obligations $ 18 $ 17 Long term obligations $ 17 $ 30 Operating Leases Operating lease right-of-use assets $ 15,987 $ 3,133 Current maturities of long-term obligations $ 2,481 $ 1,719 Long term obligations $ 18,959 $ 1,565 Other information related to leases was as follows: For the Nine Months Ended September 30, 2020 2019 Cash paid for amounts included in the measurement of operating lease liabilities $ 1,399 $ 1,314 Right-to-use assets obtained in exchange for new finance lease liabilities $ 16 $ 16 Weighted-average remaining lease term - finance leases 2.3 3.2 Weighted-average remaining lease term - operating leases 12.4 2.1 Weighted-average discount rate - finance leases 7.28% 7.28% Weighted-average discount rate - operating leases 10.07% 6.28% The weighted-average discount rate for the majority of the Company’s leases is based on the Company’s estimated incremental borrowing rate since the rates implicit in the leases were not determinable. The Company’s incremental borrowing rate is based on Management’s estimate of the rate of interest the Company would have to pay to borrow on a fully collateralized basis over a similar term an amount equal to the lease payments. Future minimum lease payments under non-cancellable leases as of September 30, 2020 were as follows: Operating Finance Year Ending December 31, Leases Leases 2020 (excluding nine months ended September 30, 2020) $ 493 $ 5 2021 3,212 19 2022 3,530 10 2023 2,545 3 2024 2,606 1 2025 2,671 — Thereafter 26,126 — Total Future Minimum Lease Payments $ 41,183 $ 38 Less imputed interest on commenced leases (19,743) (3) Total Lease Liability $ 21,440 $ 35 Service Agreements 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”), Dayton, Ohio, an FDA registered tissue establishment. Processing of the Avance Nerve Graft pursuant to the CTS Agreement began in February 2016. The CTS Agreement initially had a five-year term ending August 31, 2020. On February 22, 2019, the agreement was amended to extend the term through December 31, 2021 and then on April 22, 2020 was further amended to extend the term through December 31, 2022 and provides the Company the right to terminate the agreement after February 28, 2022, with six-months advance written notice. Under the CTS Agreement, the Company pays CTS a facility fee for use of clean room/manufacturing, storage and office space, which the Company accounts for as an embedded lease in accordance with ASC 842, “Leases”. The Company also pays CTS for services in support of its manufacturing process such as for routine sterilization of daily supplies, providing disposable supplies, microbial services and office support. During the three months ended September 30, 2020 and 2019, the Company paid fees to CTS of approximately $454 and $566, respectively, and during the nine months ended September 30, 2020 and 2019, approximately $1,193 and $1,624, respectively, and are included are included in cost of goods sold on the accompanying condensed consolidated statements of operations. In August 2008, the Company entered into an agreement with Cook Biotech to distribute the Axoguard products worldwide in the field of peripheral nerve repair, and the parties subsequently amended the agreement on February 26, 2018. Pursuant to the February 2018 amendment, the agreement expires on June 30, 2027. The Cook Biotech agreement requires certain minimum purchases, although, through mutual agreement, the parties have not established such minimums; and, to date, have not enforced such provision, and establishes a formula for the transfer cost of the Axoguard products. Under the agreement, Axogen provides purchase orders to Cook Biotech, and Cook Biotech fulfills the purchase orders. In December 2011, the Company also entered into a Master Services Agreement for Clinical Research and Related Services. The Company was required to pay $151 upon execution of this agreement and the remainder monthly based on activities associated with the execution of Axogen’s phase 3 pivotal clinical trial to support a biologics license application (“BLA”) for Avance Nerve Graft. In September 2019, the Company entered into an amendment to this agreement. The amendment extends the end of the study timeline from December 2019 to December 2021. It also increases the total number of subjects enrolled and the number of sites used in the studies. Payments made under this agreement were $208 and $196 for the three months ended September 30, 2020 and 2019, respectively. Payments made under this agreement were $699 and $337 for the nine months ended September 30, 2020 and 2019, respectively. In June 2017, the Company entered into the Nerve End Cap Supply Agreement with Cook Biotech whereby Cook Biotech is the exclusive contract manufacturer of the Axoguard Nerve Cap and both parties have provided the other party the necessarily licenses to their technologies for operation of the Supply Agreement. The Supply Agreement has a term through August 27, 2027, provided, however, that after June 27, 2022, either party may terminate the Supply Agreement upon 90 days written notice. Under the Supply Agreement the Company provides purchase orders to Cook Biotech and Cook Biotech fulfills the purchase orders. Certain executive officers of the Company are parties to employment contracts. Such contracts have severance payments for certain conditions including change in control. Concentrations Vendor Substantially all of Axogen’s revenue is currently derived from four products, Avance Nerve Graft, Axoguard Nerve Protector, Axoguard Nerve Connector and Avive Soft Tissue Membrane. Axogen has an exclusive distribution agreement with Cook Biotech for the purchase of Axoguard which expires June 30, 2027. The agreement with Cook Biotech requires certain minimum purchases by Axogen, although, through mutual agreement, the parties have not established such minimums and to date have not enforced such provision and establishes a formula for the transfer cost of the Axoguard products. The agreement allows for termination provisions for both parties. The loss of the ability to sell the Axoguard products could have a material adverse effect on Axogen’s business until other replacement products would be available. Processor Axogen is highly dependent on the continued availability of its processing facilities at CTS in Dayton, Ohio and could be harmed if the physical infrastructure of this facility is unavailable for any prolonged period of time. In addition, disruptions could lead to significant costs and reductions in revenues, as well as a potential harm to Axogen’s business reputation and financial results. In the event of disruption, Axogen believes it can find and make operational a new leased facility in less than six months, but the regulatory process for approval of facilities is time-consuming and unpredictable. Axogen’s ability to rebuild or find acceptable lease facilities could take a considerable amount of time and expense and could cause a significant disruption in service to its customers. Although Axogen has business interruption insurance, which would cover certain costs, it may not cover all costs nor help to regain Axogen’s standing in the market. In July 2018, Axogen purchased a facility (the “APC”) in Vandalia, Ohio, located near the CTS processing facility where Avance Nerve Graft and Avive Soft Tissue Membrane are currently processed. The APC, when and if operational, will be the new processing facility for Avance Nerve Graft and Avive Soft Tissue Membrane to provide continued capacity for growth and to support the transition of Avance Nerve Graft from a 361 HCT/P tissue product to a biologic product. The APC is comprised of a 70,000 square foot building on approximately 8.6 acres of land. The Company paid $731 for the land and this is recorded as Land within our property and equipment account on our balance sheet. The Company paid $4,300 for the building and this is recorded as projects in process as part of the property and equipment on the balance sheet. On July 9, 2019, Axogen entered into a Standard Form of Agreement Between Owner and Design-Builder (the “Design-Build Agreement”) with CRB Builders, L.L.C., a Missouri limited liability company (“CRB”), pursuant to which CRB will renovate and retrofit the APC. The Design-Build Agreement contains several design phase milestones that began in July 2019 and sets the date for Substantial Completion (as defined in the Design-Build Agreement) in the third quarter of 2020, subject to adjustment in accordance with the terms of the Design-Build Agreement. The estimated cost pursuant to the Design-Build Agreement is $29,300. Additional costs associated with the renovation, purchasing of furniture and equipment, validation and certification of the APC are estimated to be $13,600. The Company temporarily deferred the construction as part of the cost containment initiatives implemented in the second quarter, and has subsequently determined to resume construction in early 2021. As of September 30, 2020, the Company has recorded $9,062 in the current year and $15,127 to date related to renovations and design build in construction in progress. These items are recorded as projects in process as part of the property and equipment in its condensed consolidated balance sheet. Litigation The Company is subject to various claims, lawsuits and proceedings in the ordinary course of the Company's business, some of which have been dismissed by the Company. In the opinion of management, such claims are either adequately covered by insurance or otherwise indemnified, or are not expected, individually or in the aggregate, to result in a material, adverse effect on the Company's financial condition. However, it is possible that the Company's results of operations, financial position and cash flows in a particular period could be materially affected by these contingencies. Einhorn v. Axogen, Inc., et al., No. 8:19-cv-00069 (M.D. Fla.) (the “Einhorn Litigation”) (the “Court”). On January 9, 2019, Plaintiff Neil Einhorn, on behalf of himself and others similarly situated, filed a putative class action complaint in the United Stated District Court for the Middle District of Florida alleging violations of the federal securities laws against Axogen, certain of its directors and officers (“Individual Defendants”), and (i) the several underwriters (the “2017 Offering Underwriters”) named in that certain Underwriting Agreement, dated November 16, 2017, by and between the Company and Leerink Partners LLC, as representative of the several underwriters named therein, and (ii) the several underwriters (the “2018 Offering Underwriters”) named in that certain Underwriting Agreement, dated May 8, 2018, by and between the Company and Jefferies LLC and Leerink Partners LLC, as representatives of the several underwriters named therein (the 2017 Offering Underwriters and 2018 Offering Underwriters, collectively, with the Individual Defendants, the “Defendants”), captioned Einhorn v. Axogen, Inc., et al., No. 8:19-cv-00069 (M.D. Fla.). Plaintiff asserts that Defendants made false or misleading statements in connection with the Company’s November 2017 registration statement issued regarding its secondary public offering in November 2017 and May 2018 registration statement issued regarding its secondary public offering in May 2018, and during a class period of August 7, 2017 to December 18, 2018. In particular, Plaintiff asserts that Defendants issued false and misleading statements and failed to disclose to investors: (1) that the Company aggressively increased prices to mask lower sales; (2) that the Company’s pricing alienated customers and threatened the Company’s future growth; (3) that ambulatory surgery centers form a significant part of the market for the Company’s products; (4) that such centers were especially sensitive to price increases; (5) that the Company was dependent on a small number of surgeons whom the Company paid to generate sales; (6) that the Company’s consignment model for inventory was reasonably likely to lead to channel stuffing; (7) that the Company offered purchase incentives to sales representatives to encourage channel stuffing; (8) that the Company’s sales representatives were encouraged to backdate revenue to artificially inflate metrics; (9) that the Company lacked adequate internal controls to prevent such channel stuffing and backdating of revenue; (10) that the Company’s key operating metrics, such as number of active accounts, were overstated; and (11) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects, were materially misleading and/or lacked a reasonable basis. Axogen was served on January 15, 2019. On February 4, 2019, the court granted the parties’ stipulated motion which provided that Axogen is not required to file a response to the complaint until thirty days after Plaintiff files a consolidated amended complaint. On June 19, 2019, Plaintiff filed an Amended Class Action Complaint, and on July 22, 2019, Defendants filed a motion to dismiss. Plaintiff filed opposing papers on August 12, 2019. The Court held a status hearing on September 11, 2019 and stayed all deadlines regarding the parties’ obligations to file a case management report. On December 4, 2019 the parties’ presented oral arguments. On April 21, 2020, the Court dismissed the Complaint without prejudice, finding the Plaintiff failed to state a claim upon which relief could be granted. The Plaintiff filed a Second Amended Class Action Complaint on June 22, 2020. Axogen filed a motion to dismiss on August 6, 2020. The Plaintiff filed an opposition to such dismissal on September 20, 2020. Both parties have requested to present oral arguments and await the Court’s decision. Plaintiff is seeking compensatory damages, reimbursement of expenses and costs, including counsel and expert fees and such other relief as the court deems just and proper. The Company and Individual Defendants continue to dispute the allegations and intend to vigorously defend against any amended Complaint, if filed. The amount of loss, if any, cannot be reasonably estimated at this time. Michael Bach v. Karen Zaderej, Peter J. Mariani, Gregory G. Freitag, Jamie M. Grooms, Robert Rudelius et al, 27-CV-20-5997 (District Court, 4th Judicial District, Hennepin County, MN). On October 3, 2019, the Company received a shareholder demand sent on behalf of shareholder Michael Bach requesting that the Board of Directors take action to remedy alleged breaches of fiduciary duties related to the claims in the report issued December 18, 2018 by Seligman Investments (substantially the same allegations that form the basis for the Einhorn matters referenced above). On February 14, 2020 the Company sent a written response stating that it did not intend to take any further action. On April 21, 2020, Bach filed a shareholder derivative complaint in Hennepin County, Minnesota, alleging breach of fiduciary duty, insider selling, corporate waste, and unjust enrichment. The Board intends to vigorously defend itself in this matter. The amount of loss, if any, cannot be reasonably estimated at this time. These matters are subject to various uncertainties and it is possible that one or more may be resolved unfavorably to the Company. However, while it is not possible to predict with certainty the outcome of a matter, the Company and the Individual Defendants dispute the allegations, intend to vigorously defend themselves and as provided above the Einhorn Litigation was dismissed without prejudice prior to an amended motion being filed by plaintiffs. |
Retirement Plan
Retirement Plan | 9 Months Ended |
Sep. 30, 2020 | |
Retirement Plan | |
Retirement Plan | 14. Retirement Plan Axogen 401(k) Plan The Company sponsors the Axogen 401(k) plan (the “401(k) Plan”), a defined contribution plan covering substantially all employees of the Company. 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. Both employee contributions and Company contributions vest immediately. Employer contributions to the 401(k) Plan for the three months ended September 30, 2020 and 2019 were approximately $276 and $231, respectively and for the nine months ended September 30, 2020 and 2019 were approximately $859 and $706, respectively. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Summary of Significant Accounting Policies | |
Credit Losses | Credit Losses On January 1, 2020, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for loans and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaces the multiple existing impairment models previously used under U.S. generally accepted accounting principles, which generally require that a loss be incurred before it is recognized. The new standard also applies to financial assets arising from revenue transactions such as contract assets and accounts receivables. The adoption did not have a material impact on our condensed consolidated financial statements. Credit losses for trade receivables is determined based on historical information, current information and reasonable and supportable forecasts. We have concluded that the adoption of the standard was not material as the composition of the trade receivables at the reporting date is consistent with that used in developing the historical credit-loss percentages. Further, the risk characteristics of the Company’s customer and composition of the portfolio have not changed significantly over time. |
Fair Value Measurements | Fair Value Measurements On January 1, 2020, the Company adopted ASU 2018-13, Fair Value Measurements (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 changes the fair value measurement disclosure requirements of ASC 820, “Fair Value Measurement” by adding, eliminating, and modifying certain disclosure requirements. The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements. |
Cloud Based Arrangements | Cloud Based Arrangements On January 1, 2020, the Company adopted ASU No. 2018-15, Guidance on Cloud Computing Arrangements. ASU 2018-15 provides guidance on implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract and aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. More specifically, the ASU 2018-15 provides guidance on accounting for implementation, set-up and other upfront costs incurred in a CCA hosted by a vendor. As of January 1, 2020, this standard did not have a material impact on the Company’s consolidated financial statements. |
Reference Rate Reform | Reference Rate Reform On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (ASC 848). The ASU also establishes (1) a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and (2) certain elective hedge accounting expedients. The elective contract modification guidance in the ASU applies to “contracts or other transactions that reference [LIBOR] or a reference rate that is expected to be discontinued as a result of reference rate reform” (an “affected rate”). The optional amendments are effective for all entities as of March 12, 2020 through December 31, 2020. As of September 30, 2020, this standard did not have a material impact on the Company’s consolidated financial statements. |
Derivative Instruments | Derivative Instruments Company analyzes all financial instruments with features under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. The Company records liability classified equity contracts at fair value at the issuance and recorded as a liability. The Company also reviews debt agreements for embedded features. If these features are not clearly and closely related to the debt host, they meet the definition of a derivative and require bifurcation from the host. All derivative instruments are recorded on the balance sheet at their respective fair values. The Company will adjust the carrying value of the derivative liability to fair value at each subsequent reporting date. The changes in the value of the derivatives are recorded in the consolidated statement of operations in the period in which they occur. |
Revenue Recognition | Revenue Recognition The Company enters into contracts to sell and distribute products and services to hospitals and surgical facilities for use in caring for patients with peripheral nerve damage or transection. 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 and services to the Company’s customers. In the case of products or services sold to a customer under an international distribution or purchase agreement, the distributors are granted exclusive distribution rights to sell the products or services in an international territory defined by the contract. These international distributor agreements contain provisions that allow the Company to terminate the distribution agreement with the distributor, and upon termination, the right to repurchase inventory from the distributor at the distributor’s cost. The Company has determined that its contractual rights to repurchase international distributor inventory upon termination of such distributor agreement are not substantive and do not impact the timing of when control transfers; and, therefore, the Company has determined it is appropriate to recognize revenue when: i) the product is shipped via common carrier; or ii) the product is delivered to the customer or distributor, depending on the terms of the agreement. Determining the timing of revenue recognition for such contracts is subject to significant judgment, because an evaluation must be made regarding the international distributor’s ability to direct the use of, and obtain substantially all of the remaining benefits from, the implants received from the Company. Changes in these assessments could have a significant impact on the timing of revenue recognition from sales to distributors. A portion of the Company's product revenue is generated from consigned inventory maintained at hospitals and domestic independent sales agencies, and also from inventory physically held by field 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 the cost of sales. The Company operates in a single reportable segment of peripheral nerve repair, offers similar products to its customers, and enters into consistently structured arrangements with similar types of customers. As such, the Company does not disaggregate revenue from contracts with customers as the nature, amount, timing and uncertainty of revenue and cash flows does not materially differ within and among the contracts with customers. The contract with the customer states 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. Since the customer agrees to a stated price in the contract that does not vary over the contract term, the contracts do not contain any material types of variable consideration, and contractual rights of return are not material. The Company has several contracts with distributors in international markets which include consideration paid to the customer in exchange for distinct marketing and other services. The Company records such consideration paid to the customer as a reduction to revenue from the contracts with those distributor customers. In connection with the Acroval ® The opening and closing balances of the Company’s contract receivables and liabilities are as follows: Contract Balances Net Receivables Contract Liabilities, Current Contract Liabilities, Long-Term Opening, January 1, 2019 $ 15,321 $ 18 $ 42 Closing, September 30, 2019 15,451 14 22 Increase (decrease) 130 (4) (20) Opening, January 1, 2020 $ 16,944 $ 14 $ 15 Closing, September 30, 2020 18,758 14 6 Increase (decrease) 1,814 - (9) |
Net Loss Per Share of Common Stock | Loss Per Share of Common Stock Basic and diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Since the Company has experienced net losses for all periods presented, options and awards of 5,496,833 and 4,584,991 shares which were outstanding as of September 30, 2020 and 2019, respectively, were not included in the computation of diluted net loss per share because they are anti-dilutive. |
Recent Accounting Pronouncements | In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs. The guidance is effective for fiscal years beginning after December 15, 2020. Early adoption is not permitted. We are currently evaluating the impact the standard may have on our consolidated financial statements and related disclosures. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Summary of Significant Accounting Policies | |
Schedule of balances of contract receivables and liabilities | Contract Balances Net Receivables Contract Liabilities, Current Contract Liabilities, Long-Term Opening, January 1, 2019 $ 15,321 $ 18 $ 42 Closing, September 30, 2019 15,451 14 22 Increase (decrease) 130 (4) (20) Opening, January 1, 2020 $ 16,944 $ 14 $ 15 Closing, September 30, 2020 18,758 14 6 Increase (decrease) 1,814 - (9) |
Inventory (Tables)
Inventory (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Inventory | |
Schedule of inventories | September 30, December 31, 2020 2019 Finished goods $ 8,339 $ 10,403 Work in process 798 730 Raw materials 2,792 2,728 Inventories $ 11,929 $ 13,861 |
Fair Value Considerations (Tabl
Fair Value Considerations (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Summary of fair value financial assets measured on a recurring basis | (Level 1) (Level 2) (Level 3) Total September 30, 2020 Assets: Money market funds $ 39,112 $ — $ — $ 39,112 U.S. government securities 4,520 — — 4,520 Corporate bonds — 6,441 — 6,441 Commercial paper — 28,165 — 28,165 Asset-backed securities — — — — Total assets $ 43,632 $ 34,606 $ — $ 78,238 Liabilities Debt derivative liability $ — $ — $ 2,450 $ 2,450 Common stock derivative option liability — — 183 183 Total liabilities $ — $ — $ 2,633 $ 2,633 (Level 1) (Level 2) (Level 3) Total December 31, 2019 Assets: Money market funds $ 26,812 $ — $ — $ 26,812 U.S. government securities 4,544 — — 4,544 Corporate bonds — 17,754 — 17,754 Commercial paper — 24,679 — 24,679 Asset-backed securities — 13,808 — 13,808 Total assets $ 31,356 $ 56,241 $ — $ 87,597 |
Schedule of the fair value of instruments classified as Level 3 measurements | Quarter Ending September 30, 2020 Beginning Balance, July 1, 2020 $ 2,562 Change in fair value of option derivative 11 Change in fair value of debt derivative 60 Ending Balance, September 30, 2020 $ 2,633 Year Ending December 31, 2020 Beginning Balance $ — Option to purchase shares 183 Fair Value of Derivative Feature 2,450 Ending Balance, September 30, 2020 $ 2,633 |
Debt derivative liability | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Schedule of valuation of the debt derivative liability | September 30, 2020 Input Remaining term (years) 6.75 years Maturity date June 30, 2027 Coupon rate 9.50% Revenue participation payments Maximum each year Discount rate 10.03% (1) Probability of mandatory prepayment before 2024 5.0% (1) Estimated timing of mandatory prepayment event before 2024 December 31, 2023 (1) Probability of mandatory prepayment 2024 or after 15.0% (1) Estimated timing of mandatory prepayment event 2024 or after March 31, 2026 (1) Probability of optional prepayment event 5.0% (1) Estimated timing of optional prepayment event December 31, 2025 (1) September 30, 2020 Input Option term 6.75 years Company stock price $ 11.63 Risk free rate 0.45% Equity volatility 60% (1) Simulation trials 100,000 |
Prepaid Expense and Other (Tabl
Prepaid Expense and Other (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Prepaid Expense and Other | |
Summary of prepaid and other assets | September 30, December 31, 2020 2019 Prepaid insurance $ 539 $ — Stock option receivable — 244 Litigation receivable 23 98 Prepaid events 493 110 Prepaid marketing 480 227 Prepaid software license 135 207 Prepaid professional fees 529 433 Other Prepaid items 352 387 Prepaid and Other Assets $ 2,551 $ 1,706 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Property and Equipment | |
Schedule of property and equipment | September 30, December 31, 2020 2019 Furniture and equipment $ 2,236 $ 2,059 Leasehold improvements 12,223 2,203 Processing equipment 2,887 2,772 Land 731 731 Projects in process 22,790 10,886 Property and equipment, at cost 40,867 18,651 Less: accumulated depreciation and amortization (4,757) (3,764) Property and equipment, net $ 36,110 $ 14,887 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Intangible Assets | |
Schedule of intangible assets | September 30, 2020 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortized intangible assets Patents $ 1,201 $ (122) $ 1,079 $ 845 $ (84) $ 761 License agreements 1,089 (720) 369 1,067 (647) 420 Total amortizable intangible assets $ 2,290 $ (842) $ 1,448 $ 1,912 $ (731) $ 1,181 Unamortized intangible assets Trademarks $ 349 $ — $ 369 $ 334 $ — $ 334 Total intangible asset, net $ 2,639 $ (842) $ 1,797 $ 2,246 $ (731) $ 1,515 |
Schedule of future amortization | Year Ending December 31, 2020 (excluding nine months ended September 30, 2020) $ 40 2021 160 2022 160 2023 151 2024 67 Thereafter 870 TOTAL $ 1,448 |
Accounts Payable and Accrued _2
Accounts Payable and Accrued Expenses (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accounts Payable and Accrued Expenses | |
Schedule of accounts payable and accrued expenses | September 30, December 31, 2020 2019 Accounts payable $ 3,507 $ 8,262 Accrued expenses 3,091 3,237 Accrued compensation 9,681 7,631 Accounts Payable and Accrued Expenses $ 16,279 $ 19,130 |
Long Term Debt (Tables)
Long Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Long Term Debt | |
Schedule of components of the net carrying value | September 30, 2020 Principal Balance Debt Discount Debt Issuance Costs, Net Long-term Debt, Net Oberland facility $ 35,000 $ (2,563) (620) 31,817 |
Stock Incentive Plan (Tables)
Stock Incentive Plan (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Stock Incentive Plan | |
Summary of stock option activity | Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value (in thousands) Outstanding, December 31, 2019 3,420,181 $ 12.69 5.7 $ 26,074 Granted 647,090 $ 9.19 Exercised (326,622) $ 5.22 Cancelled (103,586) $ 20.18 Outstanding, September 30, 2020 3,637,063 $ 12.52 5.93 $ 10,901 Exercisable, September 30, 2020 2,127,093 $ 9.78 $ 9,125 |
Schedule of weighted-average assumptions for options granted | Nine months ended September 30, 2020 2019 Expected term (in years) 5.69 5.76 Expected volatility 59.25 % 56.03 % Risk free rate 0.35 % 1.54 % Expected dividends — % — % |
Summary of stock unit activity | Outstanding Stock Units Stock Units Weighted-Average Fair Value at Date of Grant per Share Weighted Average Remaining Vesting Life Aggregate Intrinsic Value (in thousands) Unvested December 31, 2019 1,113,696 $ 21.62 2.26 $ 19,800 Granted 995,940 $ 9.52 Released (168,311) $ 18.80 Forfeited (81,555) $ 18.91 Unvested September 30, 2020 1,859,770 $ 15.51 2.45 $ 21,572 Vested and Expected to Vest 1,859,770 $ 15.51 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies | |
Schedule of total lease expense | The components of total lease expense for the three and nine months ended September 30, 2020 were as follows: 2020 2019 For the Three months Ended September 30, Finance lease costs Amortization of right-to-use assets $ 6 $ 6 Interest on lease liabilities 1 1 Operating lease costs 707 483 Short term lease costs 43 12 Variable lease costs 4 1 Total lease cost $ 761 $ 501 For the Nine Months Ended September 30, Finance lease costs Amortization of right-to-use assets $ 17 $ 16 Interest on lease liabilities 2 3 Operating lease costs 1,683 1,447 Short term lease costs 104 28 Variable lease costs 14 16 Total lease cost $ 1,820 $ 1,510 |
Schedule of supplemental balance sheet information related to leases | September 30, 2020 December 31, 2019 Finance Leases Finance lease right-of-use assets $ 70 $ 87 Current maturities of long-term obligations $ 18 $ 17 Long term obligations $ 17 $ 30 Operating Leases Operating lease right-of-use assets $ 15,987 $ 3,133 Current maturities of long-term obligations $ 2,481 $ 1,719 Long term obligations $ 18,959 $ 1,565 |
Schedule of other information related to leases | For the Nine Months Ended September 30, 2020 2019 Cash paid for amounts included in the measurement of operating lease liabilities $ 1,399 $ 1,314 Right-to-use assets obtained in exchange for new finance lease liabilities $ 16 $ 16 Weighted-average remaining lease term - finance leases 2.3 3.2 Weighted-average remaining lease term - operating leases 12.4 2.1 Weighted-average discount rate - finance leases 7.28% 7.28% Weighted-average discount rate - operating leases 10.07% 6.28% |
Schedule of future minimum lease payments | Operating Finance Year Ending December 31, Leases Leases 2020 (excluding nine months ended September 30, 2020) $ 493 $ 5 2021 3,212 19 2022 3,530 10 2023 2,545 3 2024 2,606 1 2025 2,671 — Thereafter 26,126 — Total Future Minimum Lease Payments $ 41,183 $ 38 Less imputed interest on commenced leases (19,743) (3) Total Lease Liability $ 21,440 $ 35 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - shares | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Anti-dilutive securities excluded from computation of net loss per share | 5,496,833 | 4,584,991 |
Minimum | ||
Age of doubtful accounts | 30 days | |
Maximum | ||
Age of doubtful accounts | 60 days |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Contract Balances (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Summary of Significant Accounting Policies | ||
Net Receivables, Opening balance | $ 16,944 | $ 15,321 |
Net Receivables, Closing balance | 18,758 | 15,451 |
Increase/(decrease) | 1,814 | 130 |
Contract Liabilities, Current, Opening balance | 14 | 18 |
Contract Liabilities, Current, Closing balance | 14 | 14 |
Increase/(decrease) | (4) | |
Contract Liabilities, Long-Term, Opening balance | 15 | 42 |
Contract Liabilities, Long-Term, Closing balance | 6 | 22 |
Increase/(decrease) | $ (9) | $ (20) |
Inventory (Details)
Inventory (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Inventory | |||
Finished goods | $ 8,339 | $ 10,403 | |
Work in process | 798 | 730 | |
Raw materials | 2,792 | 2,728 | |
Inventories | 11,929 | $ 13,861 | |
Inventory write-downs | $ 2,108 | $ (44) |
Fair Value Considerations - Deb
Fair Value Considerations - Debt Derivative Liability (Details) - Debt derivative liability | Sep. 30, 2020Y |
Term | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability measurement input | 6.75 |
Coupon rate | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability measurement input | 0.0950 |
Discount rate | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability measurement input | 0.1003 |
Mandatory prepayment rate | Probability of mandatory prepayment before 2024 | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability measurement input | 0.050 |
Mandatory prepayment rate | Probability of mandatory prepayment 2024 or after | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability measurement input | 0.150 |
Mandatory prepayment rate | Probability of optional prepayment event | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability measurement input | 0.050 |
Fair Value Considerations - Com
Fair Value Considerations - Common Stock Derivative Option Liability (Details) - Common stock derivative option liability | Sep. 30, 2020USD ($)Yitem |
Term | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability measurement input | Y | 6.75 |
Company stock price | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability measurement input | $ | 11.63 |
Risk free rate | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability measurement input | 0.0045 |
Equity volatility | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability measurement input | 0.60 |
Simulation trials | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |
Derivative liability measurement input | item | 100,000 |
Fair Value Considerations - Fai
Fair Value Considerations - Fair Value Hierarchy (Details) - Recurring - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | $ 78,238 | $ 87,597 |
Total liabilities | 2,633 | |
Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 39,112 | 26,812 |
U.S. government securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 4,520 | 4,544 |
Corporate bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 6,441 | 17,754 |
Commercial paper | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 28,165 | 24,679 |
Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 13,808 | |
Debt derivative liability | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total liabilities | 2,450 | |
Common stock derivative option liability | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total liabilities | 183 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 43,632 | 31,356 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market funds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 39,112 | 26,812 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. government securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 4,520 | 4,544 |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 34,606 | 56,241 |
Significant Other Observable Inputs (Level 2) | Corporate bonds | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 6,441 | 17,754 |
Significant Other Observable Inputs (Level 2) | Commercial paper | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | 28,165 | 24,679 |
Significant Other Observable Inputs (Level 2) | Asset-backed securities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total assets | $ 13,808 | |
Significant Other Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total liabilities | 2,633 | |
Significant Other Unobservable Inputs (Level 3) | Debt derivative liability | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total liabilities | 2,450 | |
Significant Other Unobservable Inputs (Level 3) | Common stock derivative option liability | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total liabilities | $ 183 |
Fair Value Considerations - Lev
Fair Value Considerations - Level 3 (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2020 | Sep. 30, 2020 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Beginning Balance | $ 2,562 | |
Ending Balance | 2,633 | $ 2,633 |
Common stock derivative option liability | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Purchases | 11 | 183 |
Debt derivative liability | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Purchases | $ 60 | $ 2,450 |
Prepaid Expense and Other (Deta
Prepaid Expense and Other (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Prepaid Expense and Other | ||
Prepaid insurance | $ 539 | |
Stock option receivable | $ 244 | |
Litigation receivable | 23 | 98 |
Prepaid events | 493 | 110 |
Prepaid marketing | 480 | 227 |
Prepaid software license | 135 | 207 |
Prepaid professional fees | 529 | 433 |
Other Prepaid items | 352 | 387 |
Prepaid and Other Assets | $ 2,551 | $ 1,706 |
Property and Equipment (Details
Property and Equipment (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
May 31, 2020USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | Sep. 20, 2018ft² | Jul. 31, 2018ft² | |
Property and equipment | ||||||||
Property and equipment, at cost | $ 40,867 | $ 40,867 | $ 18,651 | |||||
Less: accumulated depreciation and amortization | (4,757) | (4,757) | (3,764) | |||||
Property and equipment, net | 36,110 | 36,110 | 14,887 | |||||
Depreciation expense | 374 | $ 192 | 993 | $ 631 | ||||
Size of building space | ft² | 70,000 | |||||||
Deposit in escrow account | $ 6,289 | |||||||
Disbursement from the escrow account | 3,464 | 4,682 | ||||||
Balance remaining in the escrow account | 1,607 | 1,607 | ||||||
Heights Union Premises | ||||||||
Property and equipment | ||||||||
Size of building space | ft² | 75,000 | |||||||
Furniture and equipment | ||||||||
Property and equipment | ||||||||
Property and equipment, at cost | 2,236 | 2,236 | 2,059 | |||||
Leasehold improvements | ||||||||
Property and equipment | ||||||||
Property and equipment, at cost | 12,223 | 12,223 | 2,203 | |||||
Processing equipment | ||||||||
Property and equipment | ||||||||
Property and equipment, at cost | 2,887 | 2,887 | 2,772 | |||||
Land | ||||||||
Property and equipment | ||||||||
Property and equipment, at cost | 731 | 731 | 731 | |||||
Projects in process | ||||||||
Property and equipment | ||||||||
Property and equipment, at cost | $ 22,790 | $ 22,790 | $ 10,886 |
Intangible Assets - Components
Intangible Assets - Components of Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Intangible assets consist of: | |||||
Gross Carrying Amount | $ 2,639 | $ 2,639 | $ 2,246 | ||
Accumulated Amortization | (842) | (842) | (731) | ||
Net Carrying Amount | 1,797 | 1,797 | 1,515 | ||
Net Carrying Amount | 1,797 | 1,797 | 1,515 | ||
Amortization of intangible assets | 39 | $ 33 | 111 | $ 89 | |
Future amortization of patents and license agreements | |||||
Intangible assets, net | 1,797 | 1,797 | 1,515 | ||
Patents | |||||
Intangible assets consist of: | |||||
Gross Carrying Amount | 1,201 | 1,201 | 845 | ||
Accumulated Amortization | (122) | (122) | (84) | ||
Net Carrying Amount | 1,079 | 1,079 | 761 | ||
Future amortization of patents and license agreements | |||||
Intangible assets, net | 1,079 | $ 1,079 | 761 | ||
Patents | Maximum | |||||
Intangible assets consist of: | |||||
Amortization period of intangible assets | 20 years | ||||
License Agreements | |||||
Intangible assets consist of: | |||||
Gross Carrying Amount | 1,089 | $ 1,089 | 1,067 | ||
Accumulated Amortization | (720) | (720) | (647) | ||
Net Carrying Amount | 369 | 369 | 420 | ||
Future amortization of patents and license agreements | |||||
Intangible assets, net | 369 | $ 369 | 420 | ||
License Agreements | Minimum | |||||
Intangible assets consist of: | |||||
Amortization period of intangible assets | 17 years | ||||
License Agreements | Maximum | |||||
Intangible assets consist of: | |||||
Amortization period of intangible assets | 20 years | ||||
Trademarks | |||||
Intangible assets consist of: | |||||
Gross Carrying Amount | 349 | $ 349 | 334 | ||
Net Carrying Amount | 369 | 369 | 334 | ||
Future amortization of patents and license agreements | |||||
Intangible assets, net | 369 | 369 | 334 | ||
Patents And License Agreements | |||||
Intangible assets consist of: | |||||
Gross Carrying Amount | 2,290 | 2,290 | 1,912 | ||
Accumulated Amortization | (842) | (842) | (731) | ||
Net Carrying Amount | 1,448 | 1,448 | 1,181 | ||
Future amortization of patents and license agreements | |||||
2020 (excluding nine months ended September 30, 2020) | 40 | 40 | |||
2021 | 160 | 160 | |||
2022 | 160 | 160 | |||
2023 | 151 | 151 | |||
2024 | 67 | 67 | |||
Thereafter | 870 | 870 | |||
Intangible assets, net | $ 1,448 | $ 1,448 | $ 1,181 |
Intangible Assets - License Agr
Intangible Assets - License Agreements (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Sales and Marketing Expense | ||||
Intangible assets | ||||
Royalty fees included in sales and marketing expense | $ 701,000 | $ 577,000 | $ 1,635,000 | $ 1,573,000 |
License Agreements | ||||
Intangible assets | ||||
Notice period for termination of license agreements | 60 days | |||
Minimum royalty of agreements | $ 12,500 | |||
Milestone fee upon receiving a Phase II Small Business Innovation Research | 15,000 | |||
Milestone fee upon FDA approval | 125,000 | |||
Milestone fee upon first commercial use of certain licensed technology | 25,000 | |||
Milestone fee upon first use to manufacture products that utilize certain technology not currently incorporated into AxoGen products | $ 10,000 | |||
License Agreements | Minimum | ||||
Intangible assets | ||||
Royalty fees range under the license agreements | 1.00% | |||
License 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 _3
Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Accounts Payable and Accrued Liabilities | ||
Accounts payable | $ 3,507 | $ 8,262 |
Accrued expenses | 3,091 | 3,237 |
Accrued compensation | 9,681 | 7,631 |
Accounts Payable and Accrued Expenses | $ 16,279 | $ 19,130 |
Long Term Debt (Details)
Long Term Debt (Details) shares in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |
Jun. 30, 2020USD ($) | Sep. 30, 2020USD ($)shares | Sep. 30, 2020USD ($)shares | Apr. 23, 2020USD ($) | |
Debt Instrument [Line Items] | ||||
Long-term debt | $ 31,817,000 | $ 31,817,000 | ||
Financing costs paid | 642,000 | |||
Oberland Facility | ||||
Debt Instrument [Line Items] | ||||
Term of debt | 7 years | |||
Principal Balance | $ 35,000,000 | 35,000,000 | 35,000,000 | |
Long-term debt | 31,817,000 | $ 31,817,000 | ||
Maximum line of credit amount | 75,000 | |||
Financing costs | $ 642,000 | |||
Financing costs paid | $ 642,000 | |||
Period for which quarterly interest payments should be made | 7 years | |||
Interest rate | 7.50% | |||
Interest rate at closing | 9.50% | 9.50% | ||
Threshold revenue achievement for payment of additional quarterly royalty | $ 70,000,000 | |||
Cash paid for interest | $ 858,000 | |||
Interest capitalized | $ 489,000 | |||
Additional payment percentage | 1.00% | |||
Lenders warrant purchase | shares | 3,500 | 3,500 | ||
Moving average of closing stock | 45 days | |||
Increase in interest rate | 11.50% | 11.50% | ||
Minimum internal rate of return ("IRR") on Capital | 4.00% | 4.00% | ||
Liquidity covenant multiplier | 1.1 | |||
Paycheck Protection Program Loan | ||||
Debt Instrument [Line Items] | ||||
Long-term debt | $ 7,820,000 | |||
Debt Instrument, Second Tranche | Oberland Facility | ||||
Debt Instrument [Line Items] | ||||
Contingent additional borrowing capacity | $ 15,000,000 | |||
Number of quarters | 2 | |||
Threshold revenue to be achieved to obtain additional borrowing | $ 20,000,000 | |||
Debt Instrument, Third Tranche | Oberland Facility | ||||
Debt Instrument [Line Items] | ||||
Contingent additional borrowing capacity | $ 25,000,000 | |||
Number of quarters | 2 | |||
Threshold revenue to be achieved to obtain additional borrowing | $ 28,000,000 | |||
Each of Third and Fourth Quarter of Year 2020 | Oberland Facility | ||||
Debt Instrument [Line Items] | ||||
Revenue target | $ 8,750,000 | |||
Each Of First And Second Quarter of Year 2021 | Oberland Facility | ||||
Debt Instrument [Line Items] | ||||
Revenue target | 17,500,000 | |||
Each Quarter After Second Quarter of Year 2021 and thereafter | Oberland Facility | ||||
Debt Instrument [Line Items] | ||||
Revenue target | $ 20,000,000 | |||
LIBOR | Oberland Facility | ||||
Debt Instrument [Line Items] | ||||
Additional interest floor rate | 2.00% | |||
Debt derivative liability | Oberland Facility | ||||
Debt Instrument [Line Items] | ||||
Fair value of derivatives | $ 2,387,000 | |||
Common stock derivative option liability | Oberland Facility | ||||
Debt Instrument [Line Items] | ||||
Fair value of derivatives | $ 176,000 |
Long Term Debt - Net Carrying V
Long Term Debt - Net Carrying Value (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Jun. 30, 2020 |
Debt Instrument [Line Items] | ||
Long-term Debt, Net | $ 31,817 | |
Oberland Facility | ||
Debt Instrument [Line Items] | ||
Principal Balance | 35,000 | $ 35,000 |
Debt Discount | (2,563) | |
Debt Issuance Costs, Net | (620) | |
Long-term Debt, Net | $ 31,817 |
Stock Incentive Plan - Narrativ
Stock Incentive Plan - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | Aug. 14, 2019 | Jun. 30, 2020 | Feb. 29, 2020 | Sep. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
Stock Option Disclosures | ||||||||
Share-based compensation expense | $ 2,947 | $ 2,395 | $ 5,725 | $ 7,384 | ||||
Directors and Officers Stock Options [Member] | Per Quarter, Over One Year | ||||||||
Stock Option Disclosures | ||||||||
Vesting percentage | 25.00% | |||||||
Vesting period (in years) | 1 year | |||||||
Stock Options | ||||||||
Stock Option Disclosures | ||||||||
Unrecognized compensation costs related to non-vested stock options and restricted stock awards | $ 18,167 | $ 18,167 | ||||||
PSUs | ||||||||
Stock Option Disclosures | ||||||||
Vesting period (in years) | 3 years | |||||||
RSUs | ||||||||
Stock Option Disclosures | ||||||||
Vesting period (in years) | 4 years | |||||||
2017 PSU | ||||||||
Stock Option Disclosures | ||||||||
Achievement of award issued (as a percent) | 72.30% | |||||||
Percentage of stock compensation | 27.70% | |||||||
Share-based compensation expense | $ 536 | |||||||
2018 PSU | ||||||||
Stock Option Disclosures | ||||||||
Share-based compensation expense | $ 1,161 | |||||||
2020 PSU | ||||||||
Stock Option Disclosures | ||||||||
Share-based compensation expense | $ 340 | |||||||
Axogen 2010 Stock Incentive Plan [Member] | Minimum | ||||||||
Stock Option Disclosures | ||||||||
Vesting period (in years) | 7 years | |||||||
Axogen 2010 Stock Incentive Plan [Member] | Maximum | ||||||||
Stock Option Disclosures | ||||||||
Vesting period (in years) | 10 years | |||||||
Axogen 2010 Stock Incentive Plan [Member] | Stock Options | ||||||||
Stock Option Disclosures | ||||||||
Vesting period (in years) | 4 years | |||||||
Axogen 2010 Stock Incentive Plan [Member] | Stock Options | One Year After Grant Date | ||||||||
Stock Option Disclosures | ||||||||
Vesting percentage | 25.00% | |||||||
Vesting period (in years) | 1 year | |||||||
Axogen 2010 Stock Incentive Plan [Member] | Stock Options | Every Six Months | ||||||||
Stock Option Disclosures | ||||||||
Vesting percentage | 12.50% | |||||||
Vesting period (in years) | 3 years | |||||||
Axogen 2017 Employee Stock Purchase Plan [Member] | ||||||||
Stock Option Disclosures | ||||||||
Shares authorized for issuance | 600,000 | 600,000 | ||||||
Number of additional shares authorized for future issuance | 373,066 | |||||||
Shares purchased by employees | 77,239 | |||||||
Weighted average price of shares purchased | $ 7.85 | |||||||
Axogen 2017 Employee Stock Purchase Plan [Member] | Directors and Officers Stock Options [Member] | ||||||||
Stock Option Disclosures | ||||||||
Vesting period (in years) | 3 years | |||||||
Axogen 2017 Employee Stock Purchase Plan [Member] | Stock Options | ||||||||
Stock Option Disclosures | ||||||||
Vesting period (in years) | 4 years | |||||||
Axogen 2017 Employee Stock Purchase Plan [Member] | Stock Options | Every Six Months | ||||||||
Stock Option Disclosures | ||||||||
Vesting percentage | 12.50% | |||||||
Vesting period (in years) | 2 years | |||||||
Axogen 2017 Employee Stock Purchase Plan [Member] | Stock Options | Two Years After Grant Date | ||||||||
Stock Option Disclosures | ||||||||
Vesting percentage | 50.00% | |||||||
Vesting period (in years) | 2 years | |||||||
New Axogen Plan [Member] | ||||||||
Stock Option Disclosures | ||||||||
Shares authorized for issuance | 3,385,482 | 1,807,299 | 1,807,299 | |||||
Number of unallocated shares available for issuance | 385,482 | |||||||
Number of additional shares authorized for future issuance | 3,000,000 | |||||||
Number of shares of RSU and PSU surrendered | 38,086 | 38,086 | ||||||
Company paid tax withholdings for employees | $ 665 | $ 665 |
Stock Incentive Plan - Stock Aw
Stock Incentive Plan - Stock Award Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Stock Options | ||
Stock Options | ||
Options, Outstanding at the beginning of the period (in shares) | 3,420,181 | |
Options Granted (in shares) | 647,090 | |
Options, Exercised (in shares) | (326,622) | |
Options, Cancelled (in shares) | (103,586) | |
Options, Outstanding at the end of the period (in shares) | 3,637,063 | 3,420,181 |
Options, Exercisable (in shares) | 2,127,093 | |
Weighted Average Exercise Price, Options outstanding at the beginning of the period (in dollars per share) | $ 12.69 | |
Weighted Average Exercise Price, Granted (in dollars per share) | 9.19 | |
Weighted Average Exercise Price, Exercised (in dollars per share) | 5.22 | |
Weighted Average Exercise Price, Cancelled (in dollars per share) | 20.18 | |
Weighted average Exercise Price, Options outstanding at the end of the period (in dollars per share) | 12.52 | $ 12.69 |
Weighted Average Exercise Price, Exercisable (in dollars per share) | $ 9.78 | |
Weighted Average Remaining Contractual Term, Outstanding | 6 years 1 month 6 days | 5 years 8 months 12 days |
Aggregate Intrinsic Value, Outstanding | $ 10,901 | $ 26,074 |
Aggregate Intrinsic Value, Exercisable | $ 9,125 | |
Restricted and Performance Stock Units [Member] | ||
Restricted and Performance Stock Units | ||
Unvested, Beginning Balance | 1,113,696 | |
Granted | 995,940 | |
Released | (168,311) | |
Forfeited | (81,555) | |
Vested, Ending Balance | 1,859,770 | 1,113,696 |
Vested and Expected to Vest | 1,859,770 | |
Unvested, Weighted Average Grant Date Fair Value, Beginning Balance | $ 21.62 | |
Granted, Grant Date Fair Value (per share) | 9.52 | |
Released, Grant Date Fair Value (per share) | 18.80 | |
Forfeited, Grant Date Fair Value (per share) | 18.91 | |
Unvested, Weighted Average Grant Date Fair Value, Ending Balance | 15.51 | $ 21.62 |
Vested and Expected to Vest, Grant Date Fair Value (per share) | $ 15.51 | |
Unvested, Weighted Average Remaining Vesting Life | 2 years 2 months 23 days | 2 years 3 months 4 days |
Unvested, Aggregate Intrinsic Value | $ 21,572 | $ 19,800 |
Stock Incentive Plan - Summary
Stock Incentive Plan - Summary of Weighted-Average Assumptions Used (Details) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Weighted-average assumptions | ||
Expected term (in years) | 5 years 8 months 8 days | 5 years 9 months 3 days |
Expected volatility (as a percent) | 59.25% | 56.03% |
Risk free rate (as a percent) | 0.35% | 1.54% |
Commitments and Contingencies -
Commitments and Contingencies - Leases (Details) ft² in Thousands, $ in Thousands | Aug. 28, 2020USD ($) | Sep. 30, 2020USD ($)ft² | Dec. 31, 2019USD ($) |
Commitments and Contingencies | |||
Tenant improvements | $ 11,539 | ||
Operating Lease, Right-of-Use Asset | 15,987 | $ 3,133 | |
Operating Lease, Liability | $ 21,440 | ||
Heights Union | |||
Commitments and Contingencies | |||
Area of lease property | ft² | 75 | ||
Operating lease, lessor allowance | $ 5,250 | ||
Tenant improvements | 11,450 | ||
Incentive from Lessor | $ 5,250 | ||
Operating lease, incremental borrowing rate | 10.60% | ||
Operating Lease, Right-of-Use Asset | $ 13,323 | ||
Operating Lease, Liability | $ 18,573 |
Commitments and Contingencies_2
Commitments and Contingencies - Lease Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Finance lease costs | ||||
Amortization of right-of-use assets | $ 6 | $ 6 | $ 17 | $ 16 |
Interest on lease liabilities | 1 | 1 | 2 | 3 |
Operating lease costs | 707 | 483 | 1,683 | 1,447 |
Short term lease costs | 43 | 12 | 104 | 28 |
Variable lease costs | 4 | 1 | 14 | 16 |
Total lease cost | $ 761 | $ 501 | $ 1,820 | $ 1,510 |
Commitments and Contingencies_3
Commitments and Contingencies - Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Finance Leases | ||
Finance lease right-of-use assets | $ 70 | $ 87 |
Current maturities of long-term obligations | 18 | 17 |
Long term obligations | 17 | 30 |
Operating Leases | ||
Operating lease right-of-use assets | 15,987 | 3,133 |
Current maturities of long-term obligations | $ 2,481 | 1,719 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Long-term Debt, Current Maturities | |
Long term obligations | $ 18,959 | $ 1,565 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Long-term Debt, Excluding Current Maturities |
Commitments and Contingencies_4
Commitments and Contingencies - Other Information Related to Leases (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Commitments and Contingencies | ||
Cash paid for amounts included in the measurement of operating lease liabilities | $ 1,399 | $ 1,314 |
Right-to-use assets obtained in exchange for new finance lease liabilities | $ 16 | $ 16 |
Weighted-average remaining lease term - finance leases | 2 years 3 months 18 days | 3 years 2 months 12 days |
Weighted-average remaining lease term - operating leases | 12 years 4 months 24 days | 2 years 1 month 6 days |
Weighted-average discount rate - finance leases | 7.28% | 7.28% |
Weighted-average discount rate - operating leases | 10.07% | 6.28% |
Commitments and Contingencies_5
Commitments and Contingencies - Future Minimum Lease Payments (Details) $ in Thousands | Sep. 30, 2020USD ($) |
Operating Leases | |
2020 (excluding nine months ended September 30, 2020) | $ 493 |
2021 | 3,212 |
2022 | 3,530 |
2023 | 2,545 |
2024 | 2,606 |
2025 | 2,671 |
Thereafter | 26,126 |
Total Future Minimum Lease Payments | 41,183 |
Less imputed interest on commenced leases | (19,743) |
Total Lease Liability | 21,440 |
Finance Leases | |
2020 (excluding nine months ended September 30, 2020) | 5 |
2021 | 19 |
2022 | 10 |
2023 | 3 |
2024 | 1 |
Total Future Minimum Lease Payments | 38 |
Less imputed interest on commenced leases | (3) |
Total Lease Liability | $ 35 |
Commitments and Contingencies_6
Commitments and Contingencies - Service Agreements (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2011 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Service Agreements | |||||
Term of agreement | 5 years | ||||
License fee amount | $ 454 | $ 566 | $ 1,193 | $ 1,624 | |
Payments made under agreement | $ 208 | $ 196 | $ 699 | $ 337 | |
License and Services Agreement [Member] | |||||
Service Agreements | |||||
Agreement termination notice period | 6 months | ||||
Master Services Agreement For Clinical Research and Related Services [Member] | |||||
Service Agreements | |||||
Service agreement amount paid upon execution of agreement | $ 151 | ||||
Nerve End Cap Supply Agreement [Member] | |||||
Service Agreements | |||||
Agreement termination notice period | 90 days |
Commitments and Contingencies_7
Commitments and Contingencies - Concentrations (Details) $ in Thousands | 1 Months Ended | 9 Months Ended | |
Jul. 31, 2018USD ($)aft² | Sep. 30, 2020USD ($)item | Jul. 09, 2019USD ($) | |
Concentrations | |||
Size of building space | ft² | 70,000 | ||
Area of land where building resides | a | 8.6 | ||
Payments to acquire Land | $ 731 | ||
Payments to acquire Building | $ 4,300 | ||
Estimated cost relating to design build agreement | $ 9,062 | $ 29,300 | |
Additional costs associated with design build agreement | $ 13,600 | ||
Construction in progress. | $ 15,127 | ||
Vendor | |||
Concentrations | |||
Number of products from which revenue is derived | item | 4 |
Commitments and Contingencies_8
Commitments and Contingencies - Litigation (Details) | Feb. 04, 2019 |
Commitments and Contingencies | |
Threshold period for not filing response to complaint | 30 days |
Retirement Plan (Details)
Retirement Plan (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)item | Sep. 30, 2019USD ($) | |
Defined Benefit Plan | ||||
Age limit for eligibility to participate in the plan | item | 18 | |||
AxoGen 401K Plan | ||||
Defined Benefit Plan | ||||
Employer contributions | $ | $ 276 | $ 231 | $ 859 | $ 706 |
Axogen 401K Plan, employer's contribution on first 3% of employee contribution | ||||
Defined Benefit Plan | ||||
Employer matching contributions | 3.00% | |||
Employee contribution matched, percent | 3.00% | |||
Axogen 401K Plan, employer's contribution on next 2% of employee contribution | ||||
Defined Benefit Plan | ||||
Employer matching contributions | 1.00% | |||
Employee contribution matched, percent | 2.00% |