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Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2022
Accounting Policies [Abstract]  
Unaudited Interim Financial Information

Unaudited Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared by management in accordance with GAAP and the rules and regulations of the SEC regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. While we believe that the disclosures presented are adequate in order to make the information not misleading, these unaudited quarterly financial statements should be read in conjunction with the financial statements and notes thereto included in the Annual Report.

The unaudited consolidated financial statements include the accounts and results of operations of Organogenesis Holdings Inc. and its wholly-owned subsidiaries, Organogenesis Inc., Organogenesis GmbH (a Switzerland corporation) and Prime Merger Sub, LLC. All intercompany balances and transactions have been eliminated in consolidation. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. In the opinion of management, the unaudited consolidated financial statements reflect all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s financial position, results of operations and cash flows at the dates and for the periods indicated. The results for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022, any other interim periods, or any future years or periods.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported results of operations during the reporting periods. In preparing the consolidated financial statements, the estimates and assumptions that management consider to be significant and that present the greatest amount of uncertainty include: revenue recognition; sales returns and credit losses; inventory reserve; recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability of long-lived and indefinite lived assets (including intangible assets); assessing

impairment of goodwill; valuation of assets and liabilities that use unobservable inputs; and the valuation and recognition of stock-based compensation. Actual results and outcomes may differ significantly from those estimates and assumptions.

Revision to Previously Issued Financial Statements

Revision to Previously Issued Financial Statements

In August 2022, the Company reached an agreement with a Group Purchasing Organization (“GPO”) to settle previously disputed GPO fees for $3,300. The Company identified that part of the settlement fee should have been accrued as of March 31, 2022 and December 31, 2021. This error resulted in an overstatement of revenue and understatement of accrued expenses and other current liabilities and accumulated deficit in the financial statements included in the Company’s quarterly reports on Form 10-Q and the Company’s Annual Report previously filed with the SEC. The Company assessed the materiality of this error on prior period financial statements in accordance with the SEC Staff Accounting Bulletin Number 99, Materiality, and ASC 250-10, Accounting Changes and Error Corrections. The Company determined that this error was not material to the financial statements of any prior annual or interim period. There was no impact to the quarter ended September 30, 2022. To correct the immaterial misstatement, the Company revised its previously issued financial statements as follows:

 

 

 

March 31, 2022

 

 

 

December 31, 2021

 

CONSOLIDATED BALANCE SHEETS

 

As Previously Reported

 

 

Adjustments

 

 

As Revised

 

 

 

As Previously Reported

 

 

Adjustments

 

 

As Revised

 

Accrued expenses and other current liabilities

 

$

32,419

 

 

$

1,700

 

 

$

34,119

 

 

 

$

36,589

 

 

$

700

 

 

$

37,289

 

Total current liabilities

 

$

76,792

 

 

$

1,700

 

 

$

78,492

 

 

 

$

82,005

 

 

$

700

 

 

$

82,705

 

Total liabilities

 

$

193,044

 

 

$

1,700

 

 

$

194,744

 

 

 

$

201,224

 

 

$

700

 

 

$

201,924

 

Accumulated deficit

 

$

(60,046

)

 

$

(1,700

)

 

$

(61,746

)

 

 

$

(60,133

)

 

$

(700

)

 

$

(60,833

)

Total stockholders’ equity

 

$

243,228

 

 

$

(1,700

)

 

$

241,528

 

 

 

$

242,035

 

 

$

(700

)

 

$

241,335

 

 

 

 

 

Three Months Ended March 31, 2022

 

 

 

Year Ended December 31, 2021

 

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

As Previously Reported

 

 

Adjustments

 

 

As Revised

 

 

 

As Previously Reported

 

 

Adjustments

 

 

As Revised

 

 

 

Net revenue

 

$

98,117

 

 

$

(1,000

)

 

$

97,117

 

 

 

$

468,059

 

 

$

(700

)

 

$

467,359

 

 

 

Gross profit

 

$

73,037

 

 

$

(1,000

)

 

$

72,037

 

 

 

$

353,860

 

 

$

(700

)

 

$

353,160

 

 

 

Income from operations

 

$

872

 

 

$

(1,000

)

 

$

(128

)

 

 

$

72,918

 

 

$

(700

)

 

$

72,218

 

 

 

Net income before income taxes

 

$

132

 

 

$

(1,000

)

 

$

(868

)

 

 

$

63,786

 

 

$

(700

)

 

$

63,086

 

 

 

Net income

 

$

87

 

 

$

(1,000

)

 

$

(913

)

 

 

$

94,902

 

 

$

(700

)

 

$

94,202

 

 

 

 

 

 

Three Months Ended March 31, 2022

 

 

 

Year Ended December 31, 2021

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

As Previously Reported

 

 

Adjustments

 

 

As Revised

 

 

 

As Previously Reported

 

 

Adjustments

 

 

As Revised

 

Net income / (loss)

 

$

87

 

 

$

(1,000

)

 

$

(913

)

 

 

$

94,902

 

 

$

(700

)

 

$

94,202

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued expenses and other current liabilities

 

$

(4,828

)

 

$

1,000

 

 

$

(3,828

)

 

 

$

8,654

 

 

$

700

 

 

$

9,354

 

 

 

 

Three Months Ended March 31, 2022

 

 

 

Year Ended December 31, 2021

 

Revenue by Product Category:

 

As Previously Reported

 

 

Adjustments

 

 

As Revised

 

 

 

As Previously Reported

 

 

Adjustments

 

 

As Revised

 

Advanced Wound Care

 

$

90,950

 

 

$

(860

)

 

$

90,090

 

 

 

$

430,839

 

 

$

(602

)

 

$

430,237

 

Surgical & Sports Medicine

 

$

7,167

 

 

$

(140

)

 

$

7,027

 

 

 

$

37,220

 

 

$

(98

)

 

$

37,122

 

Net revenue

 

$

98,117

 

 

$

(1,000

)

 

$

97,117

 

 

 

$

468,059

 

 

$

(700

)

 

$

467,359

 

 

 

 

Three Months Ended March 31, 2022

 

 

 

Year Ended December 31, 2021

 

Miscellaneous Items

 

As Previously Reported

 

 

Adjustments

 

 

As Revised

 

 

 

As Previously Reported

 

 

Adjustments

 

 

As Revised

 

GPO fees

 

$

619

 

 

$

1,000

 

 

$

1,619

 

 

 

$

2,963

 

 

$

700

 

 

$

3,663

 

PuraPly revenue

 

$

53,300

 

 

$

(500

)

 

$

52,800

 

 

 

$

198,400

 

 

$

(350

)

 

$

198,050

 

 

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). Subsequent to the issuance of ASU 2016-13, the FASB has issued the following updates: ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments- Credit Losses, ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, ASU 2019-05, Financial Instruments—Credit Losses (Topic 326)—Targeted Transition Relief and ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses. The objective of ASU 2016-13 and all the related updates is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 and the related updates are effective for fiscal years, and interim periods within those years, beginning after December 15, 2019 for public business entities excluding entities eligible to be smaller reporting companies and for fiscal years, and interim periods within those years, beginning after December 15, 2022 for all other entities. Early adoption is permitted. As the Company was a smaller reporting company when the standard was issued, the Company took advantage of the extended transition period and will adopt this standard and the related improvements on January 1, 2023 by recognizing a cumulative-effect adjustment to retained earnings for any impact. The Company evaluated the effects of adopting ASU 2016-13 and the related improvements and does not expect a material impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), to clarify certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting to apply to derivatives that are affected by the discounting transition. Both ASU 2020-04 and ASU 2021-01 are effective upon issuance through December 31, 2022. The Company’s debt agreement that utilizes LIBOR has conventional LIBOR replacement language. Since the debt agreement has not discontinued the use of LIBOR, this ASU is not yet effective for the Company. To the extent the interest rate changes to the rate specified in the debt agreement, the Company will utilize the relief in this ASU. The Company evaluated the effects of adopting the provisions of ASU 2020-04 and ASU 2021-01 and does not expect a material impact on the Company’s consolidated financial statements.