ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
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ITEM 1. |
BUSINESS |
• | Leader in Regenerative Medicine Technology with Strong Brand Recognition. |
• | Well-Positioned in Large, Attractive and Growing Global Markets—Advanced Wound Care and Surgical & Sports Medicine. |
• | Comprehensive Suite of Products to Address the Clinical and Economic Needs of Wound Care Patients and Providers. |
• | Large and Growing Body of Clinical Data and FDA Approved Products. |
• | Robust and Extensive Relationships Across the Continuum of Care. |
• | Differentiated In-house Customer Support Capabilities Including Third-Party Reimbursement Support. in-house customer support capabilities. Through our dedicated team of experienced professionals, our “Circle of Care” program provides in-house third-party reimbursement, medical and technical support. |
• | Established and Scalable Regulatory, Manufacturing and Commercial Infrastructure. in-house expertise on the regulatory approval process that is based on our successful management of multiple products through various FDA approval pathways including PMA approval, BLA approval and 510(k) clearance. We have also developed rigorous and proven FDA-compliant manufacturing, distribution, and logistics capabilities. We pair our operational capabilities with a strong commercial team of sales and marketing professionals. Our established regulatory, operational and commercial infrastructure provides a firm foundation for growth as we continue to scale our business. |
• | Extensive Executive Management Experience in Regenerative Medicine. |
• | Drive Penetration in the Fast-Growing Advanced Wound Care Market. |
• | Continued Expansion into Surgical & Sports Medicine Market. |
operational infrastructure and building out our direct sales force to supplement our independent sales agencies. We also plan to continue to take advantage of significant opportunities to cross-sell within our established customer bases in both the Advanced Wound Care and Surgical & Sports Medicine markets. We believe that the Surgical & Sports Medicine market presents a strong near-term opportunity with respect to our current product portfolio as well as a significant long-term opportunity with respect to chronic inflammatory and degenerative conditions. Given our experience in the Advanced Wound Care market and regenerative medicine in general, we believe we are well positioned to capture this opportunity. |
• | Launch Robust Pipeline of Products and Drive Innovation with a Proven Research and Development Platform. |
• | Continue to Expand Sales Force and Increase Sales Productivity and Geographic Reach. |
• | Supplement Organic Growth Through Selective Acquisitions. to evaluate tuck-in acquisitions which complement our existing portfolios in both the Advanced Wound Care and Surgical & Sports Medicine markets and will leverage our established commercial and manufacturing infrastructure. |
• | favorable global demographics and aging population; |
• | greater incidence of comorbidities that contribute to impaired healing, such as diabetes, obesity, cardiovascular and peripheral vascular disease and smoking; and |
• | increasing acceptance of advanced technologies to treat complex wounds and musculoskeletal injuries. |
• | VLUs: |
• | DFUs: |
• | Pressure Ulcers: |
• | Surgical Wounds: |
* | Based on a September 2013 JAMA Dermatology published retrospective cohort study. |
Product (Launch Year) |
Description |
Regulatory Pathway |
Clinical Application | |||
Affinity (2014)† ![]() |
Fresh amniotic membrane wound covering in which viable cells, growth factors/cytokines, and ECM proteins in the native tissue are preserved. | 361 HCT/P | Chronic and acute wounds | |||
Novachor (2021) ![]() |
Fresh chorion membrane wound covering in which viable cells, growth factors/cytokines, and ECM proteins in the native tissue are preserved. | 361 HCT/P | Chronic and acute wounds | |||
Apligraf (1998) ![]() |
Bioengineered living cell therapy that contains two living cell types, keratinocytes and fibroblasts, that produce a broad spectrum of cytokines and growth factors | PMA | VLUs; DFUs | |||
Dermagraft (2001)* ![]() |
Bioengineered product with living human fibroblasts seeded on a bioabsorbable scaffold, that produces human collagen, ECM, proteins, cytokines, and growth factors | PMA | DFUs | |||
NuShield (2010)† ![]() |
Dehydrated placental tissue wound covering preserved to retain all layers of the native tissue including both the amnion and chorion membranes, with the epithelial layer and the spongy/intermediate layer intact | 361 HCT/P | Chronic and acute wounds | |||
PuraPly AM (2016) ![]() |
Antimicrobial barrier comprised of purified native collagen matrix with broad-spectrum polyhexamethylene biguanide, or PHMB, antimicrobial agent. Line extensions include PuraPly XT, which contains additional layers of collagen matrix and a higher level of PHMB. Extra-fenestrated (EF) versions of the products allow for added conformability and fluid drainage. | 510(k) | Chronic and acute wounds (except 3 rd degree burns) |
† | Launched by NuTech Medical; acquired by Organogenesis in 2017. |
* | Launched by Smith & Nephew; acquired by Organogenesis in 2014. |
Product (Launch Year) |
Description |
Regulatory Pathway |
Clinical Application | |||
NuShield (2010) ![]() |
Dehydrated placental tissue barrier membrane preserved to retain all layers of the native tissue including both the amnion and chorion membranes, with the epithelial layer and the spongy/intermediate layer intact | 361 HCT/P | Barrier membrane to support repair of tendon, ligament and other soft tissue injuries | |||
Affinity (2014) ![]() |
Fresh amniotic membrane wound covering in which viable cells, growth factors/cytokines, and ECM proteins in the native tissue are preserved | 361 HCT/P | Wound covering for acute surgical wounds | |||
Novachor (2021) ![]() |
Fresh chorion membrane wound covering in which viable cells, growth factors/cytokines, and ECM proteins in the native tissue are preserved. | 361 HCT/P | Wound covering for acute surgical wounds | |||
PuraPly AM (2016) ![]() |
Purified native collagen matrix with broad-spectrum PHMB antimicrobial agent. Line extensions include PuraPly XT, which contains additional layers of collagen matrix and a higher level of PHMB. Extra-fenestrated (EF) versions of the products allow for added conformability and fluid drainage. | 510(k) | Antimicrobial barrier for management of open wounds in the surgical setting | |||
PuraForce (2019) ![]() |
PuraForce is a bioengineered porcine collagen surgical matrix for use in soft tissue reinforcement applications that is intended for 510(k) indications for the reinforcement of all tendons in the body. PuraForce has high biomechanical strength per unit thickness, making it ideal for extremities applications. We commercially launched this product in 2019 | 510(k) | Indicated for the reinforcement of soft tissues repaired by sutures or suture anchors during tendon repair surgery |
Incidence of 100% Wound Closure |
Median Time to 100% Wound Closure | |
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• | Bioengineered Cultured Cellular Products: |
• | Collagen Biomaterial Technology Platform: |
• | Placental-Based Products: |
• | Antimicrobial Technology: |
• | cease and desist orders; |
• | injunctions, or consent decrees; |
• | civil monetary penalties; |
• | recall, detention or seizure of our products; |
• | operating restrictions, partial or total shutdown of production facilities; |
• | refusal of or delay in granting our requests for 510(k) clearance or PMA or BLA approval of new products or modified products; |
• | withdrawing 510(k) clearance or PMA/BLA approvals that are already granted; |
• | refusal to grant export approval or export certificates for our products; and |
• | criminal prosecution. |
• | Phase 1. The biological product candidate is initially introduced into healthy human subjects and tested for safety. In the case of some product candidates for severe or life-threatening diseases, especially when the product candidate may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients. |
• | Phase 2. The biological product candidate is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product candidate for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule. |
• | Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency and safety in an expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the product candidate and provide an adequate basis for product approval and labeling. In January 2021, we announced that the first patient was enrolled in the pivotal Phase 3 clinical trial evaluating the safety and efficacy of ReNu for the management of symptoms associated with knee osteoarthritis (OA). |
• | Breakthrough therapy designation. To qualify for the breakthrough therapy program, product candidates must be intended to treat a serious or life-threatening disease or condition and preliminary clinical evidence must indicate that such product candidates may demonstrate substantial improvement on one or more clinically significant endpoints over existing therapies. The FDA will seek to ensure the sponsor of a breakthrough therapy product candidate receives intensive guidance on an efficient drug development program; intensive involvement of senior managers and experienced staff on a proactive, collaborative and cross-disciplinary review; and a rolling review. |
• | Regenerative Medicine Advance Therapy (RMAT) designation. RMAT was introduced as a new designation under the 21st Century Cures Act for the development and review of certain regenerative medicine therapies. As set forth in section 506(g)(8) of the FDCA, the term “regenerative medicine therapy” is defined to include cell therapy, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products, except for those regulated solely under section 361 of the PHSA. To receive RMAT designation, a regenerative medicine product candidate must be intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition with preliminary clinical evidence indicating that the drug has the potential to address unmet medical needs. RMAT designation does not require evidence to indicate that the drug may offer a substantial improvement over available therapies, as breakthrough designation requires. Similar to breakthrough designation, an RMAT product candidate receives intensive guidance on an efficient drug development program; involvement of senior managers and experienced staff on a proactive, collaborative and cross-disciplinary review; and a rolling review. Regenerative medicine therapies that qualify for RMAT designation may also qualify for other FDA expedited programs, including fast track designation, breakthrough therapy designation, accelerated approval, and priority review designation, if they meet the criteria for such programs. In January 2021, we announced ReNu received the RMAT designation from the FDA for the management of symptoms associated with knee osteoarthritis (OA). |
• | Accelerated approval. Drugs or biologic products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval. Accelerated approval means that a product candidate may be approved on the basis of adequate and well-controlled clinical trials establishing that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity or mortality or other clinical benefits, taking into account the severity, rarity and prevalence of the condition and the |
availability or lack of alternative treatments. As a condition of approval, FDA may require that a sponsor of a drug or biologic product candidate receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials to verify the predicted clinical benefit. In addition, for accelerated approval products FDA typically requires pre- dissemination submission of promotional materials to FDA for the agency’s consideration. A drug approved under the accelerated approval pathway may have its approval revoked on several grounds including if a required post-approval trial fails to verify clinical benefit or does not demonstrate sufficient clinical benefit to justify the risks associated with the drug. |
• | We are proud to be an equal opportunity employer. We seek to attract a diverse slate of candidates, including from historically underrepresented groups. We believe that diversity and inclusion in the workplace enhance employee engagement and stimulate innovation, and that people in diverse groups work better, share information more broadly and consider a wider range of views. We pride ourselves |
on our diverse workforce, which we believe has been and will continue to be a major contributor to our growth and innovation, and intend to continue to make diversity and inclusion a focus of our efforts regarding our workforce. |
• | We aim to maintain an “open door” culture, and encourage employees to voice their concerns, questions, suggestions and comments. We strive to foster an atmosphere where employees openly share ideas and where people are treated with dignity and respect. Our goal is to provide a productive working environment based on mutual respect and the highest level of ethical and lawful conduct. We have also established a hotline for employees to report suspected violations of law and concerns related to accounting, auditing and ethical violations. |
• | We provide our employees a competitive wage and evaluate our compensation programs to ensure that our employees are paid fairly for the valuable work they are doing. We are also committed to achieving internal pay equity and rewarding outstanding performance. We offer our employees competitive benefits and are proud that we have not raised employee contributions to our healthcare benefits for 6 years running. |
• | We aim to foster a culture where learning is continuous, and we strive to promote from within. We believe in our people and their ability to accept new responsibilities and challenges and to grow with us to contribute to our success. Growth is fostered through professional development and learning programs as well as practical experience. Employees receive regular performance reviews to support their progress and development. |
• | We recognize the benefits of a healthy workforce and offer our employees the opportunity to participate in wellness activities and programs throughout the year. We also support the mental health of our employees by offering an employee assistance program for employees and their families that provides free counseling sessions and offers other resources for employees. Additionally, our healthcare benefit allows for reimbursement for fitness and weight loss programs. |
• | We prioritize the health and safety of our employees. Guided by an Environmental Health & Safety manual that is regularly reviewed, we have a dedicated Environmental Health and Safety team, who seek to prevent and reduce workplace risks and injuries through various programs, training, projects, services, and assistance, such as ergonomic evaluation, hazard reporting, risk assessment, and first aid training. We require all work-related injuries or illnesses to be reported. This information is reviewed bi-monthly by our Safety Committee for analysis and trending. |
• | We are committed to maintaining and improving the safety of our employees and our workplace. For example, we have taken a number of steps to address the impact of the COVID-19 pandemic on our employees, including continuing to pay employees impacted by the pandemic, avoiding layoffs, and implementing changes to how we manufacture our products and to other processes in order to prioritize the health and safety of our employees and to operate under the protocols mandated by local and state authorities, with measures such as changes to shift schedules, physical distancing, contact tracing, symptom assessments and other safety measures. We will continue to assess, identify and implement measures to support the health and safety of our employees during the pandemic. |
ITEM 1A. |
RISK FACTORS |
• | Our operating results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control. |
• | We have incurred significant losses since our inception and, while we reported positive net income in the years ended December 31, 2020 and 2021, we may incur losses in the future. |
• | Our success will depend in part on the extent to which coverage and adequate reimbursement for the costs of our products and related services will be available from government payers, private health insurers and other third-party payers and we do not know whether such reimbursement will be available or, if such reimbursement is available, the rate at which it will be available. The rate of reimbursement and coverage for the use of our products has been and may continue to be unstable, unpredictable and subject to changes in government and private payer policies that could adversely affect our business, results of operations and financial condition. Currently, not all of our products are covered by all payers. |
• | Many existing and potential customers for our products are members of GPOs and/or IDNs, including accountable care organizations or public-based purchasing organizations, and our business is partly dependent on major contracts with these organizations. Cost-containment efforts of our customers, GPOs, IDNs, third-party payers and governmental organizations could adversely affect our business, results of operations and financial condition. |
• | Medicare, which is the major source of revenue for most of our customers, reimburses the same amounts for most of our products and the products of our competitors targeting the same indications in the hospital outpatient setting. Because in some sites of care the reimbursement amount is not based on the cost we charge our customers for our products or the cost our competitors charge for products targeting the same indication, our customers may elect to use products cheaper than ours in order to increase their margins, which could have a material adverse effect on our business, results of operations and financial condition. |
• | As of January 1, 2022, we must report ASP for all our products. The first ASP report will be made on or before April 30, 2022 for Q1 2022. If we do not report ASP or if we incorrectly report ASP, we may have to restate ASP for prior quarters or may face penalties, including statutory and regulatory sanctions. |
• | The COVID-19 pandemic has reduced the ability of some hospitals to care for non-emergent patients. Additional surges in COVID patients may limit hospital capacity to furnish services using our products. |
• | We have identified a material weakness in our internal control over financial reporting, and our management has concluded that our disclosure controls and procedures are not effective. While we have successfully remediated certain of the internal control deficiencies that were included in the aggregation of the previously reported material weakness, we are continuing to work on remediating the remaining internal control deficiencies, as well as other internal control deficiencies identified during the current period, that collectively are aggregating to form the material weakness in our internal controls over financial reporting that exists as of December 31, 2021. However, we cannot assure you that additional material weaknesses or significant deficiencies will not occur in the future. If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results or prevent fraud, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price. |
• | We face significant and continuing competition, which could adversely affect our business, results of operations and financial condition. |
• | Rapid technological change could cause our products to become obsolete and if we do not enhance our product offerings through our research and development efforts, we may be unable to effectively compete. |
• | To be commercially successful, we must convince physicians that our products are safe and effective alternatives to existing treatments and that our products should be used in their procedures. |
• | Our failure to comply with regulatory obligations could result in negative effects on our business. |
• | The FDA may determine that certain of our products that are, or are derived from, human cells or tissues, such as Affinity and NuShield, do not qualify for regulation solely under Section 361 of the Public Health Services Act, or PHSA. To the extent that any of these products are deemed not to be HCT/Ps or Section 361 HCT/Ps, the FDA may require that we revise our labeling and marketing claims for these products or that we suspend sales of such products until FDA approval is obtained, which could adversely affect our business, results of operations and financial condition. |
• | The FDA may determine that our suspension of NuCel and ReNu commercialization on May 31, 2021 was not conducted in a timely or otherwise proper manner. To the extent that our suspension of any of these products is determined not to comply with the 361 HCT/P Guidance, we may be subject to regulatory sanctions, which could adversely affect our business, results of operations and financial condition. |
• | Because we depend upon a limited group of suppliers and manufacturers for our Apligraf, Affinity, Dermagraft and NuShield products, we may incur significant product development costs or experience material delivery delays if there is an interruption in supply from any one of these suppliers or manufacturers, which could materially impact sales of our products. |
• | We are dependent on the proper functioning of our and third-party manufacturing facilities, our supply chain and our sales force, all of which could be negatively impacted by the global COVID-19 pandemic, or other factors, in a manner that could materially adversely affect our business, financial condition or results of operations. |
• | Uncertainty and adverse changes in the general economic conditions, including inflation, may negatively affect our business. |
• | Significant disruptions of our information technology systems or breaches of information security could adversely affect our business, results of operations and financial condition. |
• | Our patents and other intellectual property rights may not adequately protect our products. |
• | We engage in transactions with related parties and the transactions present possible conflicts of interest that could have an adverse effect on our business, results of operations and financial condition. |
• | On May 6, 2021, we ceased to qualify as a “controlled company” within the meaning of the Nasdaq rules. Although we are no longer a controlled company, during the phase-in period we may continue to rely on exemptions from certain corporate governance requirements that provide protection to stockholders of other Nasdaq listed companies. |
• | the announcement or introduction of new products by our competitors; |
• | failure of government healthcare programs and private health plans to cover our products or to timely and adequately reimburse the users of our products; |
• | the rate of reimbursement by government and private insurers for use of our products; |
• | any change in Medicare payment policy which provides a competitive advantage to our competitor’s products; |
• | any change in government healthcare programs’ and private health plans’ policies regarding sales and reimbursement of durable medical equipment, including a prohibition on physician-owned DME supplier entities; |
• | whether our products or our competitors’ products are granted pass-through reimbursement status or included in the “bundled” reimbursement structure; |
• | our ability to upgrade and develop our systems and infrastructure to accommodate growth; |
• | our ability to attract and retain key personnel in a timely and cost effective manner; |
• | our ability to offer our wound care and surgical products and supplies using our existing sales force and distribution network; |
• | the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations and infrastructure; |
• | changes in, or enactment of new laws or regulations promulgated by federal, state or local governments; |
• | cost containment initiatives or policies developed by government and commercial payers that create financial incentives not to use our products; |
• | our inability to demonstrate that our products are cost-effective or superior to competing products; |
• | our ability to develop new products; |
• | discovery of product defects during the manufacturing process; |
• | initiation of a government investigation into potential non-compliance with laws or regulations; |
• | issuance of government advisory opinions or program bulletins that could negatively affect one or more of our sales models; |
• | sanctions imposed by federal or state governments due to non-compliance with laws or regulations; |
• | recall of one or more of our products by the FDA due to noncompliance with FDA requirements; and |
• | general economic conditions as well as economic conditions specific to the healthcare industry. |
• | properly identify and anticipate physician and patient needs; |
• | develop and introduce new products or product enhancements in a timely manner; |
• | adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third parties; |
• | demonstrate the safety and efficacy of new products, including through the conduct of additional clinical trials; |
• | obtain the necessary regulatory clearances or approvals for new products or product enhancements; |
• | achieve adequate coverage and reimbursement for our products; and |
• | compete successfully against other skin substitutes and other modalities for treating wounds such as negative-pressure wound therapy and hyperbaric oxygen. |
• | their lack of experience using our products; |
• | lack of evidence supporting additional patient benefits from use of our products over conventional methods; |
• | pressure to contain costs; |
• | preference for other treatment modalities or our competitors’ products; |
• | perceived liability risks generally associated with the use of new products and procedures; |
• | limited availability of coverage and/or reimbursement from third-party payers; and |
• | the time that must be dedicated to training. |
• | the safety and efficacy of our products; |
• | the potential and perceived advantages of our products over alternative treatments; |
• | clinical data and the clinical indications for which our products are approved; |
• | product labeling or product insert requirements of the FDA or other regulatory authorities, including any limitations or warnings contained in approved labeling; |
• | the cost of, and relative reimbursement rate for, using our products relative to the use of our competitors’ products or alternative treatment modalities; |
• | relative convenience and ease of administration; |
• | the strength of marketing and distribution support; |
• | the quality of the service and support provided to our customers; |
• | the timing of market introduction of competitive products; |
• | publicity concerning our products or competing products and treatments; |
• | our reputation and the reputation of the products; |
• | the shelf life of our products and our ability to manage the logistics of the end-user supply chain; and |
• | sufficient and readily accessible third-party insurance coverage and reimbursement. |
• | harm to our business reputation; |
• | investigations by regulators; |
• | significant defense costs; |
• | distraction of management’s attention from our primary business; |
• | substantial monetary awards to patients or other claimants; |
• | loss of revenue; |
• | exhaustion of any available insurance and our capital resources; and |
• | decreased demand for our products. |
• | issue additional equity securities that would dilute our stockholders’ value; |
• | use cash that we may need in the future to operate our business; |
• | incur debt that could have terms unfavorable to us or that we might be unable to repay; |
• | structure the transaction in a manner that has unfavorable tax consequences, such as a stock purchase that does not permit a step-up in the tax basis for the assets acquired; |
• | be unable to realize the anticipated benefits, such as increased revenues, cost savings, or synergies from additional sales of existing or newly acquired products; |
• | be unable to successfully integrate, operate, maintain and manage our newly acquired operations; |
• | divert management’s attention from the existing business to integrate, operate, maintain and manage our newly acquired operations and personnel; |
• | acquire unknown liabilities that could subject us to government investigations and/or litigation or other actions that make it impossible to realize the anticipated benefits of the transaction; |
• | be unable to secure the services of key employees related to the acquisition; and |
• | be unable to succeed in the marketplace with the acquisition. |
• | we may enter into contracts between us, on the one hand, and related parties, on the other, that are not as a result of arm’s-length transactions; |
• | our executive officers and directors that hold positions of responsibility with related parties may be aware of certain business opportunities that are appropriate for presentation to us as well as to such other related parties and may present such business opportunities to such other parties; and |
• | our executive officers and directors that hold positions of responsibility with related parties may have significant duties with, and spend significant time serving, other entities and may have conflicts of interest in allocating time. |
• | the FDA may require additional clinical trials in connection with the approval of product candidates; |
• | delays in reaching a consensus with the FDA or other regulatory authorities on trial design; |
• | delays in reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites; |
• | delays in opening clinical trial sites or obtaining required IRB or independent ethics committee approval at each clinical trial site; |
• | our decision or the requirement of regulators or IRBs to suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements, a finding that the participants are being exposed to unacceptable health risks, or the imposition of a clinical hold as a result of a serious adverse event or after an inspection of our clinical trial operations or clinical trial sites; |
• | delays in recruiting suitable patients to participate in our future clinical trials, including, but not limited to challenges associated with COVID-19; |
• | failure by us, any CROs we engage or any other third parties to adhere to clinical trial or regulatory requirements; |
• | failure by us, any CROs we engage or any other third parties to perform in accordance with Good Clinical Practice, or GCP, cGMPs, or applicable regulatory guidelines in the United States and other international markets; |
• | failure by physicians to adhere to delivery protocols leading to variable results; |
• | delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical trial sites, including delays by third parties with whom we have contracted to perform certain of those functions due to COVID-19 or other reasons; |
• | insufficient or inadequate supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates; |
• | delays in having patients complete participation in a clinical trial or return for post-treatment follow-up; |
• | clinical trial sites or patients dropping out of a clinical trial at a rate higher than we anticipate; |
• | selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data; |
• | receipt of negative or inconclusive clinical trial results; |
• | occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; |
• | occurrence of serious adverse events in clinical trials of the same class of agents conducted by other sponsors; and |
• | changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; |
• | the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind in return for, the purchase, recommendation, leasing or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; |
• | federal physician self-referral law, which prohibits a physician from referring a patient to an entity with which the physician (or an immediate family member) has a financial relationship, for the furnishing of certain designated health services for which payment may be made by Medicare or Medicaid, unless an exception applies; |
• | federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other government payers that are false or fraudulent; |
• | Section 242 of HIPAA codified at 18 U.S.C. § 1347, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or from making false or fraudulent statements to defraud any healthcare benefit program (i.e., public or private); |
• | federal transparency laws, including the Physician Payments Sunshine Act which requires the tracking and disclosure to the federal government by pharmaceutical and medical device manufacturers of payments and other transfers of value to physicians and teaching hospitals as well as ownership and investment interests that are held by physicians and their immediate family members; and |
• | state law equivalents of each of these federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payer, including commercial insurers; state laws that require pharmaceutical and medical device companies to comply with their industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict certain payments that may be made to healthcare providers and other potential referral sources; state laws that require drug and medical device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that prohibit giving gifts to licensed healthcare professionals; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts in certain circumstances, such as specific disease states. |
• | the availability of our products due to restricted coverage; |
• | the ability of our customers to pay for our products; |
• | our ability to maintain pricing so as to generate revenues or achieve or maintain profitability; and |
• | our ability to access capital. |
• | increase our vulnerability to adverse changes in general economic, industry and competitive conditions; |
• | require us to dedicate a substantial portion of our cash flow from operations to making payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes; |
• | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; |
• | expose us to the risk of increased interest rates as certain of our borrowings are at variable rates, and we may not be able to enter into interest rate swaps and any swaps we enter into may not fully mitigate our interest rate risk; |
• | restrict us from capitalizing on business opportunities; |
• | make it more difficult to satisfy our financial obligations, including payments on our indebtedness; |
• | place us at a competitive disadvantage compared to our competitors that have less debt; and limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy or other general corporate purposes. |
• | incur additional indebtedness for borrowed money and guarantee indebtedness; |
• | pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock; |
• | enter into any new line of business not reasonably related to our existing business; |
• | prepay, redeem or repurchase certain debt; |
• | make loans and investments; |
• | sell or otherwise dispose of assets; |
• | incur liens; |
• | enter into transactions with affiliates; and |
• | enter into agreements restricting our subsidiaries’ ability to pay dividends; and consolidate, merge or sell all or substantially all of our assets. |
• | a limited availability of market quotations for the Company’s securities; |
• | reduced liquidity for the Company’s securities; |
• | a determination that the Company’s Class A common stock is a “penny stock” which will require brokers trading in the Company’s Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for the Company’s securities; |
• | a limited amount of news and analyst coverage; and |
• | a decreased ability to issue additional securities or obtain additional financing in the future. |
• | any derivative action or proceeding brought on behalf of the Company; |
• | any action asserting a claim of breach of a fiduciary duty owed by, or any wrongdoing by, any director, officer or employee of the Company to the Company or the Company’s stockholders; |
• | any action asserting a claim arising pursuant to any provision of the DGCL, the certificate of incorporation (including as it may be amended from time to time), or the bylaws; |
• | any action to interpret, apply, enforce or determine the validity of the certificate of incorporation or the bylaws; or |
• | any action asserting a claim governed by the internal affairs doctrine, in each case, except for, (1) any action as to which the Court of Chancery determines that there is an indispensable party not subject to the personal jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten (10) days following such determination) and (2) any action asserted under the Securities Exchange Act of 1934, as amended, or the rules and regulations promulgated thereunder, for which federal courts have exclusive jurisdiction. |
• | the revenues generated by sales of our products; |
• | the costs associated with expanding our sales and marketing efforts; |
• | the expenses we incur in manufacturing and selling our products; |
• | the costs of developing and commercializing new products or technologies; |
• | the cost of obtaining and maintaining regulatory approval or clearance of certain products and products in development; |
• | the number and timing of acquisitions and other strategic transactions such as our acquisition of NuTech Medical, and integration costs associated with such acquisitions; |
• | the costs associated with capital expenditures; and |
• | unanticipated general, legal and administrative expenses. |
• | imposing fines and penalties on us; |
• | preventing us from manufacturing or selling our products; |
• | delaying or denying pending applications for approval or clearance of our products or of new uses or modifications to our existing products, or withdrawing or suspending current approvals or clearances; |
• | ordering or requesting a recall of our products; |
• | issuing warning letters or untitled letters; |
• | imposing operating restrictions, including a partial or total shutdown of production or investigation of any or all of our products; |
• | refusing to permit to import or export of our products; |
• | detaining or seizing our products; |
• | obtaining injunctions preventing us from manufacturing or distributing any or all of our products; |
• | commencing criminal prosecutions or seeking civil penalties; and |
• | requiring changes in our advertising and promotion practices. |
• | the laws and regulations of the FDA and its foreign counterparts requiring the reporting of true, complete and accurate information to such regulatory bodies, including but not limited to safety problems associated with the use of our products; |
• | laws and regulations of the FDA and its foreign counterparts concerning the conduct of clinical trials and the protection of human research subjects; |
• | other laws and regulations of the FDA and its foreign counterparts relating to the manufacture, processing, packing, holding, investigating or distributing in commerce of medical devices, biological products and/or HCT/Ps; or |
• | manufacturing standards we have established. |
• | changes in the valuation of the Company’s deferred tax assets and liabilities; |
• | expected timing and amount of the release of any tax valuation allowances; |
• | tax effects of stock-based compensation; |
• | costs related to intercompany restructurings; |
• | changes in tax laws, regulations or interpretations thereof; and |
• | lower than anticipated future earnings in jurisdictions where the Company has lower statutory tax rates and higher than anticipated future earnings in jurisdictions where the Company has higher statutory tax rates. |
• | labor availability and costs for hourly and management personnel; |
• | profitability of the Company’s products, especially in new markets and due to seasonal fluctuations; |
• | changes in interest or exchange rates; |
• | impairment of long-lived assets; |
• | macroeconomic conditions, both nationally and locally; |
• | negative publicity relating to our products; |
• | changes in consumer preferences and competitive conditions; and |
• | expansion to new markets. |
ITEM 1B. |
UNRESOLVED STAFF COMMENTS |
ITEM 2. |
PROPERTIES |
ITEM 3. |
LEGAL PROCEEDINGS |
ITEM 4. |
MINE SAFETY DISCLOSURES |
ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
ITEM 6. |
RESERVED |
ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Adjusted EBITDA excludes stock-based compensation expense as it has been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business and an important part of our compensation strategy; |
• | Adjusted EBITDA excludes depreciation and amortization expense and, although these are non-cash expenses, the assets being depreciated may have to be replaced in the future; |
• | Adjusted EBITDA excludes net interest expense, or the cash requirements necessary to service interest, which reduces cash available to us; |
• | Adjusted EBITDA excludes the impact of the changes in the fair value of our Earnout liability and warrant liability; |
• | Adjusted EBITDA excludes certain transactions expenses such as the Company’s warrant exchange transaction and the CPN acquisition transaction; |
• | Adjusted EBITDA excludes loss on the extinguishment of debt; |
• | Adjusted EBITDA excludes charges related to restructuring activities; |
• | Adjusted EBITDA excludes certain income associated with the settlement of deferred acquisition consideration and recovery of certain notes receivable from related parties; |
• | Adjusted EBITDA excludes write-off of the capitalized costs related to certain unfinished construction work; |
• | Adjusted EBITDA excludes the cancellation fee for terminating certain agreements; |
• | Adjusted EBITDA excludes income tax expense (benefit); and |
• | Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure. |
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Net revenue |
$ | 468,059 | $ | 338,298 | $ | 260,981 | ||||||
Cost of goods sold |
114,199 | 87,319 | 75,948 | |||||||||
|
|
|
|
|
|
|||||||
Gross profit |
353,860 | 250,979 | 185,033 | |||||||||
Operating expenses: |
||||||||||||
Selling, general and administrative |
250,200 | 204,193 | 200,088 | |||||||||
Research and development |
30,742 | 20,086 | 14,799 | |||||||||
|
|
|
|
|
|
|||||||
Total operating expenses |
280,942 | 224,279 | 214,887 | |||||||||
|
|
|
|
|
|
|||||||
Income (loss) from operations |
72,918 | 26,700 | (29,854 | ) | ||||||||
|
|
|
|
|
|
|||||||
Other expense, net: |
||||||||||||
Interest expense |
(7,236 | ) | (11,279 | ) | (8,996 | ) | ||||||
Gain on settlement of deferred acquisition consideration |
— | 2,246 | — | |||||||||
Change in fair value of warrant liability |
— | — | 2,140 | |||||||||
Loss on the extinguishment of debt |
(1,883 | ) | — | (1,862 | ) | |||||||
Other income (loss), net |
(13 | ) | 97 | 13 | ||||||||
|
|
|
|
|
|
|||||||
Total other expense, net |
(9,132 | ) | (8,936 | ) | (8,705 | ) | ||||||
|
|
|
|
|
|
|||||||
Net income (loss) before income taxes |
63,786 | 17,764 | (38,559 | ) | ||||||||
Income tax (expense) benefit |
31,116 | (530 | ) | (150 | ) | |||||||
|
|
|
|
|
|
|||||||
Net income (loss) |
$ | 94,902 | $ | 17,234 | $ | (38,709 | ) |
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
(in thousands) |
||||||||||||
Net income (loss) |
$ | 94,902 | $ | 17,234 | $ | (38,709 | ) | |||||
Interest expense |
7,236 | 11,279 | 8,996 | |||||||||
Income tax expense (benefit) |
(31,116 | ) | 530 | 150 | ||||||||
Depreciation |
5,781 | 4,438 | 3,783 | |||||||||
Amortization |
4,949 | 3,745 | 6,043 | |||||||||
|
|
|
|
|
|
|||||||
EBITDA |
81,752 | 37,226 | (19,737 | ) | ||||||||
|
|
|
|
|
|
|||||||
Stock-based compensation expense |
3,864 | 1,661 | 936 | |||||||||
Restructuring charge (1) |
4,704 | 618 | — | |||||||||
Gain on settlement of deferred acquisition consideration (2) |
— | (2,246 | ) | — | ||||||||
Recovery of certain notes receivable from related parties (3) |
(179 | ) | (1,516 | ) | — | |||||||
Cancellation fee (4) |
— | 1,950 | — | |||||||||
Write-off of a fixed asset (5) |
1,104 | — | — | |||||||||
Change in fair value of Earnout (6) |
(3,985 | ) | 203 | — | ||||||||
Change in fair value of warrant liability (7) |
— | — | (2,140 | ) | ||||||||
Loss on extinguishment of debt (8) |
1,883 | — | 1,862 | |||||||||
Exchange offer transaction costs (9) |
— | — | 916 | |||||||||
CPN transaction costs (10) |
— | 929 | — | |||||||||
|
|
|
|
|
|
|||||||
Adjusted EBITDA |
$ | 89,143 | $ | 38,825 | $ | (18,163 | ) | |||||
|
|
|
|
|
|
(1) | Amounts reflect employee retention and benefits as well as the facility-related cost associated with the Company’s restructuring activities. See Note “11. Restructuring”. |
(2) | Amount reflects the gain recognized related to the settlement of the deferred acquisition consideration dispute with the sellers of NuTech Medical in February 2020 as well as the settlement of the assumed legacy lawsuit from the sellers of NuTech Medical in October 2020. See Note “18. Commitments and Contingencies”. |
(3) | Amounts reflect the collection of certain notes receivable from related parties previously reserved. See Note “19. Related Party Transactions”. |
(4) | Amount reflects the cancellation fee for terminating certain product development and consulting agreements the Company inherited from NuTech Medical. |
(5) | Amount reflects the write-off of certain design and consulting fees previously capitalized related to the unfinished construction work on the 275 Dan Road Building. |
(6) | Amounts reflect the change in the fair value of the Earnout liability in connection with the CPN acquisition. See Note “3. Acquisition”. |
(7) | In connection with the Avista Merger, we issued 4.1 million Private Warrants which were classified as a liability. The Private Warrants were settled in the warrant exchange transactions in the third quarter of 2019. Amount reflects the change in the fair value of the warrant liability. |
(8) | Amounts reflect the loss recognized on the extinguishment of the 2019 Credit Agreement upon repayment in 2021 and the loss recognized on the extinguishment of the Master Lease Agreement upon repayment in 2019. See Note “12. Long-Term Debt Obligations”. |
(9) | Amount reflects legal, advisory and other professional fees incurred in the quarter ended September 30, 2019, related directly to the warrant exchange transactions. See Note “13. Stockholders’ Equity”. |
(10) | Amount reflects legal, advisory and other professional fees incurred in the nine months ended September 30, 2020, related directly to the CPN acquisition. See Note “3. Acquisition”. |
Years Ended December 31, |
Change |
|||||||||||||||||||||||||||
2021 |
2020 |
2019 |
2021 to 2020 |
2020 to 2019 |
||||||||||||||||||||||||
(in thousands, except for percentages) |
||||||||||||||||||||||||||||
Advanced Wound Care |
$ | 430,839 | $ | 294,624 | $ | 220,744 | $ | 136,215 | 46 | % | $ | 73,880 | 33 | % | ||||||||||||||
Surgical & Sports Medicine |
37,220 | 43,674 | 40,237 | (6,454 | ) | (15 | %) | 3,437 | 9 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net revenue |
$ | 468,059 | $ | 338,298 | $ | 260,981 | $ | 129,761 | 38 | % | $ | 77,317 | 30 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
Change |
|||||||||||||||||||||||||||
2021 |
2020 |
2019 |
2021 to 2020 |
2020 to 2019 |
||||||||||||||||||||||||
(in thousands, except for percentages) |
||||||||||||||||||||||||||||
Cost of goods sold |
$ | 114,199 | $ | 87,319 | $ | 75,948 | $ | 26,880 | 31 | % | $ | 11,371 | 15 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Gross profit |
$ | 353,860 | $ | 250,979 | $ | 185,033 | $ | 102,881 | 41 | % | $ | 65,946 | 36 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
Change |
|||||||||||||||||||||||||||
2021 |
2020 |
2019 |
2021 to 2020 |
2020 to 2019 |
||||||||||||||||||||||||
(in thousands, except for percentages) |
||||||||||||||||||||||||||||
Selling, general and administrative |
$ | 250,200 | $ | 204,193 | $ | 200,088 | $ | 46,007 | 23 | % | $ | 4,105 | 2 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
Change |
|||||||||||||||||||||||||||
2021 |
2020 |
2019 |
2021 to 2020 |
2020 to 2019 |
||||||||||||||||||||||||
(in thousands, except for percentages) |
||||||||||||||||||||||||||||
Research and development |
$ | 30,742 | $ | 20,086 | $ | 14,799 | $ | 10,656 | 53 | % | $ | 5,287 | 36 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
Change |
|||||||||||||||||||||||||||
2021 |
2020 |
2019 |
2021 to 2020 |
2020 to 2019 |
||||||||||||||||||||||||
(in thousands, except for percentages) |
||||||||||||||||||||||||||||
Interest expense |
$ | (7,236 | ) | $ | (11,279 | ) | $ | (8,996 | ) | $ | 4,043 | (36 | %) | $ | (2,283 | ) | 25 | % | ||||||||||
Gain on settlement of deferred acquisition consideration |
— | 2,246 | — | (2,246 | ) | (100 | %) | 2,246 | ** | |||||||||||||||||||
Change in fair value of warrant liability |
— | — | 2,140 | — | ** | (2,140 | ) | (100 | %) | |||||||||||||||||||
Loss on the extinguishment of debt |
(1,883 | ) | — | (1,862 | ) | (1,883 | ) | ** | 1,862 | (100 | %) | |||||||||||||||||
Other income (expense), net |
(13 | ) | 97 | 13 | (110 | ) | (113 | %) | 84 | ** | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total other expense, net |
$ | (9,132 | ) | $ | (8,936 | ) | $ | (8,705 | ) | $ | (196 | ) | 2 | % | $ | (231 | ) | 3 | % | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** | not meaningful |
Years Ended December 31, |
Change |
|||||||||||||||||||||||||||
2021 |
2020 |
2019 |
2021 to 2020 |
2020 to 2019 |
||||||||||||||||||||||||
(in thousands, except for percentages) |
||||||||||||||||||||||||||||
Income tax (expense) benefit |
$ | 31,116 | $ | (530 | ) | $ | (150 | ) | $ | 31,646 | ** | $ | (380 | ) | ** | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** | not meaningful |
December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
(in thousands) |
||||||||||||
Cash and cash equivalents |
$ | 113,929 | $ | 84,394 | $ | 60,174 | ||||||
|
|
|
|
|
|
|||||||
Line of credit |
$ | — | $ | 10,000 | $ | 33,484 | ||||||
Term loan |
73,425 | 59,710 | 49,634 | |||||||||
Finance lease obligations |
200 | 15,061 | 17,488 | |||||||||
|
|
|
|
|
|
|||||||
Total debt |
$ | 73,625 | $ | 84,771 | $ | 100,606 | ||||||
|
|
|
|
|
|
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
(in thousands) |
||||||||||||
Net cash provided by (used in) operating activities |
$ | 61,978 | $ | 5,466 | $ | (33,528 | ) | |||||
Net cash used in investing activities |
(31,220 | ) | (23,498 | ) | (6,234 | ) | ||||||
Net cash provided by (used in) financing activities |
(1,036 | ) | 42,468 | 78,727 | ||||||||
|
|
|
|
|
|
|||||||
Net increase in cash and restricted cash |
$ | 29,722 | $ | 24,436 | $ | 38,965 | ||||||
|
|
|
|
|
|
ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. |
CONTROLS AND PROCEDURES |
(1) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets; |
(2) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors; and |
(3) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the issuer’s consolidated financial statements. |
• | In 2021, we planned the implementation of a new company-wide enterprise resource planning, or ERP, system to provide additional systematic controls and segregation of duties for our accounting processes.Due, in part, to turnover in key positions, our enterprise resource planning system go live date has been delayed. We anticipate the ERP system going live in 2022. |
• | We have continued to train and cross train our employees on their internal control responsibilities and how to best support the Company if personnel turnover issues within their departments occur. We have also supplemented our internal resources with third-party resources, where necessary. |
• | We have continued to engage an outside firm to assist management with performing control operating effectiveness testing throughout the year |
• | We regularly reported the results of control testing to the key stakeholders across the organization, including the audit committee, on testing progress and defined corrective actions, and we monitored and reported on the results of control remediation. Through these actions, we have continued to strengthen our internal policies, processes, and reviews. |
ITEM 9B. |
OTHER INFORMATION |
ITEM 9C. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. |
EXECUTIVE COMPENSATION |
ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. |
PRINCIPAL ACCOUNTING FEES AND SERVICES |
ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
Exhibit No. |
Exhibit | |
23.1* | Consent of RSM US LLP | |
31.1* | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 | |
31.2* | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 | |
32.1* | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101* | The following materials from the Annual Report of Organogenesis Holdings Inc. on Form 10-K for the year ended December 31, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020 of Organogenesis Holdings Inc., (ii) Consolidated Statements of Operations for the years ended December 31, 2021, 2020, and 2019 of Organogenesis Holdings Inc., (iii) Consolidated Statements of Redeemable Common Stock and Stockholders’ Equity (Deficit) for the years ended December 31, 2021, 2020, and 2019 of Organogenesis Holdings Inc., (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019 of Organogenesis Holdings Inc., and (v) Notes to Consolidated Financial Statements of Organogenesis Holdings Inc. | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* | Filed herewith. |
† | Confidential treatment granted as to portions of this Exhibit. The confidential portions of this Exhibit have been omitted and are marked by asterisks. |
‡ | Management contract or compensatory plan or arrangement. |
ITEM 16. |
FORM 10-K SUMMARY |
ORGANOGENESIS HOLDINGS INC. | ||
By: |
/s/ Gary S. Gillheeney, Sr. | |
Gary S. Gillheeney, Sr. President and Chief Executive Officer | ||
Date: |
March 1, 2022 |
Signature |
Title |
Date | ||
/s/ Gary S. Gillheeney, Sr. Gary S. Gillheeney, Sr. |
Chief Executive Officer, President and Director (Principal Executive Officer) |
March 1, 2022 | ||
/s/ David Francisco David Francisco |
Chief Financial Officer (Principal Financial and Accounting Officer) |
March 1, 2022 | ||
/s/ Alan A. Ades Alan A. Ades |
Director |
March 1, 2022 | ||
/s/ Robert Ades Robert Ades |
Director |
March 1, 2022 | ||
/s/ Prathyusha Duraibabu Prathyusha Duraibabu |
Director |
March 1, 2022 | ||
/s/ David Erani David Erani |
Director |
March 1, 2022 | ||
/s/ Jon Giacomin Jon Giacomin |
Director |
March 1, 2022 | ||
/s/ Arthur S. Leibowitz Arthur S. Leibowitz |
Director |
March 1, 2022 | ||
/s/ Glenn H. Nussdorf Glenn H. Nussdorf |
Director |
March 1, 2022 | ||
/s/ Michael J. Driscoll Michael J. Driscoll |
Director |
March 1, 2022 |
Page | ||||
F-2 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
F-9 |
• | We obtained an understanding of the relevant controls related to the realizability of deferred tax assets and tested such controls for design and operating effectiveness, including controls over management’s evaluation of the positive and negative evidence such as future reversals of deferred tax assets and liabilities and projections of future taxable income. |
• | We tested the completeness and accuracy of the underlying data used by management in developing the projections of future taxable income. |
• | With the assistance of our income tax professionals, we evaluated the reasonableness of the Company’s projections of future taxable income, including the taxable income by tax jurisdiction, by comparing the projections to historical results. |
• | With the assistance of our income tax professionals, we evaluated the estimated future reversals of deferred tax assets and liabilities by: |
• | Recalculating the underlying schedule of reversals of deferred tax assets and liabilities. |
• | Confirming that the expected reversals of deferred tax assets and liabilities are based on the actual amounts that would reverse in a particular year or are reasonably supported by the nature of the reversing item and period in which the item would be deductible or taxable. |
• | Evaluating the reasonableness of management’s analysis that the reversals of deferred tax assets and liabilities are supported by the appropriate tax law. |
December 31, |
||||||||
2021 |
2020 |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Restricted cash |
||||||||
Accounts receivable, net |
||||||||
Inventory |
||||||||
Prepaid expenses and other current assets |
||||||||
|
|
|
|
|||||
Total current assets |
||||||||
Property and equipment, net |
||||||||
Intangible assets, net |
||||||||
Goodwill |
||||||||
Operating lease right-of-use |
||||||||
Deferred tax asset, net |
||||||||
Other assets |
||||||||
|
|
|
|
|||||
Total assets |
$ | $ | ||||||
|
|
|
|
|||||
Liabilities and Stockholders’ Equity |
||||||||
Current liabilities: |
||||||||
Current portion of deferred acquisition consideration |
$ | $ | ||||||
Current portion of term loan |
||||||||
Current portion of finance lease obligations |
||||||||
Current portion of operating lease obligations |
||||||||
Current portion of deferred rent and lease incentive obligation |
||||||||
Accounts payable |
||||||||
Accrued expenses and other current liabilities |
||||||||
|
|
|
|
|||||
Total current liabilities |
||||||||
Line of credit |
||||||||
Term loan, net of current portion |
||||||||
Deferred acquisition consideration, net of current portion |
||||||||
Earnout liability |
||||||||
Deferred rent and lease incentive obligation, net of current portion |
||||||||
Finance lease obligations, net of current portion |
||||||||
Operating lease obligations, net of current portion |
||||||||
Other liabilities |
||||||||
|
|
|
|
|||||
Total liabilities |
||||||||
|
|
|
|
|||||
Commitments and contingencies (Note 18) |
||||||||
Stockholders’ equity: |
||||||||
Preferred stock, $ |
— | |||||||
Common stock, $ |
||||||||
Additional paid-in capital |
||||||||
Accumulated deficit |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total stockholders’ equity |
||||||||
|
|
|
|
|||||
Total liabilities and stockholders’ equity |
$ | $ | ||||||
|
|
|
|
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Net revenue |
$ | $ | $ | |||||||||
Cost of goods sold |
||||||||||||
Gross profit |
||||||||||||
Operating expenses: |
||||||||||||
Selling, general and administrative |
||||||||||||
Research and development |
||||||||||||
Total operating expenses |
||||||||||||
Income (loss) from operations |
( |
) | ||||||||||
Other expense, net: |
||||||||||||
Interest expense |
( |
) | ( |
) | ( |
) | ||||||
Gain on settlement of deferred acquisition consideration |
— | |||||||||||
Change in fair value of warrant liability |
— |
— |
||||||||||
Loss on the extinguishment of debt |
( |
) | — | ( |
) | |||||||
Other income (loss), net |
( |
) | ||||||||||
Total other expense, net |
( |
) | ( |
) | ( |
) | ||||||
Net income (loss) before income taxes |
( |
) | ||||||||||
Income tax (expense) benefit |
( |
) | ( |
) | ||||||||
Net income (loss) |
( |
) | ||||||||||
Non-cash deemed dividend to warrant holders |
— | — | ( |
) | ||||||||
Net income (loss) attributed to common shareholders |
$ | $ | $ | ( |
) | |||||||
Net income (loss) attributed to common shareholders, per share: |
||||||||||||
Basic |
$ | $ | $ | ( |
) | |||||||
Diluted |
$ | $ | $ | ( |
) | |||||||
Weighted-average common shares outstanding |
||||||||||||
Basic |
||||||||||||
Diluted |
||||||||||||
Redeemable Common Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Equity |
||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||
Balance as of December 31, 2018 (as reported) |
$ | — | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||
Adjustment due to Private Warrant reclassification |
— | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||
Adjustment due to right of use asset amortization |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2018 (as adjusted) |
— | ( |
) | |||||||||||||||||||||||||
Adoption of ASC 606 |
— | — | — | — | — | |||||||||||||||||||||||
Exercise of common stock warrants |
— | — | — | — | ||||||||||||||||||||||||
Exercise of stock options |
— | — | — | — | ||||||||||||||||||||||||
Common stock issued in warrant exchange |
— | — | — | ( |
) | |||||||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | — | |||||||||||||||||||||||
Redemption of redeemable common stock placed into treasury |
( |
) | — | — | — | — | — | — | ||||||||||||||||||||
Stock issued in the 2019 Underwritten Public Offering, net of issuance costs of $ |
— | — | — | |||||||||||||||||||||||||
Net loss |
— | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2019 (as adjusted) |
— | — | ( |
) | ||||||||||||||||||||||||
Exercise of stock options |
— | — | — | |||||||||||||||||||||||||
Issuance of common stock associated with business acquisition |
— | — | — | — | ||||||||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | — | |||||||||||||||||||||||
Stock issued in the 2020 Underwritten Public Offering, net of issuance costs of $ |
— | — | — | |||||||||||||||||||||||||
Net income |
— | — | — | — | — |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance as of December 31, 2020 (as adjusted) |
— | — | ( |
) | ||||||||||||||||||||||||
Exercise of stock options |
— | — | — | — | ||||||||||||||||||||||||
Vesting of RSUs, net of shares surrendered to pay taxes |
— | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||
Stock-based compensation expense |
— | — | — | — | — | |||||||||||||||||||||||
Net income |
— | — | — | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance as of December 31, 2021 |
— | $ | — | $ | $ | $ | ( |
) | $ | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Cash flows from operating activities: |
||||||||||||
Net income (loss) |
$ |
$ |
$ |
( |
) | |||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||||||
Depreciation |
||||||||||||
Amortization of intangible assets |
||||||||||||
Amortization of operating lease right-of-use |
— |
— |
||||||||||
Non-cash interest expense |
||||||||||||
Deferred interest expense |
||||||||||||
Deferred rent expense |
||||||||||||
Gain on settlement of deferred acquisition consideration |
— |
( |
) |
— |
||||||||
Deferred tax expense (benefit) |
( |
) |
||||||||||
Loss on disposal of property and equipment |
||||||||||||
Provision recorded for doubtful accounts |
||||||||||||
Adjustment for excess and obsolete inventories |
||||||||||||
Stock-based compensation |
||||||||||||
Loss on extinguishment of debt |
— |
|||||||||||
Change in fair value of Earnout liability |
( |
) |
— |
|||||||||
Change in fair value of warrant liability |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Changes in operating assets and liabilities: |
||||||||||||
Accounts receivable |
( |
) |
( |
) |
( |
) | ||||||
Inventory |
( |
) |
( |
) |
( |
) | ||||||
Prepaid expenses and other current assets |
( |
) |
( |
) |
( |
) | ||||||
Operating leases |
( |
) |
— |
— |
||||||||
Accounts payable |
( |
) |
||||||||||
Accrued expenses and other current liabilities |
||||||||||||
Other liabilities |
( |
) |
( |
) |
( |
) | ||||||
|
|
|
|
|
|
|||||||
Net cash provided by (used in) operating activities |
( |
) | ||||||||||
Cash flows from investing activities: |
||||||||||||
Purchases of property and equipment |
( |
) | ( |
) | ( |
) | ||||||
Cash paid for business acquisition |
— | ( |
) | — | ||||||||
Acquisition of intangible asset |
— | — | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Net cash used in investing activities |
( |
) | ( |
) | ( |
) | ||||||
Cash flows from financing activities: |
||||||||||||
Line of credit borrowings (repayments) under the 2019 Credit Agreement |
( |
) | ( |
) | ||||||||
Term loan borrowings (repayments) under the 2019 Credit Agreement, net of debt discount and issuance cost |
( |
) | ||||||||||
Proceeds from term loan under the 2021 Credit Agreement, net of debt discount and issuance cost |
— | — | ||||||||||
Term loan repayments under the 2021 Credit Agreement |
( |
) | — | — | ||||||||
Proceeds from equity financing |
— | |||||||||||
Payment of equity issuance costs |
( |
) | ( |
) | ||||||||
Repayment of notes payable |
— | — | ( |
) | ||||||||
Principal repayments of finance lease obligations |
( |
) | ( |
) | ( |
) | ||||||
Redemption of redeemable common stock placed into treasury |
— | — | ( |
) | ||||||||
Proceeds from the exercise of stock options |
||||||||||||
Proceeds from the exercise of common stock warrants |
— | — | ||||||||||
Payments of withholding taxes in connection with RSUs vesting |
( |
) | — | — | ||||||||
Payments of deferred acquisition consideration |
( |
) | ( |
) | — | |||||||
Payment to extinguish debt |
( |
) | — | — | ||||||||
|
|
|
|
|
|
|||||||
Net cash provided by (used in) financing activities |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
Change in cash and restricted cash |
||||||||||||
Cash and restricted cash, beginning of year |
||||||||||||
|
|
|
|
|
|
|||||||
Cash and restricted cash, end of year |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Supplemental disclosure of cash flow information: |
||||||||||||
Cash paid for interest |
$ | $ | $ | |||||||||
Cash paid for income taxes |
$ | $ | $ | |||||||||
Supplemental disclosure of non-cash investing and financing activities: |
||||||||||||
Reimbursement of offering expenses included in prepaid expenses and other current assets |
$ | — | $ | $ | — | |||||||
Fair value of shares issued for business acquisition |
$ | — | $ | $ | — | |||||||
Deferred acquisition consideration and earnout liability recorded for business acquisition |
$ | — | $ | $ | — | |||||||
Non-cash deemed dividend related to warrant exchange |
$ | — | $ | — | $ | |||||||
Equity issuance costs included in accounts payable |
$ | — | $ | — | $ | |||||||
Purchases of property and equipment in accounts payable and accrued expenses |
$ | $ | $ | |||||||||
Acquisition of intangible assets included in accrued expenses and other liabilities |
$ | — | $ | — | $ | |||||||
Right-of-use |
$ | $ | — | $ |
As of December 31, 2020 |
||||||||||||
CONSOLIDATED BALANCE SHEETS |
As Previously Reported |
Adjustments |
As Revised |
|||||||||
Property and equipment, net |
$ | $ | ( |
) | $ | |||||||
Total assets |
$ | $ | ( |
) | $ | |||||||
Additional paid-in capital |
$ | $ | ( |
) | $ | |||||||
Accumulated deficit |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Total stockholders’ equity |
$ | $ | ( |
) | $ | |||||||
Total liabilities and stockholders’ equity |
$ | $ | ( |
) | $ |
For the Year Ended December 31, 2020 |
For the Year Ended December 31, 2019 |
|||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
As Previously Reported |
Adjustments |
As Revised |
As Previously Reported |
Adjustments |
As Revised |
||||||||||||||||||
Selling, general and administrative |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Total operating expenses |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Income from operations |
$ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||
Change in fair value of warrant liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
Total other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Net income (loss) before income taxes |
$ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||
Net income (loss) |
$ | ( |
) | $ | $ | ( |
) | |||||||||||||||||
Non-cash deemed dividend to warrant holders |
$ | ( |
) | $ | $ | ( |
) | |||||||||||||||||
Net income (loss) attributed to common shareholders |
$ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||
Net income (loss), per share: |
||||||||||||||||||||||||
Basic |
$ |
$ |
$ |
( |
) | $ |
( |
) | ||||||||||||||||
Diluted |
$ |
$ |
$ |
( |
) | $ |
( |
) |
For the Year Ended December 31, 2020 |
||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
As Previously Reported |
Adjustments |
As Revised |
|||||||||
Net loss |
$ | $ | ( |
) | $ | |||||||
Depreciation |
$ | $ | $ | |||||||||
Recovery of certain notes receivable from related parties |
$ | ( |
) | $ | $ | |||||||
Prepaid expenses and other current assets |
$ | ( |
) | $ | $ | ( |
) | |||||
Accounts payable |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Net cash provided by (used in) operating activities |
$ | $ | ( |
) | $ | |||||||
Purchases of property and equipment |
$ | ( |
) | $ | $ | ( |
) | |||||
Proceeds from the repayment of notes receivable from related parties |
$ | $ | ( |
) | $ | |||||||
Net cash used in investing activities |
$ | ( |
) | $ | $ | ( |
) |
For the Year Ended December 31, 2019 |
||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
As Previously Reported |
Adjustments |
As Revised |
|||||||||
Net loss |
$ | ( |
) | $ | $ | ( |
) | |||||
Depreciation |
$ | $ | $ | |||||||||
Change in fair value of warrant liability |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
Leasehold improvements |
||
Building |
||
Furniture and computers |
||
Equipment |
Trade names and trademarks |
||
Developed technology |
||
Customer relationships |
||
Non-compete agreements |
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Advanced Wound Care revenue |
$ | $ | $ | |||||||||
Surgical and Sports Medicine revenue |
||||||||||||
Total revenue |
$ | $ | $ | |||||||||
• |
Level 1—Quoted prices in active markets for identical assets or liabilities. |
• |
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. |
• | Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. |
Fair Value Measurements |
||||||||||||||||
as of December 31, 2021 Using: |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
Liabilities: |
||||||||||||||||
Earnout liability |
$ | — | $ | — | $ | — | $ | — | ||||||||
$ | — | $ | — | $ | — | $ | — | |||||||||
Fair Value Measurements |
||||||||||||||||
as of December 31, 2020 Using: |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
Liabilities: |
||||||||||||||||
Earnout liability |
$ | — | $ | — | $ | $ | ||||||||||
$ | — | $ | — | $ | $ | |||||||||||
Earnout liability |
||||
Balance as of December 31, 2019 |
$ | |||
Acquisition Date fair value |
||||
Change in fair value |
||||
Balance as of December 31, 2020 |
||||
Change in fair value |
( |
) | ||
Balance as of December 31, 2021 |
$ | |||
Warrant liability |
||||
Balance as of December 31, 2019 |
$ |
|||
Change in fair value |
( |
) | ||
Settled in warrant exchange transaction |
( |
) | ||
Balance as of December 31, 2020 |
$ |
|||
December 31, |
||||||||
2021 |
2020 |
|||||||
Accounts receivable |
$ | $ | ||||||
Less—allowance for doubtful accounts |
( |
) | ( |
) | ||||
$ | $ | |||||||
Balance as of December 31, 2019 |
$ | |||
Additions |
||||
Write-offs |
( |
) | ||
Balance as of December 31, 2020 |
$ | |||
Additions |
||||
Write-offs |
( |
) | ||
Balance as of December 31, 2021 |
$ | |||
December 31, |
||||||||
2021 |
2020 |
|||||||
Raw materials |
$ | $ | ||||||
Work in process |
||||||||
Finished goods |
||||||||
$ | $ | |||||||
December 31, |
||||||||
2021 |
2020 |
|||||||
Subscriptions |
$ | $ | ||||||
Conferences and marketing expenses |
||||||||
Deposits |
||||||||
Reimbursement of offering expenses |
||||||||
Insurance |
||||||||
Other |
||||||||
$ | $ | |||||||
December 31, |
||||||||
2021 |
2020 |
|||||||
Leasehold improvements |
$ | $ | ||||||
Building |
— | |||||||
Furniture, computers and equipment |
||||||||
Accumulated depreciation and amortization |
( |
) | ( |
) | ||||
Construction in progress |
||||||||
$ | $ | |||||||
Original Cost |
Accumulated Amortization |
Net Book Value |
||||||||||
Developed technology |
$ | $ | ( |
) | $ | |||||||
Trade names and trademarks |
( |
) | ||||||||||
Customer relationship |
( |
) | ||||||||||
Independent sales agency network |
( |
) | — |
|||||||||
Patent |
( |
) | — |
|||||||||
Non-compete agreements |
( |
) | ||||||||||
Total |
$ | $ | ( |
) | $ | |||||||
Original Cost |
Accumulated Amortization |
Net Book Value |
||||||||||
Developed technology |
$ | $ | ( |
) | $ | |||||||
Trade names and trademarks |
( |
) | ||||||||||
Customer relationship |
( |
) | ||||||||||
Independent sales agency network |
( |
) | — |
|||||||||
Patent |
( |
) | — |
|||||||||
Non-compete agreements |
( |
) | ||||||||||
Total |
$ | $ | ( |
) | $ | |||||||
2022 |
$ | |||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
Thereafter |
||||
Total |
$ | |||
December 31, |
||||||||
2021 |
2020 |
|||||||
Personnel costs |
$ | $ | ||||||
Royalties |
||||||||
Accrued but unpaid lease obligations and interest |
— | |||||||
Other |
||||||||
$ | $ | |||||||
Employee |
Facility |
|||||||
Liability balance as of December 31, 2019 |
$ | $ | ||||||
Expenses |
||||||||
Cash distributions |
||||||||
Liability balance as of December 31, 2020 |
||||||||
Expenses |
||||||||
Cash distributions |
( |
) | ( |
) | ||||
Liability balance as of December 31, 2021 |
$ | $ | ||||||
December 31, |
||||||||
2021 |
2020 |
|||||||
Line of credit |
$ | $ | ||||||
Term loan |
||||||||
Less debt discount and debt issuance cost |
( |
) | ( |
) | ||||
Term loan, net of debt discount and debt issuance cost |
$ | $ | ||||||
2022 |
$ | |||
2023 |
||||
2024 |
||||
2025 |
||||
2026 and beyond |
||||
Total |
$ | |||
December 31, |
||||||||
2021 |
2020 |
|||||||
Shares reserved for issuance for outstanding options |
||||||||
Shares reserved for issuance for outstanding restricted stock units |
||||||||
Shares reserved for issuance for future grants |
||||||||
Total shares of authorized common stock reserved for future issuance |
||||||||
Number of Shares |
Weighted Average Grant Date Fair Value |
|||||||
Unvested at December 31, 2020 |
$ | |||||||
Granted |
||||||||
Vested |
( |
) | ||||||
Canceled/Forfeited |
( |
) | ||||||
Unvested at December 31, 2021 |
$ | |||||||
Year Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Risk-free interest rate |
% | % | ||||||
Expected term (in years) |
||||||||
Expected volatility |
% | % | ||||||
Expected dividend yield |
% | % | ||||||
Exercise price |
$ | $ | ||||||
Underlying stock price |
$ | $ |
Number of Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term |
Aggregate Intrinsic Value |
|||||||||||||
(in years) |
||||||||||||||||
Outstanding as of December 31, 2020 |
$ | |||||||||||||||
Granted |
||||||||||||||||
Exercised |
( |
) | ||||||||||||||
Canceled / forfeited |
( |
) | ||||||||||||||
Outstanding as of December 31, 2021 |
||||||||||||||||
Options exercisable as of December 31, 2021 |
||||||||||||||||
Options vested or expected to vest as of December 31, 2021 |
$ | |||||||||||||||
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Income tax expense (benefit): |
||||||||||||
Current tax expense (benefit) |
||||||||||||
Federal |
$ | — | $ | ( |
) | $ | ( |
) | ||||
State |
||||||||||||
Foreign |
( |
) | ||||||||||
Total current tax expense |
||||||||||||
Deferred tax expense (benefit) |
||||||||||||
Federal |
( |
) | ||||||||||
State |
( |
) | — | — | ||||||||
Foreign |
— | |||||||||||
Total deferred tax expense |
( |
) | ||||||||||
Total income tax expense (benefit) |
$ | ( |
) | $ | $ | |||||||
December 31, |
||||||||
2021 |
2020 |
|||||||
Net operating loss carryforwards |
||||||||
Federal |
$ | $ | ||||||
State |
||||||||
Foreign |
||||||||
Other |
||||||||
163j interest |
— | |||||||
Stock-based compensation |
||||||||
Finance leases |
||||||||
Operating leases |
|
|
|
|
|
|
— |
|
Fixed assets |
||||||||
|
|
|
|
|||||
Net deferred tax assets before valuation allowance |
||||||||
Valuation allowance |
— | ( |
) | |||||
ROU assets |
|
|
( |
) | |
|
— |
|
Intangibles |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Net deferred tax assets |
$ | $ | ||||||
|
|
|
|
December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
U.S. federal statutory income tax rate |
% | % | % | |||||||||
Federal valuation allowance |
( |
)% | ( |
)% | ( |
)% | ||||||
State valuation allowance |
( |
)% | ( |
)% | ( |
)% | ||||||
State and local income taxes |
% | % | % | |||||||||
Nondeductible expenses |
% | % | ( |
)% | ||||||||
Uncertain tax position reserves |
% | % | ( |
)% | ||||||||
Research and development credits |
% | % | ( |
)% | ||||||||
|
|
|
|
|
|
|||||||
Effective income tax rate |
( |
)% | % | ( |
)% | |||||||
|
|
|
|
|
|
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Gross balance at beginning of year |
$ | $ | $ | |||||||||
Additions based on tax positions related to the current period |
||||||||||||
Reductions for tax positions of prior years |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Gross balance at end of year |
$ | $ | $ | |||||||||
|
|
|
|
|
|
Year Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Numerator: |
||||||||||||
Net Income (loss) |
$ | $ | $ | ( |
) | |||||||
Less: Non-cash dividend to warrant holders |
— | — | ||||||||||
|
|
|
|
|
|
|||||||
Net Income (loss) attributable to common shareholders |
$ | $ | $ | ( |
) | |||||||
|
|
|
|
|
|
|||||||
Denominator: |
||||||||||||
Weighted average common shares outstanding—basic |
||||||||||||
Dilutive effect of restricted stock units |
— | |||||||||||
Dilutive effect of options |
— | |||||||||||
|
|
|
|
|
|
|||||||
Weighted-average common shares outstanding—diluted |
||||||||||||
Earnings (loss) per share—basic |
$ | $ | $ | ( |
) | |||||||
|
|
|
|
|
|
|||||||
Earnings (loss) per share—diluted |
$ | $ | $ | ( |
) | |||||||
|
|
|
|
|
|
December 31, |
||||||||
2021 |
2020 |
|||||||
Principal portion of rent in arrears |
$ |
$ |
||||||
Interest portion of rent in arrears |
— |
|||||||
Unpaid operating and common area maintenance costs |
||||||||
|
|
|
|
|||||
Total accrued but unpaid lease obligations |
$ |
$ |
||||||
Accrued interest on accrued but unpaid lease obligations |
$ |
$ |
Classification |
|
|
Year Ended December 31, 2021 |
|||||
Finance lease |
|
|
||||||
Amortization of right-of-use |
COGS and SG&A | |
|
$ | ||||
Interest on lease liabilities |
Interest Expense | |
|
|||||
|
|
|
|
|||||
Total Finance lease cost |
|
|
||||||
Operating lease cost |
COGS, R&D, SG&A | |
|
|||||
Short-term lease cost |
COGS, R&D, SG&A | |
|
|||||
Variable lease cost |
COGS, R&D, SG&A | |
|
|||||
|
|
|
|
|||||
Total lease cost |
|
|
$ | |||||
|
|
|
|
December 31, 2021 |
January 1 2021 |
|||||||
Property and equipment, gross |
$ | $ | ||||||
Accumulated depreciation |
( |
) | ( |
) | ||||
|
|
|
|
|||||
t |
$ | $ | ||||||
|
|
|
|
|||||
s |
$ | $ | ||||||
Finance lease long-term obligations |
||||||||
|
|
|
|
|||||
Total finance lease liabilities |
$ | $ | ||||||
|
|
|
|
Year Ended December 31, 2021 |
||||
Cash paid for amounts included in the measurement of lease liabilities: |
||||
Operating cash flows for operating leases |
$ |
|||
Operating cash flows for finance leases |
$ |
|||
Financing cash flows for finance leases |
$ |
|||
Right-of-use assets obtained in exchange for lease obligations—upon adoption: |
||||
Operating leases |
$ |
|||
Finance leases |
— | |||
Right-of-use assets obtained in exchange for lease obligations—post adoption: |
||||
Operating leases |
$ |
|||
Finance leases |
— |
December 31, 2021 |
||||
Weighted-average remaining lease term |
||||
Finance leases |
||||
Operating leases |
December 31, 2021 |
||||
Weighted-average discount rate |
||||
Finance leases |
% | |||
Operating leases |
% |
Operating leases |
Finance leases |
|||||||
2022 |
$ | $ | ||||||
2023 |
||||||||
2024 |
||||||||
2025 |
||||||||
2026 |
||||||||
Thereafter |
||||||||
|
|
|
|
|||||
Total lease payments |
||||||||
Less: interest |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total lease liabilities |
$ | $ | ||||||
|
|
|
|
Exhibit 21.1
SUBSIDIARIES OF ORGANOGENESIS HOLDINGS INC.
NAME OF ORGANIZATION |
JURISDICTION | |
Organogenesis Inc. |
Delaware | |
Prime Merger Sub, LLC |
Delaware | |
Organogenesis Switzerland GmbH |
Switzerland |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements on Forms S-3 (No. 333-229003 and 333-233621) and Form S-8 (No. 333-229601) of Organogenesis Holdings Inc. of our report dated March 1 2022, relating to the consolidated financial statements of Organogenesis Holdings Inc. and its subsidiaries, appearing in this Annual Report on Form 10-K of Organogenesis Holdings Inc. for the year ended December 31, 2021.
/s/ RSM US LLP |
Boston, Massachusetts |
March 1, 2022 |
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gary S. Gillheeney, Sr., certify that:
1. I have reviewed this Annual Report on Form 10-K of Organogenesis Holdings Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls over financial reporting.
Date: March 1, 2022
/s/ Gary S. Gillheeney, Sr. |
Gary S. Gillheeney, Sr. |
Chief Executive Officer |
(Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David Francisco, certify that:
1. I have reviewed this Annual Report on Form 10-K of Organogenesis Holdings Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls over financial reporting.
Date: March 1, 2022
/s/ David Francisco |
David Francisco |
Chief Financial Officer |
(Principal Financial and Accounting Officer) |
Exhibit 32.1
Certification of Periodic Financial Report
Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Each of the undersigned officers of Organogenesis Holdings Inc. (the Company) certifies, to his knowledge and solely for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-K of the Company for the year ended December 31, 2021 complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: March 1, 2022
/s/ Gary S. Gillheeney, Sr. |
Gary S. Gillheeney, Sr. |
Chief Executive Officer (Principal Executive Officer) |
Dated: March 1, 2022
/s/ David Francisco |
David Francisco |
Chief Financial Officer (Principal Financial and Accounting Officer) |
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