Revenue

Distribution Model

The Company receives payments from its customers based on billing schedules established in each contract. Up-front payments and fees are recorded as deferred revenue upon receipt or when due and

may

require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. As of

September 30, 2019,

deferred revenue was

$28

thousand.

The Company has agreements with DePuy Synthes Mitek Sports Medicine, a division of DePuy Orthopaedics, Inc. (“Mitek”) that include the grant of certain licenses, performance of development services, and supply of product. Revenues from the agreements with Mitek represent

71%

and

70%

of total Company revenues for the

three

- and

nine

-month periods ended

September 30, 2019,

respectively. The Company has agreements with other customers that

may

include the delivery of a license and supply of product.

Hybrid Commercial Model

The Company recently completed the implementation of a U.S.-based hybrid commercial model through which the Company launched TACTOSET, its surgically-delivered bone repair therapy, in the

third

quarter of

2019.

The Company sells TACTOSET utilizing a network of regional and local distributors in conjunction with its own small internal sales team.

The Company recognizes revenue from TACTOSET product sales when the customer obtains control or upon utilization of the Company’s product in return for agreed-upon, fixed-price consideration. Revenues were

not

significant for the period. Performance obligations are settled upon transfer or utilization of the Company’s product to the customer. The Company’s payment terms are consistent with prevailing practice in the respective markets in which the Company does business. The Company’s customers make payments based on fixed-price terms, which are

not

affected by contingent events that could impact the transaction price. Payment terms fall within the

one

-year guidance for the practical expedient, which allows the Company to forgo adjustment of the contractual payment amount of consideration for the effects of a significant financing component. Product returns are only accepted at the discretion of the Company and are

not

expected to be significant. The Company accrues for sales returns and allowances on TACTOSET based upon research performed and current market conditions. The Company assesses the risk of loss on accounts receivable and adjusts the allowance for doubtful accounts based on this risk assessment, and this adjustment is

not

expected to be significant. Management believes that the allowance for doubtful accounts is adequate to provide for probable losses resulting from accounts receivable. The Company sells to a diversified base of customers and, therefore, believes there is

material concentration of credit risk.

Product and Total Revenue

Product revenue by product group was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Orthobiologics	$	26,765	$	24,097	$	74,975	$	69,778
Surgical		578		1,191		4,071		3,700
Dermal		417		80		990		163
Other		1,855		1,413		4,709		4,940
Product Revenue	$	29,615	$	26,781	$	84,745	$	78,581

Total revenue by geographic location was as follows:

	Three Months Ended September 30,
	2019					2018
	Total		Percentage of			Total		Percentage of
	Revenue		Revenue			Revenue		Revenue
Geographic Location:
United States	$	23,512		79	%	$	21,695		81	%
Europe		3,943		13	%		3,132		12	%
Other		2,242		8	%		1,960		7	%
Total Revenue	$	29,697		100	%	$	26,787		100	%

	Nine Months Ended September 30,
	2019					2018
	Total		Percentage of			Total		Percentage of
	Revenue		Revenue			Revenue		Revenue
Geographic Location:
United States	$	66,538		78	%	$	63,377		81	%
Europe		11,396		14	%		9,021		11	%
Other		6,904		8	%		6,201		8	%
Total Revenue	$	84,838		100	%	$	78,599		100	%

May 2, 2018,

the Company publicly disclosed a voluntary recall of certain lots of its HYAFF-based products, HYALOFAST, HYALOGRAFT C, and HYALOMATRIX. The Company initiated the recall after internal quality testing, which indicated that the products were at risk of

not

maintaining certain measures throughout their entire shelf life. While there was

indication of any safety or efficacy issue related to the products at the time, the Company removed the products from the field as a precautionary measure. During the

three

-month period ended

March 31, 2018,

the Company recorded a revenue reserve for this voluntary recall of

$1.1

million of which

$0.9

million was related to revenue recorded in prior periods. The adjustments related to the initial revenue reserve subsequent to

June 30, 2018

were immaterial. The revenue reserves impacted Dermal and Orthobiologics product groups and all geographic locations. Recall recovery activities were completed during the

fourth

quarter of

2018,

and product shipments resumed in

December 2018.