(Mark One) | |||||
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the fiscal year ended December 31, | |||||
OR | |||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| |||||
59-2417093 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, AORT New York Stock Exchange o Large accelerated filer x Non-accelerated filer o ☐ Yes o No x 41,225,138. Document Parts Into Which Incorporated Proxy Statement for the Annual Meeting of Stockholders to be filed within 120 days after December 31, Part III TABLE OF CONTENTS Forward-Looking Statements PART I world. I indication means that an aortic Aortic Dissections On-X heart valves are bileaflet mechanical valves composed of a graphite substrate coated with FDA. Thoracic Stents and Stent Grafts The TM NEXUS The first implant of the next generation NEXUS DUO, the dual branch graft system in the NEXUS product line, occurred in the fourth quarter of 2022 as a limited market release. E-nside TM Cook. Cook. graft. We received the final production lots of E-ventus BX in May 2023 and we anticipate substantially depleting the remaining inventory through the first quarter of fiscal year 2024. devices. Other We are currently transitioning our PhotoFix CE Mark to our new Notified Body, DEKRA. See Part I, Item 1A, “Risk Factors—Industry Risks—Our products and tissues are highly regulated and subject to significant quality and regulatory risks,” for a discussion of the risks related to our PhotoFix CE Mark. business abandonment. PerClot is an absorbable powdered hemostat, consisting of plant starch modified into ultra-hydrophilic, adhesive-forming hemostatic polymers. PerClot granules are biocompatible, absorbable polysaccharides containing no animal or human components. PerClot granules have a molecular structure that rapidly absorbs water, forming a gelled adhesive matrix that provides a mechanical barrier to any further bleeding and results in the accumulation of platelets, red blood cells, and coagulation proteins (thrombin, fibrinogen, etc.) at the site of application. PerClot does not require additional operating room preparation or special storage conditions and is easy to apply. PerClot is readily dissolved by saline irrigation and is totally absorbed by the body within several days. Our physician relations and education staff, clinical research staff, and field representatives assist physicians by providing educational materials, seminars, and clinics on methods for using our products and implanting tissue preserved by us, including virtual and remote We maintain a headquarters. effectiveness data. The MDR is ongoing. The FDA granted Breakthrough Device Designation in the first quarter of 2020 for Arcevo LSA, and in the second quarter of 2020 for E-vita Our main facilities are in Kennesaw, Georgia; Austin, Texas; and Hechingen, Germany, where the local supply of qualified personnel in the medical device and tissue processing industries is limited and competition for such personnel is intense and has become increasingly more so The Company strives to provide equal opportunity to all applicants and employees, including those from diverse backgrounds. While a number of these protocols were lessened or eliminated upon the waning of the COVID-19 pandemic, we continue to look for opportunities to provide a safer, healthier, work environment for our employees. energy shortages, travel disruptions, currency fluctuation, and disruptions to banking systems or capital markets. 1. Operations and Comprehensive Loss. Our ability to realize the anticipated business opportunities, growth prospects, cost savings, synergies, and other benefits of these and other transactions depends on a number of factors including our ability to: The Corporate Rebrand involved significant financial and resource investment and will continue to do so as we complete our global brand transitions over the coming years. The anticipated benefits of the Corporate Rebrand may not be achieved within the anticipated timeframe, without additional near or long-term investment, or at all. Any of these factors could negatively impact our revenues, earnings per share, decrease or delay the expected accretive effect of the Corporate Rebrand, and negatively impact the price of our common stock. Most recently, the European Parliament extended the MDR transition period under Regulation (EU) 2023/607 but it is still unclear whether this extension will be able to mitigate the challenges posed by the transition to the MDR. In order for devices to qualify for the extended MDR transition period, manufacturers must submit a formal application to the relevant notified body by May 26, 2024, and the applicant and notified body must enter into a signed written agreement no later than September 26, 2024. If we are unable to obtain agreements covering our products by that time, the presently applicable extensions will expire and impact our ability to market those devices. published at this time. increased risk. matters or efforts by certain governmental authorities to reduce such emphasis. Our enterprise risk management framework assesses cybersecurity threats alongside other company risks as part of our overall risk assessment process. This approach involves collaboration between enterprise risk professionals and subject matter experts to identify and assess material cybersecurity threat risks, their severity, and potential mitigations. We leverage various tools and services, including network monitoring, vulnerability assessments, penetration testing, and tabletop exercises, to enhance our risk identification and assessment capabilities. manufacture aortic stent grafts. In April 2022 we opened a distribution center in Singapore to support sales activities in the APAC region. PART II 2021 High Low First quarter $ 26.60 $ 21.65 Second quarter 32.34 21.86 Third quarter 29.13 22.16 Fourth quarter 23.20 16.95 2020 High Low First quarter $ 31.77 $ 12.63 Second quarter 25.52 15.95 Third quarter 21.93 16.13 Fourth quarter 24.10 16.60 2021. Total Number of Common Shares Dollar Value Purchased as of Common Shares Total Number of Average Price Part of Publicly That May Yet Be Common Shares Paid per Announced Purchased Under the Period Purchased Common Share Plans or Programs Plans or Programs 10/01/21 - 10/31/21 -- $ -- -- $ -- 11/01/21 - 11/30/21 422 21.21 -- -- 12/01/21 - 12/31/21 423 18.37 -- -- Total 845 $ 19.79 -- $ -- 2023. Under our new Ares Credit Agreement (further described in Liquidity and Capital Resources section in Part II, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations”), we are prohibited from repurchasing our common stock, except for the repurchase of stock from our employees or directors when tendered in payment of taxes or the exercise price of stock options, upon the satisfaction of certain requirements. [Reserved] Critical Accounting Policies assumptions. The following are accounting policies that we believe are most important to the portrayal of our financial condition and results of operations and may involve a higher degree of judgment and complexity. net potential future payments. The fair value hierarchy. 2022 Revenues as a Percentage of Total Revenues for the Revenues for the Twelve Months Ended Twelve Months Ended December 31, December 31, 2021 2020 Percent Change 2021 2020 Products: Aortic stents and stent grafts $ 85,387 $ 61,663 38% 28% 24% Surgical sealants 70,714 62,068 14% 24% 25% On-X 57,363 48,053 19% 19% 19% Other 8,133 7,515 8% 3% 3% Total products 221,597 179,299 24% 74% 71% Preservation services 77,239 73,928 4% 26% 29% Total $ 298,836 $ 253,227 18% 100% 100% periods presented: 2022. Surgical Sealants 2022. The increase in other revenues for the twelve months ended December 31, June 30, 2023. short-term renewal provisions. 2022. The increase in Cost of Products and Preservation Services Twelve Months Ended December 31, 2021 2020 Cost of products $ 65,196 $ 50,128 2022. Twelve Months Ended December 31, 2021 2020 Cost of preservation services $ 36,126 $ 35,315 2022. Twelve Months Ended December 31, 2021 2020 Gross margin $ 197,514 $ 167,784 Gross margin as a percentage of total revenues 66% 66% Operating Expenses Twelve Months Ended December 31, 2021 2020 General, administrative, and marketing expenses $ 169,774 $ 141,136 General, administrative, and marketing expenses as a percentage of total revenues 57% 56% 2022. Twelve Months Ended December 31, 2021 2020 Research and development expenses $ 35,546 $ 24,207 Research and development expenses as a percentage of total revenues 12% 10% 2022, respectively, related to PerClot pre-launch inventory manufactured as part of the Baxter transaction. upon receipt of the PerClot PMA in May 2023. Twelve Months Ended December 31, 2021 2020 Loss before income taxes $ (14,827) $ (17,174) Income tax expense (benefit) 7 (492) Net loss $ (14,834) $ (16,682) Diluted loss per common share $ (0.38) $ (0.44) Diluted weighted-average common shares outstanding 38,983 37,861 pandemic in certain regions. 2022. foreign derived intangible income deduction. credit. companies. Products is seasonal, as these products have not fully penetrated many markets and, therefore, the nature of any seasonal trends may not yet be obvious. . exercises. In addition, we will be required to pay fees of 0.50% per annum on the daily unused amount of the Revolving Credit Facility and 1.00% per annum on the daily unused amount of the Delayed Draw Term Loan Facility. We Year Ended December 31, 2021 2020 Cash flows provided by (used in): Operating activities $ (2,585) $ 12,369 Investing activities 5,660 (73,128) Financing activities (12,223) 93,608 Effect of exchange rate changes on cash, cash equivalents, and restricted securities 2,200 (5,185) (Decrease) increase in cash, cash equivalents, and restricted securities $ (6,948) $ 27,664 2022. expense, $5.0 million of fair value adjustment of long-term loan, and $4.8 million of write-down of inventories and deferred preservation costs. payments of short-term notes payable. As part of the transaction with Baxter, We have revenues and expenses that are denominated in foreign currencies. Specifically, a portion of our international aortic stent Item 8. Financial Statements and Supplementary Data. Management’s Report on Internal 2023. Report of Independent Registered Public Accounting Firm Description of the Matter Report of Independent Registered Public Accounting Firm 23, 2024 Artivion, Inc. and Subsidiaries December 31, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 55,010 $ 61,412 Restricted securities -- 546 Trade receivables, net 53,019 45,964 Other receivables 5,086 2,788 Inventories, net 76,971 73,038 Deferred preservation costs, net 42,863 36,546 Prepaid expenses and other 14,748 14,295 Total current assets 247,697 234,589 Goodwill 250,000 260,061 Acquired technology, net 166,994 186,091 Operating lease right-of-use assets, net 45,714 18,571 Property and equipment, net 37,521 33,077 Other intangibles, net 34,502 40,966 Deferred income taxes 2,357 1,446 Other long-term assets 8,267 14,603 Total assets $ 793,052 $ 789,404 Artivion, Inc. and Subsidiaries December 31, 2021 2020 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 10,395 $ 9,623 Accrued expenses 7,687 7,472 Accrued compensation 13,163 10,192 Taxes payable 3,634 2,808 Accrued procurement fees 3,689 3,619 Current portion of finance lease obligation 528 614 Current maturities of operating leases 3,149 5,763 Current portion of long-term debt 1,630 1,195 Current portion of contingent consideration -- 16,430 Other 1,078 2,752 Total current liabilities 44,953 60,468 Long-term debt 307,493 290,468 Contingent consideration 49,400 43,500 Non-current maturities of operating leases 44,869 14,034 Non-current finance lease obligations 4,374 5,300 Deferred income taxes 28,799 34,713 Deferred compensation liability 5,952 5,518 Other 6,484 6,690 Total liabilities 492,324 460,691 Commitments and contingencies Shareholders' equity: Preferred stock $0.01 par value per share, 5,000 shares authorized, 0 shares issued -- -- Common stock $0.01 par value per share, 75,000 shares authorized, 41,397 and 40,394 shares issued as of December 31, 2021 and 2020, respectively 414 404 Additional paid-in capital 322,874 316,192 Retained earnings 1,975 20,022 Accumulated other comprehensive (loss) income (9,887) 6,743 Treasury stock at cost, 1,487 shares as of December 31, 2021 and 2020 (14,648) (14,648) Total shareholders' equity 300,728 328,713 Total liabilities and shareholders' equity $ 793,052 $ 789,404 Artivion, Inc. and Subsidiaries Year Ended December 31, 2021 2020 2019 Revenues: Products $ 221,597 $ 179,299 $ 197,246 Preservation services 77,239 73,928 78,976 Total revenues 298,836 253,227 276,222 Cost of products and preservation services: Products 65,196 50,128 55,022 Preservation services 36,126 35,315 38,187 Total cost of products and preservation services 101,322 85,443 93,209 Gross margin 197,514 167,784 183,013 Operating expenses: General, administrative, and marketing 169,774 141,136 143,011 Research and development 35,546 24,207 22,960 Total operating expenses 205,320 165,343 165,971 Gain from sale of non-financial assets (15,923) -- -- Operating income 8,117 2,441 17,042 Interest expense 16,887 16,698 14,886 Interest income (79) (217) (738) Other expense, net 6,136 3,134 1,250 (Loss) income before income taxes (14,827) (17,174) 1,644 Income tax expense (benefit) 7 (492) (76) Net (loss) income $ (14,834) $ (16,682) $ 1,720 (Loss) income per share: Basic $ (0.38) $ (0.44) $ 0.05 Diluted $ (0.38) $ (0.44) $ 0.05 Weighted-average common shares outstanding: Basic 38,983 37,861 37,118 Diluted 38,983 37,861 37,860 Net (loss) income $ (14,834) $ (16,682) $ 1,720 Other Comprehensive loss: Foreign currency translation adjustments (16,630) 15,332 (2,517) Comprehensive loss $ (31,464) $ (1,350) $ (797) Artivion, Inc. and Subsidiaries Year Ended December 31, 2021 2020 2019 Net cash flows from operating activities: Net (loss) income $ (14,834) $ (16,682) $ 1,720 Adjustments to reconcile net (loss) income to net cash from operating activities: Depreciation and amortization 23,977 20,712 18,317 Non-cash compensation 10,711 6,912 8,799 Change in fair value of contingent consideration 8,870 4,523 -- Non-cash lease expense 7,521 7,145 5,009 Write-down of inventories and deferred preservation costs 5,377 3,443 1,488 Write-off of Endospan Option 4,944 -- -- Non-cash interest expense 2,005 3,656 1,631 Change in fair value of long-term loan receivable 409 4,949 -- Deferred income taxes (4,470) 4,283 (2,305) Gain on sale of non-financial assets (15,923) -- -- Other 2,060 124 551 Changes in operating assets and liabilities: Prepaid expenses and other assets (1,404) (2,720) (6,177) Accounts payable, accrued expenses, and other liabilities (1,893) (9,157) 251 Receivables (11,560) 9,938 (5,332) Inventories and deferred preservation costs (18,375) (24,757) (8,125) Net cash flows (used in) provided by operating activities (2,585) 12,369 15,827 Net cash flows from investing activities: Proceeds from sale of non-financial assets, net 19,000 -- -- Ascyrus Acquisition, net of cash acquired -- (59,119) -- Payments for Endospan agreement -- (5,000) (15,000) Capital expenditures (13,091) (7,328) (8,072) Other (249) (1,681) (871) Net cash flows provided by (used in) investing activities 5,660 (73,128) (23,943) Net cash flows from financing activities: Proceeds from exercise of stock options and issuance of common stock 3,756 2,432 4,758 Proceeds from issuance of convertible debt -- 100,000 -- Proceeds from revolving line of credit -- 30,000 -- Proceeds from financing insurance premiums -- 2,815 -- Repayment of revolving line of credit -- (30,000) -- Redemption and repurchase of stock to cover tax withholdings (1,914) (1,995) (2,743) Payment of debt issuance costs (2,219) (3,647) -- Repayment of debt (3,085) (5,346) (2,780) Payment of contingent consideration (8,200) -- -- Other (561) (651) (728) Net cash flows (used in) provided by financing activities (12,223) 93,608 (1,493) Effect of exchange rate changes on cash, cash equivalents, and restricted securities 2,200 (5,185) 1,667 (Decrease) increase in cash, cash equivalents, and restricted securities (6,948) 27,664 (7,942) Cash, cash equivalents, and restricted securities, beginning of year 61,958 34,294 42,236 Cash, cash equivalents, and restricted securities, end of year $ 55,010 $ 61,958 $ 34,294 See accompanying Notes to Consolidated Financial Statements. Artivion, Inc. and Subsidiaries Accumulated Additional Other Total Common Paid In Retained Comprehensive Treasury Shareholders' Stock Capital Earnings (Loss) Income Stock Equity Shares Amount Shares Amount Balance at December 31, 2018 38,463 $ 385 $ 260,361 $ 34,984 $ (6,072) (1,484) $ (14,591) $ 275,067 Net income -- -- -- 1,720 -- -- -- 1,720 Other comprehensive loss -- -- -- -- (2,517) -- -- (2,517) Equity compensation 254 2 9,409 -- -- -- -- 9,411 Exercise of options 334 3 3,292 -- -- -- -- 3,295 Employee stock purchase plan 61 1 1,462 -- -- -- -- 1,463 Redemption and repurchase of stock to cover tax withholdings (94) (1) (2,742) -- -- -- -- (2,743) Balance at December 31, 2019 39,018 $ 390 $ 271,782 $ 36,704 $ (8,589) (1,484) $ (14,591) $ 285,696 Net loss -- -- -- (16,682) -- -- -- (16,682) Other comprehensive income -- -- -- -- 15,332 -- -- 15,332 Stock issued for the Ascyrus Acquisition 992 10 19,990 -- -- -- -- 20,000 Equity component of the convertible note issuance -- -- 16,426 -- -- -- -- 16,426 Equity compensation 296 3 7,501 -- -- -- -- 7,504 Exercise of options 89 1 927 -- -- (3) (57) 871 Employee stock purchase plan 83 1 1,560 -- -- -- -- 1,561 Redemption and repurchase of stock to cover tax withholdings (84) (1) (1,994) -- -- -- -- (1,995) Balance at December 31, 2020 40,394 $ 404 $ 316,192 $ 20,022 $ 6,743 (1,487) $ (14,648) $ 328,713 Net loss -- -- -- (14,834) -- -- -- (14,834) Other comprehensive loss -- -- -- -- (16,630) -- -- (16,630) Stock issued for contingent consideration 553 6 9,994 -- -- -- -- 10,000 Adoption of ASU 2020-06 -- -- (16,426) (3,213) -- -- -- (19,639) Equity compensation 260 3 11,274 -- -- -- -- 11,277 Exercise of options 179 1 2,145 -- -- -- -- 2,146 Employee stock purchase plan 87 1 1,608 -- -- -- -- 1,609 Redemption and repurchase of stock to cover tax withholdings (76) (1) (1,913) -- -- -- -- (1,914) Balance at December 31, 2021 41,397 $ 414 $ 322,874 $ 1,975 $ (9,887) (1,487) $ (14,648) $ 300,728 Artivion, Inc. and Subsidiaries Revenue Recognition Shipping and Handling Charges The unrealized loss from foreign currency intra-entity loans that are of long term investment nature was $6.4 million for the year ended December 31, 2022. Financial Instruments 2021 2020 2019 Cash paid during the year for: Interest $ 14,407 $ 13,049 $ 13,297 Income taxes 5,483 4,122 1,944 Non-cash investing and financing activities: Issuance of common stock for Ascyrus Acquisition $ -- $ 20,000 $ -- Issuance of common stock for contingent consideration 10,000 -- -- Operating lease right of use assets 31,726 1,864 2,604 Accounts Receivable and Allowance for Doubtful Accounts inventory. net These costs are then allocated among the tissues processed during the period based on cost drivers, such as the number of donors or number of tissues processed. We apply a yield estimate to all tissues in process and in quarantine to estimate the portion of tissues that will ultimately become implantable. We estimate quarantine and in process yields based on our historical yield experience with similar tissues and 2021 2020 Equipment and software $ 73,820 $ 66,141 Furniture and fixtures 6,668 6,186 Leasehold improvements 39,175 38,256 Total property and equipment 119,663 110,583 Less accumulated depreciation and amortization 82,142 77,506 Property and equipment, net $ 37,521 $ 33,077 2021 2020 2019 Depreciation expense $ 7,157 $ 6,948 $ 7,467 Our definite lived intangible assets consist of acquired technologies, customer lists and relationships, distribution and manufacturing rights and know-how, patents, and other intangible assets. We amortize our definite lived intangible assets over their expected useful lives using the straight-line method, which we believe approximates the period of economic benefits of the related assets. Our indefinite lived intangible assets do not amortize but are instead subject to periodic impairment testing as discussed in “Impairments of Long-Lived Assets and Debt Issuance Costs Assessing the recoverability of deferred tax assets involves judgment and complexity including the consideration of prudent and feasible tax planning. Estimates and judgments used in the determination of the need for a valuation allowance and in calculating the amount of a needed valuation allowance include, but are not limited to, the following: New Accounting Pronouncements 2. Sale of PerClot Leases Topic 842 (“ASC 842”) by bifurcating the lease and non-lease components and recognizing each component based on ASC 842 and ASU 2014-09, Revenue from Contracts with Customers Topic 606. The amount of lease revenue was $278,000 for the twelve months ended December 31, 2023. The contingent consideration represents the estimated fair value of future potential payments. The fair value of the contingent consideration liability was estimated by discounting to present value the contingent payments expected to be made based on a probability-weighted scenario approach. We applied a discount rate based on our unsecured credit spread and the term commensurate risk-free rate to the additional consideration to be paid, and then applied a risk-based estimate of the probability of achieving each scenario to calculate the fair value of the contingent consideration. This fair value measurement was based on unobservable inputs, including management estimates and assumptions about the future achievement of milestones and future estimate of revenues, and is, therefore, classified as Level 3 within the fair value hierarchy presented in Note 5. We used a discount rate of distribution rights for NEXUS, and under a subsequent amendment, the NEXUS DUO (collectively the “NEXUS Products”) and accessories in certain countries in Europe in exchange for a fixed distribution fee of $9.0 million paid in September 2019. 5. Financial Instruments December 31, 2021 Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds $ 10,015 -- -- $ 10,015 Total assets $ 10,015 $ -- $ -- $ 10,015 Long-term liabilities: Contingent consideration -- -- (49,400) (49,400) Total liabilities $ -- $ -- $ (49,400) $ (49,400) December 31, 2020 Level 1 Level 2 Level 3 Total Cash equivalents: Money market funds $ 11,484 -- -- $ 11,484 Restricted securities: Money market funds 546 -- -- 546 Endospan loan -- -- 409 409 Total assets $ 12,030 $ -- $ 409 $ 12,439 Current liabilities: Contingent consideration -- -- (16,430) (16,430) Long-term liabilities: Contingent consideration -- -- (43,500) (43,500) Total liabilities $ -- $ -- $ (59,930) $ (59,930) Endospan Loan Contingent Consideration Balance as of December 31, 2020 $ 409 $ (59,930) Payments -- 20,000 Change in valuation (409) (9,470) Balance as of December 31, 2021 $ -- $ (49,400) Unrealized Estimated Holding Market December 31, 2021 Cost Basis Gains Value Cash equivalents: Money market funds $ 10,015 -- $ 10,015 Total assets $ 10,015 $ -- $ 10,015 Unrealized Estimated Holding Market December 31, 2020 Cost Basis Gains Value Cash equivalents: Money market funds $ 11,484 -- $ 11,484 Restricted securities: Money market funds 546 -- 546 Total assets $ 12,030 $ -- $ 12,030 net 2021 2020 Raw materials and supplies $ 35,780 $ 33,625 Work-in-process 9,712 6,318 Finished goods 31,479 33,095 Total inventories, net $ 76,971 $ 73,038 Deferred preservation costs, net at December 31, 2021 2020 Cardiac tissues $ 20,591 $ 17,374 Vascular tissues 22,272 19,172 Total deferred preservation costs, net $ 42,863 $ 36,546 2021 2020 Goodwill $ 250,000 $ 260,061 In-process R&D 2,208 2,392 Procurement contracts and agreements 2,013 2,013 Trademarks 66 765 2022. 2021 2020 Balance as of January 1, $ 260,061 $ 186,697 Ascyrus acquisition (942) 63,357 Revaluation of goodwill denominated in foreign currency (9,119) 10,007 Balance as of December 31, $ 250,000 $ 260,061 Definite Lived Intangible Assets Weighted Average Gross Carrying Accumulated Net Carrying Useful Life December 31, 2021 Value Amortization Value (Years) Acquired technology $ 213,626 $ 46,632 $ 166,994 17.7 Other intangibles: Customer lists and relationships 31,148 9,618 21,530 20.5 Distribution and manufacturing rights and know-how 9,847 4,308 5,539 5.0 Patents 4,083 3,144 939 17.0 Other 3,969 1,762 2,207 4.4 Total other intangibles $ 49,047 $ 18,832 $ 30,215 10.6 Weighted Average Gross Carrying Accumulated Net Carrying Useful Life December 31, 2020 Value Amortization Value (Years) Acquired technology $ 222,182 $ 36,091 $ 186,091 17.6 Other intangibles: Customer lists and relationships 31,316 8,132 23,184 20.5 Distribution and manufacturing rights and know-how 14,728 5,349 9,379 6.1 Patents 3,966 3,113 853 17.0 Other 3,453 1,073 2,380 4.4 Total other intangibles $ 53,463 $ 17,667 $ 35,796 10.8 Amortization Expense 2021 2020 2019 Amortization expense $ 16,820 $ 13,764 $ 10,850 2022 2023 2024 2025 2026 Total Amortization expense $ 15,765 $ 15,261 $ 14,885 $ 12,878 $ 12,650 $ 71,439 61 2021 2020 2019 Domestic $ (10,263) $ (11,443) $ 6,369 Foreign (4,564) (5,731) (4,725) (Loss) income before income taxes $ (14,827) $ (17,174) $ 1,644 2021 2020 2019 Current: Federal $ 1,896 $ (2,460) $ 48 State 551 445 80 Foreign 3,391 707 2,041 5,838 (1,308) 2,169 Deferred: Federal (2,801) 1,721 (850) State (307) 384 (131) Foreign (2,723) (1,289) (1,264) (5,831) 816 (2,245) Income tax expense (benefit) $ 7 $ (492) $ (76) Our income tax expense 2021 2020 2019 Tax expense (benefit) at statutory rate $ (3,114) $ (3,606) $ 345 Increase (reduction) in income taxes resulting from: Valuation allowance change 1,566 3,952 153 Foreign income taxes 1,138 378 425 Nondeductible executive compensation 1,075 580 778 Net change in uncertain tax positions 762 (1,115) (360) Foreign interest disallowance 307 298 292 State income taxes, net of federal benefit 73 (455) (108) Nondeductible entertainment expenses 65 94 201 Foreign deferred items 53 (63) 365 Equity compensation (477) (204) (1,921) Research and development credit (959) (457) (400) Other (482) 106 154 Total income tax expense (benefit) $ 7 $ (492) $ (76) 2021 2020 Deferred tax assets: Finance and operating leases $ 13,762 $ 6,880 Loss carryforwards 6,649 7,911 Excess interest carryforward 3,547 2,660 Accrued expenses 2,088 2,002 Stock compensation 2,007 2,034 Deferred compensation 1,535 1,326 Property 1,356 1,397 Credit carryforwards 601 1,214 Inventory and deferred preservation costs write-downs 397 308 Other 3,770 2,798 Less valuation allowance (13,282) (7,170) Total deferred tax assets, net 22,430 21,360 2021 2020 Deferred tax liabilities: Intangible assets (29,086) (35,770) Finance and operating leases (13,404) (6,617) Unrealized gains and losses (4,088) (4,929) Debt costs (1,024) (1,528) Prepaid items (395) (417) Inventory and deferred preservation costs write-downs (105) -- Financing arrangements -- (4,700) Other (770) (665) Total deferred tax liabilities (48,872) (54,626) Total deferred tax liabilities, net $ (26,442) $ (33,266) 2021 2020 2019 Beginning balance $ 2,574 $ 3,523 $ 3,889 Increases related to current year tax positions 1,661 473 691 Decreases due to the lapsing of statutes of limitations (241) (1,703) (880) Decreases related to prior year tax positions (170) (238) (154) (Decreases) increases for foreign exchange differences (121) 99 (22) Increases (decreases) related to prior year tax positions 386 420 (1) Ending balance $ 4,089 $ 2,574 $ 3,523 We recorded non-current liabilities of Operating leases: December 31, 2021 December 31, 2020 Operating lease right-of-use assets $ 58,097 $ 28,242 Accumulated amortization (12,383) (9,671) Operating lease right-of-use assets, net $ 45,714 $ 18,571 Current maturities of operating leases $ 3,149 $ 5,763 Non-current maturities of operating leases 44,869 14,034 Total operating lease liabilities $ 48,018 $ 19,797 Finance leases: Property and equipment, at cost $ 6,759 $ 7,620 Accumulated amortization (2,105) (1,905) Property and equipment, net $ 4,654 $ 5,715 Current maturities of finance leases $ 528 $ 614 Non-current maturities of finance leases 4,374 5,300 Total finance lease liabilities $ 4,902 $ 5,914 Weighted average remaining lease term (in years): Operating leases 12.5 5.1 Finance leases 8.8 9.8 Weighted average discount rate: Operating leases 5.8% 5.2% Finance leases 2.0% 2.0% Current maturities of finance leases are included as a component of Other current December 31, 2021 December 31, 2020 Amortization of property and equipment $ 596 $ 643 Interest expense on finance leases 110 118 Total finance lease expense 706 761 Operating lease expensea 7,521 7,145 Sublease income (399) (905) Total lease expense $ 7,828 $ 7,001 aTotal rental expense for operating leases was Cash paid for amounts included in the measurement of lease liabilities: 2021 2020 Operating cash flows for operating leases $ 6,061 $ 7,407 Financing cash flows for finance leases 557 653 Operating cash flows for finance leases 105 126 Finance Operating Sublease Leases Leases Income 2022 $ 600 $ 5,928 $ 306 2023 629 5,619 -- 2024 623 6,174 -- 2025 599 5,188 -- 2026 579 4,797 -- Thereafter 2,318 42,210 -- Total minimum lease payments $ 5,348 $ 69,916 $ 306 Less amount representing interest 446 21,898 Present value of net minimum lease payments 4,902 48,018 Less current maturities 528 3,149 Lease obligations, less current maturities $ 4,374 $ 44,869 The Credit Agreement includes certain customary events of default that include, among other things, non-payment of principal, interest, or fees; inaccuracy of representations and warranties; breach of covenants; cross-default to certain material indebtedness; bankruptcy and insolvency; and change of control. Upon the occurrence and during the continuance of an event of default, the lenders may declare all outstanding principal and accrued but unpaid interest under the Credit Agreement immediately due and payable and may exercise the other rights and remedies provided under the Credit Agreement and related loan documents. we entered into a credit and guaranty agreement with Ares Management Credit funds to borrow up to $350.0 million senior secured, interest-only, credit facilities. Upon closing, we borrowed a total of $220.0 million which we used, along with cash on hand, to pay off outstanding debt related to the Credit Agreement and related fees and expenses. See Note 17 for further discussion of our new Credit and Guaranty Agreement. The interest expense recognized on the Convertible Senior Notes includes approximately $5.0 million for the aggregate of the contractual coupon interest and the amortization of the debt issuance costs during the twelve months ended December 31, 2023. The interest expense recognized on the Convertible Senior Notes includes approximately $4.9 million for the aggregate of the contractual coupon interest and the amortization of the debt issuance Holders of the Convertible Senior Notes may convert their notes at their option at any time prior to January 1, 2025 but only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the As of December 31, 2021 2020 Term loan balance $ 216,000 $ 218,250 Convertible senior notes 100,000 79,555 2.45% Sparkasse Zollernalb (KFW Loan 1) 566 886 1.40% Sparkasse Zollernalb (KFW Loan 2) 1,061 1,457 Total loan balance 317,627 300,148 Less unamortized loan origination costs (8,504) (8,485) Net borrowings 309,123 291,663 Less short-term loan balance, net (1,630) (1,195) Long-term loan balance, net $ 307,493 $ 290,468 2022 2023 2024 2025 2026 Thereafter Total Maturities $ 2,785 $ 2,785 $ 2,596 $ 102,462 $ 2,250 $ 204,749 $ 317,627 geographic regions: 2021 2020 2019 Domestic hospitals $ 150,301 $ 137,810 $ 144,538 International hospitals 106,639 80,524 85,241 International distributors 41,046 34,429 40,427 CardioGenesis cardiac laser therapy 850 464 6,016 Total sources of revenue $ 298,836 $ 253,227 $ 276,222 2022: Authorized Available for Grant Plan Shares 2021 2020 1996 Discounted Employee Stock Purchase Plan, as amended 1,900,000 63,000 150,000 2009 Equity and Cash Incentive Plan 7,570,000 -- 52,000 2020 Equity and Cash Incentive Plan 4,105,000 3,310,000 4,094,000 Total 13,575,000 3,373,000 4,296,000 2020 ECIP. A summary of stock grant activity for the years ended December 31, Weighted Average Grant Date RSAs Shares Fair Value Unvested at December 31, 2018 326,000 $ 17.19 Granted 93,000 29.77 Vested (149,000) 14.45 Forfeited (27,000) 20.53 Unvested at December 31, 2019 243,000 23.30 Granted 123,000 24.70 Vested (108,000) 20.66 Unvested at December 31, 2020 258,000 25.08 Granted 140,000 25.68 Vested (130,000) 22.40 Forfeited (33,000) 27.39 Unvested at December 31, 2021 235,000 26.59 Weighted Average Remaining Aggregate Contractual Intrinsic RSUs Shares Term in years Value Unvested at December 31, 2018 251,000 1.05 $ 7,123,000 Granted 103,000 Vested (101,000) Forfeited (27,000) Unvested at December 31, 2019 226,000 0.93 6,131,000 Granted 141,000 Vested (118,000) Forfeited (37,000) Unvested at December 31, 2020 212,000 1.02 5,015,000 Granted 144,000 Vested (93,000) Forfeited (39,000) Unvested at December 31, 2021 224,000 0.94 4,558,000 Vested and expected to vest 224,000 0.94 $ 4,558,000 Weighted Average Remaining Aggregate Contractual Intrinsic PSUs Shares Term in years Value Unvested at December 31, 2018 147,000 0.72 $ 4,179,000 Granted 322,000 Vested (87,000) Forfeited (35,000) Unvested at December 31, 2019 347,000 2.33 9,400,000 Granted 70,000 Vested (55,000) Forfeited (31,000) Unvested at December 31, 2020 331,000 1.64 7,805,000 Granted 215,000 Vested (60,000) Forfeited (114,000) Unvested at December 31, 2021 372,000 0.90 7,579,000 Vested and expected to vest 372,000 0.90 $ 7,579,000 During the years ended December 31, Weighted Average Weighted Remaining Aggregate Average Contractual Intrinsic Shares Exercise Price Term in years Value Outstanding at December 31, 2018 1,333,000 $ 13.04 3.93 $ 20,439,000 Granted 169,000 29.62 Exercised (334,000) 9.87 Forfeited (39,000) 22.64 Outstanding at December 31, 2019 1,129,000 16.14 3.67 12,763,000 Granted 212,000 26.24 Exercised (88,000) 10.49 Forfeited (12,000) 27.36 Outstanding at December 31, 2020 1,241,000 18.16 3.38 8,215,000 Granted 226,000 24.90 Exercised (179,000) 12.02 Forfeited (42,000) 26.00 Outstanding at December 31, 2021 1,246,000 20.00 3.20 4,038,931 Vested and expected to vest 1,246,000 $ 20.00 3.20 $ 4,038,931 Exercisable at December 31, 2021 873,000 $ 17.48 2.19 $ 4,038,931 Other information concerning stock options for the years ended December 31 2021 2020 2019 Weighted-average fair value of options granted $ 8.82 $ 8.64 $ 11.47 Intrinsic value of options exercised 2,716,000 1,267,000 6,519,000 2021 2020 2019 Stock ESPP Stock ESPP Stock ESPP Options Options Options Options Options Options Expected life of options 5.00 Years 0.50 Years 5.00 Years 0.50 Years 5.00 Years 0.50 Years Expected stock price volatility 0.40 0.45 0.35 0.52 0.40 0.39 Risk-free interest rate 0.57% 0.07% 1.41% 1.00% 2.54% 2.35% 2021 2020 2019 RSA, RSU, and PSU expense $ 9,023 $ 5,288 $ 7,451 Stock option and ESPP option expense 2,254 2,216 1,960 Total stock compensation expense $ 11,277 $ 7,504 $ 9,411 Included in the total stock compensation expense, as applicable in each period, were expenses related to RSAs, RSUs, PSUs, and stock options issued in each respective year, as well as those issued in prior periods that continue to vest during the period, and compensation related to our ESPP. These amounts were recorded as stock compensation expense and were subject to our normal allocation of expenses to inventory costs and deferred preservation costs. We capitalized Basic (loss) income per common share 2021 2020 2019 Net (loss) income $ (14,834) $ (16,682) $ 1,720 Net loss (income) allocated to participating securities 94 111 (12) Net (loss) income allocated to common shareholders $ (14,740) $ (16,571) $ 1,708 Basic weighted-average common shares outstanding 38,983 37,861 37,118 Basic (loss) income per common share $ (0.38) $ (0.44) $ 0.05 Diluted (loss) income per common share 2021 2020 2019 Net (loss) income $ (14,834) $ (16,682) $ 1,720 Net loss (income) allocated to participating securities 94 111 (12) Net (loss) income allocated to common shareholders $ (14,740) $ (16,571) $ 1,708 Basic weighted-average common shares outstanding 38,983 37,861 37,118 Effect of dilutive options and awardsa - - 742 Diluted weighted-average common shares outstanding 38,983 37,861 37,860 Diluted (loss) income per common share $ (0.38) $ (0.44) $ 0.05 The following table summarizes revenues, cost of products and preservation services, and gross margins for our reportable segments (in thousands): 2021 2020 2019 Revenues: Medical devices $ 221,597 $ 179,299 $ 197,246 Preservation services 77,239 73,928 78,976 Total revenues 298,836 253,227 276,222 Cost of products and preservation services: Medical devices 65,196 50,128 55,022 Preservation services 36,126 35,315 38,187 Total cost of products and preservation services 101,322 85,443 93,209 Gross margin: Medical devices 156,401 129,171 142,224 Preservation services 41,113 38,613 40,789 Total gross margin $ 197,514 $ 167,784 $ 183,013 2021 2020 2019 Products: Aortic stents and stent grafts $ 85,387 $ 61,663 $ 64,974 Surgical sealants 70,714 62,068 68,611 On-X 57,363 48,053 50,096 Other 8,133 7,515 13,565 Total products 221,597 179,299 197,246 Preservation services: 77,239 73,928 78,976 Total revenues $ 298,836 $ 253,227 $ 276,222 2021 2020 2019 US $ 151,151 $ 138,274 $ 150,553 International 147,685 114,953 125,669 Total revenues $ 298,836 $ 253,227 $ 276,222 December 31, 2022, and 10% for the year ended December 31, 2021 . 17. Subsequent Events PART III J. Patrick Mackin John E. Davis Matthew A. Getz Andrew M. Green Jean F. Holloway, Esq. Amy D. Horton, CPA Rochelle L. Maney Marshall S. Stanton, M.D. Andrew M. Green was appointed to the position of Vice President, Regulatory affairs in March 2021. Mr. Green has Robert C. Thomson, Ph.D. was appointed to the position of Vice President, Research and Development in June of 2023. Dr. Thomson brings more than 27 years of diverse R&D, technology, marketing, and business experience in the medical device industry. During his career at W.L. Gore, he successfully developed and globally commercialized several cardiovascular devices, including combination products. Dr. Thomson served as a senior director leading Peripheral vascular device R&D teams and businesses for several years before transitioning into the development of Aortic therapies. During this period, he held a senior management position leading teams focused on the development of an endovascular product portfolio. Prior to joining Artivion, he most recently led cardiac and vascular R&D and service development teams while also serving on an executive medical device review board. Dr. Thomson has held 2 US patents and has authored 15 peer-reviewed scientific publications. He received his Ph.D. in Biomedical Engineering from Rice University, where he currently serves as a Bioengineering Advisory Board Member and holds a Bachelor of Science in Chemical Engineering from the University of Edinburgh in Scotland. 2023. 2023. PART IV Financial Statements. SIGNATURES ARTIVION, INC. /s/ J. PATRICK MACKIN February /s/J. J. Patrick Mackin Finance Lance A. Berry Amy D. Horton Daniel J Bevevino Elizabeth A. Hoff Jon W. Salveson Description 2.1 2.2 2.3 3.1 3.2 3.3 3.4 4.2 4.3 4.4 10.1(a)† 10.1(b)† 10.1(c)† 10.1(d)† 10.2(a)† 10.2(b)† 10.2(c)† 10.2(d)†∞ 10.2(e)†∞ 10.2(f)†∞ 10.3 10.3(a)† 10.3(d) 10.13(a)+ 10.14(a) 10.14(b) 10.14(c) 10.14(d) 10.15(a) 10.15(c) 10.15(d)++ 10.16++ 10.16(a)++ 10.16(b)++ 10.16(c)++ 10.16(d)+ 10.17(a) 10.18++ 10.18(a)++ 10.19++ 10.20 10.21+ 10.21(a)+ 31.2* 32** 97.1* 101.INS* XBRL Instance Document 101.SCH* XBRL Taxonomy Extension Schema Document 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* XBRL Taxonomy Extension Definition Linkbase 101.LAB* XBRL Taxonomy Extension Label Linkbase Document 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File – formatted as Inline XBRL and contained in Exhibit 101
Delaware Delaware
59-2417093
1655 Roberts Boulevard N.W., Kennesaw, GA 30144
(Address of principal executive offices) (zip code)$.01$0.01 par valuexAccelerated filer o oSmaller reporting company o Emerging growth company o ¨o20212023 the aggregate market value of the voting stock of the Registrant held by non-affiliates of the registrant was $1,069,799,941$666,252,083 computed using the closing price of $28.40$17.19 per share of Common Stock on June 30, 2021,2023, the last trading day of the registrant’s most recently completed second fiscal quarter, as reported by the New York Stock Exchange, based on management’s belief that Registrant has no affiliates other than its directors and executive officers.18, 202216, 2024 the number of outstanding shares of Common Stock of the registrant was 40,115,521.202110-K and reflect the views of management as of the date of this Form 10-K.•Our belief that new products, new indications, global expansion, and business development are the four growth areas that will drive our business in the future;•The potential impact of the COVID-19 pandemicand similar pandemics and the wars in Ukraine and in the Gaza Strip and around Israel, may have on product demand for and sales of our product sales,products and services, business operations, manufacturing operations, supply chain, cash flow, workforce, clinical and regulatory timelines, and our research and development projects;•Our belief thatThe potential impact general global, regional, or national economic downturns and macroeconomic trends, including heightened inflation, interest rate and currency fluctuations, as well as general or localized economic slowdowns or recessions may have on demand for and sales of our products and services, including ordering trends for international distributors may delay or reduce purchases of products inbased on currency fluctuations against the US Dollars depending on the relative price of goods in their local currencies;dollar, and our business operations, manufacturing operations, supply chain, and workforce;•Our beliefs thatabout the userobustness of surgical adhesivesour global supply chain in light of current global and sealants, with or without suturesmacroeconomic conditions and staples, for certain indications can enhanceabout the efficacypotential impact of supply chain disruptions, particularly disruptions to single and cost-effectivenesssole source suppliers and third-party manufacturing partners;certain procedures through more effectiveour clinical trials and rapid wound closure;product launches;•Our beliefs and anticipation regarding the favorable attributes, benefits, and benefitsclinical advantages of our products and services, the basis on which our products and services compete, the benefits of our physician education activities, and the advantages of our relationships with organ and tissue procurement organizations and tissue banks,banks;FDA classificationfuture regulatory status of our medical devices and processed tissues, our compliance with applicable laws and regulations, and the advantages of our intellectual property and its significanceability to make timely transitions to our segmentsNotified Bodies and obtain renewals for our Conformité Européenne Mark product certification impacted by Brexit and the transition to the Medical Device Regulation in Europe, and the impact these transitions, renewals, and related processes may have on our business, including any impact on our customers' ordering patterns and our business as a whole, our relations with our employees, timelines regarding product launches and regulatory certifications, clearances, renewals, and approvals;ability to supply products;Our beliefs about potential competition and competitive products, potential adverse regulatory consequences, potential security vulnerabilities, and the associated potential adverse effects on our business;Our beliefs about the impact of the contaminated saline solution and the tissue processed with contaminated saline solution we identified in the fourth quarter of 2020;•Our beliefs regarding our global expansion efforts, including the international growth opportunity that would be provided by obtaining regulatory approval for BioGlue in China;•Our beliefs regarding the impact lower INR anticoagulation therapy and transcatheter heart valve replacement may have on the number of patients choosing On-X mechanical heart valves;milestones for the regulatory approvals of the NEXUS stent graft system in the US and the AMDS globally;milestones;•Our beliefs regarding the fair value of our acquisitions, divestitures, and other business development activities and the estimates and assumptions about the future achievements of milestones and future revenues and cash flows related to those business development activities, including our ability to achieve the milestones in the Ascyrus and Baxter Transaction;transactions;•Our beliefs about the anticipated benefits from our corporate reincorporation and rebranding and the risks posed by the same;Our beliefs about the present value and potential impairment of our intangible assets and leases;Our beliefs about the timing for handpiece availability and CardioGenesis cardiac laser therapy revenue;Our beliefs regarding the impact alternative anticoagulation therapy may and transcatheter heart valve replacement have on the number of patients choosing On-X mechanical heart valves;Our beliefs about our ability to make timely transitions to our notified bodies and obtain renewals for our CE Marks impacted by Brexit and the transition to the Medical Device Regulation (“MDR”) in Europe, our ability to obtain derogations related to the same, and the impact these renewals and derogations may have on our business;Our beliefs about our R&D and product pipeline, including our beliefs about the timing of our clinical trials and product launches;•Our belief that revenues for preservation services, particularly revenues for certain high-demand cardiac tissues, can vary from quarter to quarterquarter-to-quarter and year to yearyear-to-year due to a variety of factors including: quantity and type of incoming tissues, yields of tissue through the preservation process, timing of receipt of donor information, staffing levels, timing of the release of tissues to an implantable status, demand for certain tissue types due to the number and type of procedures being performed, and pressures from competing products or services;•Our beliefs regarding the seasonal nature of the demand for some of our products and services and the reasons for such seasonality, if any, and regarding the impact of consignment inventory on product sales, if any;•Our belief that our cash from operations and existing cash and cash equivalents will enable us to meet our current operational liquidity needs for at least the next twelve months, our expectations regarding future cash requirements, and the impact that our cash requirements might have on our cash flows for the next twelve months;•Our expectation regarding the impact on cash flows of undertaking significant business development activities and the potential need to obtain additional debt financing or equity financing;•Our belief that we will incur expenses for research and development projects, including for clinical research projects to gain regulatory approvals for products or indications, including On-X, aortic stents and stent grafts, and BioGlue products, and for research and development for new products despite reduced planned spending due to COVID-19 and that our efforts to develop new products and technologies which will likely require additional investment, research, and new clinical studies or data;•Our beliefs about pending and potential legal or other governmental or regulatory proceedings;•Our expectations regarding the timing and impact of clinical research work and regulatory approvals for and expected distribution ofcertain products or indications, including On-X, aortic stents and stent grafts, and BioGlue products, and the CryoValve SGPVSG pulmonary heart valve if the FDAUS Food and Drug Administration reclassifies allograft heart valves as Class III medical devices;•Our beliefs and expectations regarding the utilization of net operating loss carryforwards from our acquisitions of JOTEC, On-X Life Technologies, Inc., Hemosphere, Inc., and Cardiogenesis Corporation;•Our beliefs about our operating results which may fluctuate significantly on a periodic basis as a result of internal and external factors, including reduced demand for our products, the potential impact of GLP-1 drugs, healthcare workforce trends and labor disputes, regulatory challenges, the availability of products, materials, and supplies, strategic actions we take such as acquisitions or divestitures, unanticipated costs and expenses, market reception of our new or improved product offerings, and interest rate and currency fluctuations; and•Other statements regarding projections of future financial and business performance; anticipated growth and trends in our business and the markets relevant to our business, including ashow our growth relates to our competitors; the robustness and reliability of our workforce and supply chain; future production capacity and product supply; the availability and benefits of our products in the future; and the expected timing and impact of our strategic initiatives. however, is subject to a number of risks and uncertainties which could cause actual results to differ materially and adversely from our expectations, including, without limitation, in addition to those specified in the text surrounding such statements, the risk factors discussed in Item 1A of this Form 10-K and other factors, many of which are beyond our control. Consequently, all of the forward-looking statements made in this Form 10-K are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized, or even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. Readers are urged to carefully review and consider the various disclosures made in this Form 10-K and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. Unless specifically indicated otherwise, the forward-looking statements in this Form 10-K do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that have not been completed as of the date of this filing. We assume no obligation, and expressly disclaim any duty, to update publicly any such forward-looking statements, whether as a result of new information, future events, or otherwise.stents and stent grafts, surgical sealants, On-X® mechanical heart valves and related surgical products (“On-X” products), and implantable cardiac and vascular human tissues. Aortic stents and stent grafts include JOTEC®aortic arch stent grafts, abdominal stent grafts, and surgical products (collectively, “JOTEC Products”),synthetic vascular grafts. Aortic arch stent grafts include our E-vita® Open NEO, E-vita Open Plus, the Ascyrus Medical Dissection Stent (“AMDS”) hybrid prosthesis,, and the NEXUS® endovascular stent graft system (“NEXUS”), the NEXUS DUO.TM aortic arch stent graft (“NEXUS DUO”), and E-vita Thoracic 3G products. Abdominal stent grafts include our E-xtra Design Engineering (including ArtivexTM), E-nsideTM, E-tegraTM, E-ventusTM BX, and E-liacTM products. Surgical sealants include our BioGlue®Surgical Adhesive products (“BioGlue”) products. . In addition to these four major product families, we sell or distribute PhotoFix® bovine surgical patches (“PhotoFix”) and CardioGenesis® cardiac laser therapy Therion® chorioamniotic allografts (previously marketed(prior to our abandonment of the business as NeoPatch®),of June 30, 2023). We began to manufacture and supply PerClot® hemostatic powder (prior to(“PerClot”) during the sale to a subsidiarysecond quarter of 2023 (as part of the Transitional Manufacturing and Supply Agreement (“TMSA”) of the Baxter International, Inc (“Baxter”))Transaction, described below).and On-X Life Technologies, Inc. (“On-X”On-X LTI”), an Austin, Texas-based mechanical heart valve company acquired on January 20, 2016, Ascyrus Medical GmbH, a manufacturing entity founded in September 2020, as well as separateapproximately twenty additional country entities to support direct sales operations in Brazil, Canada, France, Italy, Poland, Spain, Switzerland, and the UK. Additionally, we have entities in Australia, China, Korea, Singapore, Thailand, and Vietnam, to provide sales and marketing support forthroughout the Asia Pacific region.stents and stent grafts, surgical sealants, On-X products, and other product revenues. The Preservation Services segment includes services revenues from the preservation of cardiac and vascular implantable human tissues. See Part II, Item 8, Note 1816 of the “Notes to Consolidated Financial Statements” for further information on our segments and for our geographic information.•New Products – Through product development and commercialization of new and next-generation products and services focused on aortic repair;•New Indications – Through regulatory approvals in new markets and for new products, and through approvals for expanded indications for our existing products and services;•Global Expansion – By entering new international markets, establishing new international direct sales territories, and developing our commercial infrastructure in new markets, including emerging markets, such as China and Brazil; and•Business Development – By pursuing select acquisitions, licensing, and distribution opportunities that are aligned to our objectives and complement our existing products, services, and infrastructure. Examples include our acquisitions of JOTEC, On-X LTI, and Ascyrus Medical LLC (“Ascyrus”), and our distribution agreement and purchase option for NEXUS.NEXUS and NEXUS DUO (the “NEXUS Products”). To the extent that we identify, develop, or acquire non-core products or applications, we may dispose of these assets or pursue licensing or distribution agreements with third-party partners for development or commercialization such as with the sale of the PerClot product line.Markets, Products, Services, and Competition
assureensure that our current or future competitors will not succeed in developing alternative technologies, products, or services that have advantages over those that have been, or are being, developed by us or that would render our products or technologies obsolete or non-competitive. Any of these competitive disadvantages could materially, adversely affect us.Tetralogytetralogy of Fallot, Truncus Arteriosus,fallot, truncus arteriosus, and Pulmonary Atresiapulmonary atresia can require complex cardiac reconstructive surgery to repair the defect. A variety of tissues and synthetic materials are implanted in these cardiac procedures. Implantable human tissues (homografts)(allografts) and animal tissues (xenografts) as well as other synthetic materials may be used in cardiac procedures. Implantable devices may be entirely synthetic, such as mechanical heart valves, or contain both synthetic materials and xenograft tissue components, such as bioprosthetic heart valves. These devices may be implanted surgically through open heart surgery, or in some cases, without sternotomy through transcatheter valve replacement.PatientsPatients who receive mechanical heart valves are required to undergo long-term blood thinning or anticoagulation drug therapy to minimize the risk of thromboembolism, stroke, or other complications from the formation of blood clots.2015 years, after which the valve typically must be replaced. These valves typically contain a synthetic sewing ring to facilitate surgical implantation. Patients receiving a bioprosthetic heart valve may not require long-term anticoagulation drug therapy, although some of these patients may require anticoagulation drug therapy for other heart or vascular conditions that are common in this patient population.tends to causemay lead some patients to choose bioprosthetic heart valves over mechanical heart valves.homograft,allograft, or a human heart valve, during aortic valve replacement surgery due to endocarditis. The Classhomograftallograft is the recommended course of treatment when endocarditis has functionally destroyed the aortic valve annulus. The previous Class II indication meant that it was an acceptable course of treatment. Consequently, for many physicians, human heart valves are the preferred alternative to animal-derived and mechanical valves for patients who have, or are at risk to contract, endocarditis. also not as susceptible to progressive calcification as glutaraldehyde-fixed bioprosthetic tissues. A Ross Procedure may be a preferred surgical technique by physicians and patients, particularly for young patients, due to the human heart valve’s long-term resistance to calcification and the patient’s relative freedom from re-intervention surgery. In a Ross Procedure, a diseased aortic valve is replaced with a patient’s own pulmonary valve, which is in turn replaced with a donated human pulmonary valve.throughfrom the aortic valve to the rest of the body. It extends upwards from the heart through the aortic arch and then down through the chest and into the abdomen, where it divides into arteries that supply each leg. leg. The aorta is comprised of five segments: ascending, arch, thoracic, thoraco-abdominal, and abdominal. In some patients, part of the aorta can become abnormally large or bulge, referred to as an “aneurysm.”, a portfolio of stent grafts tailor-made for a patient’s anatomy for TAAA repair, and the E-liacTM for repair of aneurysms in the iliac arteries, as well as less differentiated products, including the E-vita® Thoracic 3G for TAA repair and the E-tegraTM for AAA repair.Syndrome,syndrome, and patients with bicuspid aortic valves (two leaflets on the valve instead of three) are more likely to develop aortic dissection.dissection. In addition, asas an aneurysm grows, the wall of the aorta is progressively weakened until it can split or tear, resulting in a ruptured aorta or an aortic dissection.dissection. Left untreated, an aortic dissection often results in a ruptured aorta, leading to death.aorta.aorta. We sell the E-vita Open Plus, E-vita Open Neo,NEO, and AMDS as well as distribute the NEXUS Products to treat these conditions impacting the aortic arch and thoracic aorta.transplant.transplant. Patients with ESRD often undergo hemodialysis through an access site with an implanted vascular graft. We market our CryoVein® femoral vein and CryoArtery® femoral artery vascular preservation services for vascular access., including those made of bovine or porcine tissue, can be used for a variety of vascular repair procedures. Bioprosthetic grafts are readily available and are a relatively inexpensive solution for those requiring a vascular repair procedure. Bioprosthetic tissues are typically processed with glutaraldehyde, which may result in progressive calcification.patients.patients. The transplant of human tissue that has not been preserved must be accomplished within extremely short time limits. Cryopreservation expands the treatment options available by extending these timelines.On-X’sour silicon-free pyrolytic carbon coating that provides a smooth microstructure surface. We believe that the smooth pyrolytic carbon surface and other characteristics of the valve, such as full, 90-degree leaflet opening of the valve and flared valve inlet, contribute to the flow dynamics of the On-X valve. The On-X AAP is an On-X aortic valve combined with a synthetic vascular graft to allow physicians to more conveniently treat patients requiring both an aortic valve replacement and replacement of a portion of the ascending aorta with an aortic graft. Each device is available in a range of valve sizes in a variety of sewing ring options to suit physicians’ preferences, along with dedicated instruments to facilitate valve sizing and implantation. On-X heart valves are FDA approved for the replacement of diseased, damaged, or malfunctioning native or prosthetic heart valves in the aortic and mitral positions and are classified as a Class III medical device. We also hold a Conformité Européene Mark product certification (“CE Mark”) for On-X heart valves.PROACT was a prospective, randomized, controlled clinical trial comparing a reduced versus standard warfarin dose for On-X heart valve recipients. the aortic valve replacement arm of PROACT, the reduced warfarin dose group had 60% fewer bleeding events without an increased risk of stroke. As a consequence, in 2015 the FDA approved the On-X aortic valve for use with a lower INR (International Normalized Ratio), which means that patients with On-X aortic heart valves can be managed on lower doses of warfarin for anticoagulation. This new indication was, and still is, unique to the On-X aortic valve.valve and was based on a prospective, randomized, controlled clinical trial called PROACT comparing a reduced versus standard warfarin dose for On-X heart valve recipients. In the aortic valve replacement arm of the trial, the reduced warfarin dose group had 60% fewer bleeding events without an increased risk of stroke. The 2020 American Heart Association / American College of Cardiology guidelines specifically mentioned On-X aortic heart valves as the only mechanical aortic heart valve that can be managed at a low INR of 1.5-2.0. Recent real-world data from 510 On-X aortic heart valve patients was presented at the 2023 Annual European Association for Cardio-Thoracic Surgery Conference and showed one-year outcomes of On-X aortic heart valves at low INR (1.5-2.0) reduces risk of major bleeding by more than 84%, proving safe for patients with no significant increase in thromboembolic events and no valve thrombosis.for the On-Xin mechanical mitral heart valve was submitted tovalves has not been approved by the FDA in mid-2021 and is still under FDA review. We currently anticipate receiving FDA approval in 2022.While patients with an On-X aortic heart valve can be safely maintained at a lower INR, patients with mechanical prosthetic heart valves would still benefit by elimination of the need for warfarin anticoagulation therapy, due to warfarin’s significant drawbacks for patients including the need to frequently draw blood for monitoring and to observe certain dietary and alcohol restrictions. We believe that providing an acceptable alternative to warfarin anticoagulation may increase the number of patients choosing an On-X aortic heart valve not only due to the valve’s existing durability and clinical superiority, but also due to the ability to avoid warfarin.As a result, Artivion initiated the PROACT Xa clinical trial to determine if patients with an On-X aortic valve can be maintained safely and effectively on apixaban as an alternative to warfarin, given the drawbacks associated with warfarin. This prospective, randomized, controlled, parallel-arm clinical trial is on-going with enrollment anticipated to be completed in 2022.CORCYMCorcym S.r.l. (who completed acquisition of the LivaNova heart valve business in June 2021) (“Corcym”). On-X heart valves compete with these products based on their features and benefits, such as full, 90-degree leaflet opening, pure pyrolytic carbon, flared inlet, and approved labeling claim for reduced INR for aortic valves.On-X.On-X LTI. We sell On-X heart valves throughout the world including North America, Europe, the Middle East, and Africa (collectively, “EMEA”), Asia Pacific (“APAC”), and Latin America (“LATAM”). Stents and Stent Grafts and thoracic and abdominal aortic disease, such as aortic dissections and aortic aneurysms, as well as in other aortic and peripheral procedures.Neo andNEO hybrid stent graft, with an updated delivery system and improved handling. We obtained a CE Mark for E-vita Open
PlusNEO in the first quarter of 2020 and began limited distribution of E-vita Open NEO in the second quarter of 2020 with full product launch in the fourth quarter of 2020.PlusNEO stent graft system enables a one-stage treatment to repair this condition through a combined surgical and endovascular treatment, providing a more cost-effective solution for the healthcare system and allowing the patient to avoid an additional operation.operation.
hold aobtained marketing approvals in addition to the CE Mark for the E-vita Open Plus and additional marketing approvals have been grantedNEO in other countries throughout the world. The E-vita Open PlusNEO competes outside the US with products from Terumo Medical Corporation (“Terumo”), formerly Vascutek) and two smaller competitors.companies. We do not currently sell E-vita Open Plus in the US and we believe there are no competitive products currently being commercializedNEO in the US. The E-vita Open Plus NEO competes in the EUEurope primarily on its proven stent graft technology and long-term clinical data.E-vita Open Neo is the next generation hybrid stent graftCE Mark for the E-vita Open Plus that has an improved handlingexpired in 2022 and delivery system. We obtained a CE Mark for E-vita Open Neo in the first quarter of 2020 and began limited distribution of E-vita Open Neo inproduct will be discontinued when the second quarter of 2020 with full product launch in the fourth quarter of 2020.remaining inventory is depleted. Medical LLC (“Ascyrus”) in September 2020. Ascyrus has developed the AMDS hybrid prosthesis, the world's first aortic arch remodeling device for use in the treatment of acute Type A aortic dissection. Hemi-arch reconstruction is the standard of care for the treatment of acute Type A aortic dissection. AMDS is used as a complement to, and in conjunction with, hemi-arch reconstruction without adding technical complexity to this life-saving procedure. The design of the AMDS allows for rapid deployment of the graft in the aortic arch during a standard replacement of the ascending aorta, adding on average less than fivefifteen minutes to the procedure time. The deployment of the AMDS preserves the native arch, potentially allowing for minimally invasive re-interventions as needed, including the repair of additional entry tears, rather than an invasive arch repair. In the Dissected Aorta Repair Through Stent (“DARTS”) clinical trial supporting its CE Mark and Health Canada approvals, the AMDS was shown to reduce mortality, complications, and reoperations compared to the standard of care, thereby improving the care of patients and offering significant cost savings for the health care system.We began selling AMDS in September 2020 following the acquisition of Ascyrus. We sell AMDS outside of the US, including in EMEA, Canada, APAC, and LATAM.
We have begun Enrollment for the PERSEVERE clinical trial to gain US approval andwas completed in November of 2023. We currently anticipate first enrollmentreceiving a Premarket Approval (“PMA”) from the FDA for the AMDS in late 2025.first half of 2022.We acquired the exclusive distribution rights Products in certain countries in Europe for NEXUS in September 2019 fromunder an exclusive distribution agreement with Endospan Ltd. (“Endospan”), an Israeli corporation (“Endospan”).corporation. Endospan holds a CE Mark for NEXUS which is the only endovascular stent graft system approved for the repair of both aneurysms and dissections in the aortic arch and markets the NEXUS DUO as a custom-made alternative for flexible aortic arch repair. NEXUS DUO is a low profile, custom made aortic arch system designed to treat a range of aortic arch pathologies including chronic dissection, aortic aneurysm, penetrating aortic ulcer, as well as intramural hematoma. Unlike the NEXUS off-the-shelf device, NEXUS DUO includes a secondary branch designed to minimize surgical preparation for patients undergoing endovascular repair of the aortic arch. While open surgical repair remains the standard of care for complete aortic arch replacement, endovascular repair offers an alternative, less invasive procedure to treat the aortic arch with decreased surgical morbidity and mortality. The ability to repair the aortic arch with an endovascular approach is especially advantageous for elderly patients who are not suited for open surgery and for patients who were previously treated for a Type A dissection in an open surgical approach. The addition of the NEXUS Products to our highly differentiated aortic stent graft portfolio further strengthens our position as a leader in the aortic repair market.Several United States,US, including Cook, Gore, and Bolton Medical.Terumo. The NEXUS Products also competescompete with other manufacturers’ standard open repair and hybrid procedures including aortic debranching, frozen elephant trunk, and thoracic endovascular aortic repair (“TEVAR”) with chimneys or snorkels.We also entered into a securities purchase option agreement with Endospan in September 2019 which provides us the option to purchase all the outstanding securities of Endospan from Endospan’s securityholders at the time of acquisition (or the option to acquire all of Endospan’s assets) up through a certain period of time after FDA approval of NEXUS. Endospan is currently enrolling patients in their US pivotal
IDE trial, TRIOMPHE.aorta.aorta. The E-vita Thoracic 3G is sometimes used in conjunction with the E-vita Open PlusNEO and E-xtra Design Engineering.We holdEngineering.Cook.E-nyaThe E-nya is a thoracic stent graft system for the minimally invasive repair of lesions of the descending aorta, including thoracic aortic aneurysms and dissections. The E-nya system was designed to give physicians more options and control while treating both simple and challenging anatomies. The E-nya builds upon JOTEC’s experience in the thoracic endovascular aortic repair market and increases the number of options to treat a broader range of patients. The system offers both bare spring and covered proximal configurations with tip capture technology, enhancing control and predictability during deployment while achieving optimal outcomes. The lower profile graft material leverages JOTEC’s expertise in textile manufacturing and is designed for both flexibility in conformance and long-term durability.E-nya competes primarily with products from Medtronic, Gore, Cook, and Terumo.We obtained a CE Mark for E-nya in the fourth quarter of 2019 and began limited distribution of E-nya in the second quarter of 2020. We have temporarily suspended this limited release while we implement modifications in response to customer feedback and hope to resume limited market release in early 2023.AbdominalCook.JOTEC hasWe have pioneered a service whereby it manufactureswe can manufacture a customized thoraco-abdominal stent graft within 3 weeks.in three weeks or less. Our custom E-xtra Design Engineering stent graft systems aresystem includes TAAA and ArtivexTM Thoracic Extension Stent Graft System (“Artivex”). Our custom TAAA is often used in conjunction with E-vita Thoracic 3G, as well as the AAA offering, the E-tegra, or in combination with both.We sell In December 2023 we launched Artivex as part of our E-xtra Design Engineering stent graft systems in EMEA. Artivex is indicated for use in both thoraco-abdominal aneurysms and dissections extending into the thoraco-abdominal aorta.E-xtra Design Engineering TAAA competes with customized product offerings from Cook and Terumo. Artivex competes with other thoracic extension products marketed by Medtronic, Gore, Terumo, and Cook.
Cook and Terumo.implantation.implantation. The E-tegra is often used in combination with E-xtra Design Engineering and the E-liac.additionaladditional marketing approvals have been granted in several other countries throughout the world. The E-tegra competes with products from several companies including Medtronic, Gore, Terumo, Endologix, and Cook.graft hasgrafts have a combination of high flexibility together with high radial strength through the combination of the microporous single-layer ePTFE cover and the cobalt chromium stent. The E-ventus BX stent graft featuresgrafts feature minimal recoil and foreshortening and enables secure fixation and positioning in the vessel. The E-ventus BX delivery system has a highly flexible catheter that allows easy advancement in the vessel and enables lesions to be reliably reached by the catheter. Radiopaque markers on the delivery system enable secure and accurate positioning of the stent graft.graft. The E-ventus BX is often used in conjunction with E-xtra Design Engineering products, E-nside stent graft,grafts, and the E-liac stent graft.haswas manufactured by Bentley, who holds a CE Mark for that product and additionaladditional marketing approvals in several other countries throughout the world. The E-ventus BX competes with products from Maquet, Gore, BD, and Bentley InnoMed. TMdevices.additionaladditional marketing approvals have been granted in several other countries throughout the world. The E-liac competes with products from Gore and Cook.Cook.
grafts. Not only are we able to manufacture and sell a broad line of synthetic vascular graft offerings, but also, we are able to manufacture our own nitinol stents, given our expertise incorporating nitinol in our synthetic graft systems.
Vascutek,Terumo, and Maquet. product is a polymer consisting of bovine blood protein and an agent for cross-linking proteins, which was developed for use in cardiac, vascular, neurologic, and pulmonary procedures. BioGlue is stronger than other cardiovascular sealants with a tensile strength that is four to five times that of fibrin sealants. BioGlue begins to polymerize within 20 to 30 seconds, and reaches its bonding strength within two minutes, and it adheres to tissues in a wet field. BioGlue is dispensed through a controlled delivery system that consists of a disposable syringe and various applicator tips. BioGlue syringes are available in pre-filled 2ml, 5ml, and 10ml volumes with applicator tips suitable for various applications. (See also, “Government Regulation – International Approval Requirements” and Part I, Item 1A, “Risk Factors—Industry Risks—Our products and tissues are highly regulated and subject to significant quality and regulatory risks.” for additional discussion about our BioGlue CE Mark). We also distribute BioGlue in Japan where it is approved for adhesion and support of hemostasis for aortotomy closure sites, suture/anastomosis sites (including aortic dissection and anastomosis sites with use of a prosthetic graft), and suture sites on the heart. Additional marketing approvals have been granted for specified applications in severalnumerous other countries throughout the world.Baxter; Ethicon;Baxter, Ethicon, Grena Ltd, Integra LifeSciences;LifeSciences, and Bard, a subsidiary of BD. BioGlue competes with these products based on its features and benefits, such as its strength and ease of use.(stroke),stroke, or deterioration due to calcification.Our cardiac tissues include the CryoValve® SG pulmonary heart valve (“CryoValve SGPV”) and the CryoPatch® SG pulmonary cardiac patch (“CryoPatch SG”) which are both processed with our proprietary SynerGraft® decellularization technology. A multi-center study showed that, at 10 years, freedom from conduit dysfunction was significantly better in patients receiving our proprietary SynerGraft SGPV valves (83%) compared with patients receiving standard allografts
(60%(58%)., valve replacements for women in their child-bearing years, and valve replacements for patients with endocarditis. In addition, implantationimplantation of SynerGraft treated cardiac tissue reduces the risk for induction of Class I and Class II alloantibodies, based on Panel Reactive Antibody (“PRA”) measured at up to one year, compared to standard processed cardiac tissues. We believe that this reduced risk may provide a competitive advantage for CryoValve SGPV and CryoPatch SG for patients who later need a whole organ transplant, because an increased PRA can decrease the number of possible donors for subsequent organ transplants and increase time on transplant waiting lists.lists.
Life Sciences, CORCYM (who completed acquisition of the LivaNova heart valve business in June 2021),Lifesciences, Corcym, and Abbott Laboratories. Laboratories. Alternatives to our human cardiac patches include xenograft SIS and glutaraldehyde fixed bovine pericardial patches. We compete with these xenograft products from companies including Aziyo Biologics, Edwards Life Sciences,Lifesciences, Anteris Technologies, Abbott Laboratories, and Baxter.TechnologiesProducts
Aziyo Biologics, and Abbott Laboratories, based on PhotoFix’s features and benefits, such as the photo-oxidation cross-linking process that does not use glutaraldehyde.glutaraldehyde.
Angina consists of pressure, discomfort, or pain in the chest typically due to narrowed or blocked arteries that are also a cause of ischemic heart disease. Patients with severe angina are often treated with surgical procedures including angioplasty or coronary artery bypass or with medications such as aspirin, nitrates, beta-blockers, statins, or calcium channel blockers. Pain may be chronic or may become pronounced with exercise. Angina can also be treated with Transmyocardial Revascularization (“TMR”), a procedure that can be performed as an open surgical procedure or through a minimally invasive surgery either as a stand-alone procedure or concurrently with coronary artery bypass. During TMR, the surgeon uses a disposable handpiece to deliver precise bursts of laser energy directly to an area of heart muscle that is suffering from ischemic heart disease through a small incision or small ports with the patient under general anesthesia and without stopping the heart. TMR is typically performed with a CO2 or Holmium: YAG laser. It takes approximately 6 to 10 pulses of the laser to traverse the myocardium and create channels of one millimeter in diameter. During a typical procedure, approximately 20 to 40 channels are made in the heart muscle. external openings seal with little blood loss. Angina usually subsides with improved oxygen supply to the targeted areas of the damaged heart muscle. We currently sell the CardioGenesis cardiac laser therapyproduct line to perform TMR.Our CardioGenesis cardiac laser therapy product line consists of Holmium: YAG laser consoles, related service and maintenance, and single-use, fiber-optic handpieces, which are used in TMR to treat patients with severe angina resulting from diffuse coronary artery disease. Patients undergoing TMR treatment with CardioGenesis products have been shown to have angina reduction, longer event-free survival, reduction in cardiac related hospitalizations, and increased exercise tolerance. Our SolarGen 2100s Console (“console”) uses the solid-state technology of the Holmium: YAG laser system to provide a stable and reliable energy platform that is designed to deliver precise energy output. The console has an advanced electronic and cooling system technology, which allows for a smaller and lighter system, while providing 115V power capability. We also provide service plan options to ensure that the console is operating within the critical factory specifications. We sell the SoloGrip® III disposable handpieces (“handpieces”), which consist of multiple, fine fiber-optic strands in a one-millimeter diameter bundle and are designed to work with the console. The handpiece has an ergonomic design and is pre-calibrated in the factory to provide easy and convenient access for treating all regions of the left ventricle. See Part 1, Item I, “Business—Suppliers, Sources, and Availability of Raw Materials and Tissues,” for a discussion of the limitations around our supply of handpieces and consoles.The CardioGenesis cardiac laser therapy product line is FDA approved for treating patients with severe angina that are not responsive to conventional therapy. We began selling the CardioGenesis cardiac laser therapy product line primarily in the US in May 2011 when we completed the acquisition of CardiogenesisCardioGenesis Corporation.Our CardioGenesis cardiac laser therapycompetes with other methods Due to supply-related factors outside of our control, we abandoned the business as of June 2023. See Part II, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information on the treatment of coronary artery disease, including drug therapy, percutaneous coronary intervention, coronary artery bypass surgery, and enhanced external counter pulsation. There is currently no directly competitive laser technology for the performance of TMR as Stryker discontinued the directly competitive CO2 Heart Laser System. Currently, Laser Engineering Inc. services the Stryker laser system, but no more handpieces are being sold. Our CardioGenesis cardiac laser therapy product competes with other methods for the treatment of coronary artery disease on the basis of its ease of use, versatility, size of laser console, and improved access to the treatment area with a smaller fiber-optic system.We did not have a supply of handpieces for cardiac laser therapy while we waited for the FDA to approve our supplier’s change in manufacturing location through our Premarket Approval (“PMA”)-supplement. In January 2021 we received PMA-S approval for this change in manufacturing site and we resumed limited sales of TMR handpieces in the fourth quarter of 2021.We sell handpieces and consoles primarily in the US.PerClotHemostatic agents are frequently utilized as an adjunct to sutures and staples to control intraoperative bleeding. Hemostatic agents prevent excess blood loss and can help maintain good visibility of the operative site. These products may reduce operating room time and decrease the number of blood transfusions required in surgical procedures. Hemostatic agents are available in various forms including pads, sponges, liquids, and powders.PerClot has a CE Mark and additional marketing approvals have been granted in a number of other countries throughout the world. PerClot is indicated for use in surgical procedures, including cardiac, vascular, orthopaedic, neurological, gynecological, ENT, and trauma surgery as an adjunct hemostat when control of bleeding from capillary, venular, or arteriolar vessels by pressure, ligature, and other conventional means is either ineffective or impractical.PerClot competes with various topical absorbable hemostats including offerings from Pfizer, Baxter, Ethicon, Bard, and BioCer Entwicklungs. Other competitive products may include topical thrombin and fibrin sealants. A number of companies have surgical hemostat products under development. PerClot competes on the basis of safety, clinical efficacy, absorption rates, and ease of use.a powdered hemostatic agent, worldwide, except a few countries. In July 2021 we entered into an asset purchase agreement and other ancillary agreements related to the sale of PerClot to a subsidiary of Baxter and an agreement to terminate all of our material agreements with SMI related to PerClot (collectively the “Baxter Transaction”). Under the terms of the Baxter Transaction, we will continue to provide to Baxter certain transition, and manufacturing, and supply services relating to the sale of SMI PerClot outside of the US and manufacture and supply of PerClot to Baxter postin the US.approval.In January 2019 we completed enrolling patients in a clinical trial for the purpose of obtaining FDA PMA approval. In conjunction with Baxter, we submitted the PMAapproval to the FDAcommercialize PerClot in the third quarter of 2021,US, which we transferred to Baxter, and began manufacturing and supplying PerClot for Baxter, as discussed further in “Research and Development and Clinical Research” below.a national accounts manager,managers, and sales and marketing management. Through our field representatives and our physician relations and education department, we conduct field training for surgeons regarding the surgical applications of our products and tissues.90100 direct field service representatives and distributor managers across several countries in the EMEA region in Germany, the UK, France, Spain, Italy, Poland, Austria, Switzerland, Netherlands, Belgium, and Ireland.region. We provide customer service, logistics, marketing, and clinical support to cardiac, vascular, thoracic, and general surgeons throughout the EMEA region.3040 sales and clinical support specialists.programs in 2021.programs. We sponsor programs, and work with other companies such as Endospan to sponsor programs, where surgeons train other surgeons in best-practice techniques. In addition, we host several workshops throughout the year that provide didactic and hands-on training to surgeons. We also produce educational videos for physicians and coordinate peer-to-peer training at various medical institutions. We believe that these activities enhance the medical community’s understanding of the clinical benefits of the products and tissues offered by us and help to differentiate us from other medical device companies and tissue processors.processesmanufacturing or tissue processing fail to meet these requirements or are subject to regulatory enforcement action, they may have to be scrapped, or our products or tissues could be rejected during or after processing, recalled, or rejected by customers. In these cases, we may have to immediately scrap raw or in processin-process materials orand expense the costs of manufacturing or preservation.thethese products, we may not be able to meet demand for these products. Our ability to fully recover all possible losses from these suppliers and contract manufacturers may have practical limitations imposed by factors like industry standard contractual terms or the financial resources of the adverse party.they and/or their facilities cease operations temporarily or permanently, or if those suppliers take unreasonable business positions, we could be forced to cease product manufacturing or tissue processing until the suppliers resume operations, until alternative suppliers cancould be identified and qualified, or permanently if the suppliers do not resume operations and no alternative suppliers could be identified and qualified. We could also be forced to purchase alternative materials, supplies, or services with unfavorable terms due to diminished bargaining power. Ongoing sustaining efforts are in process to find alternative suppliers for single- or sole-source raw materials, supplies, and services wherever feasible. The process of qualifying alternative suppliers and manufacturers could result in additional costs or lengthy delays or may not be possible. ongoing global COVID-19 pandemic, has continued to impact the wars in Ukraine and in the Gaza Strip and around Israel, and other macroeconomic factors are impactingthe global supply chain; the pandemic’stheir impact on workforces, global mobility, material availability, demand, shipping, reorder time, and reliability has reportedly continued or worsened in many cases. Any of these adverse outcomes could have a material, adverse effect on our revenues or profitability.Additional attention has been appliedTable of Contentsmanagingmanage this increased risk and we will continue to adjust as necessary into the future. See also Part I, Item 1A, “Risk Factors – Operational Risks” for our disclosures of risks related to suppliers, sources, and availability of raw materials and tissues.all of our owninternal manufacturing operations at three facilities: Austin, Texas for On-X products, Hechingen, Germany for JOTEC Products,internally manufactured aortic stent grafts, and Kennesaw, Georgia for allmost other products and services. The NEXUS product is solelyCertain aortic stent graft assemblies are manufactured for us by Endospana contract manufacturer in Herzelia, Israel, and theSlovakia. The AMDS product is solely manufactured by a contract manufacturersupplier in Charlotte, North Carolina.Carolina, and the NEXUS Products are solely manufactured by Endospan in Herzliya, Israel.facility, facility—which contains our corporate headquarters, manufacturing, and laboratory space, space—and an additional off-site warehouse, in Kennesaw, Georgia. We manufacture BioGlue, PhotoFix, and PhotoFixPerClot and process human tissues at this facility.Our headquarters also includes a CardioGenesis cardiac laser therapy console maintenance and evaluation laboratory space.We maintain a facility of combined manufacturing and office space in Atlanta, Georgia which we sublet to a third-party beginning in 2018.JOTECaortic stent graft facility consists of combined manufacturing, warehousing, and office space in Hechingen, Germany and is our EMEA headquarters.the UK,Greece, Italy, Poland, Singapore, Spain, Switzerland, and Switzerland. the UK. See also Part I, Item 2, “Properties.”The Medical Device Directive (“MDD”) is the governing document for the European Economic Area (“EEA”) that details requirements for safety and risk of devices. The Medical Device Regulation (“MDR”) replaced MDD on May 26, 2021 and imposes more stringent requirements on manufacturers and European Notified Bodies, who have already begun the transition to these new requirements. See Part I, Item 1A, “Risk Factors—Industry Risks—Our products and tissues are highly regulated and subject to significant quality and regulatory risks,” for a discussion of risks related to the transition to MDR and “Government Regulation – International Approval Requirements” for additional discussion about the MDR transition.Materials,Raw materials, solutions, and other components utilized in our manufacturing and tissue processing operations as well as certain subassemblies and finished goods manufactured by third parties are received and inspected by trained quality control personnel according to written specifications and standard operating procedures. Those items found to comply with our standards are utilized in our operations. Materials,Raw materials, solution, components, subassemblies, and tissues are documented throughout manufacturing or processing to assureensure traceability.Backlog
2021,2023 we did not have a firmsignificant backlog of orders related to our medical devices. The limited supply of certain types or sizes of preserved tissue can result in a backlog of orders for these tissues. The amount of backlog fluctuates based on the tissues available for shipment and the surgical needs of specific cases. Our backlog of human tissue consists mostly of pediatric tissues that have limited availability. Our backlog is generally not considered firm and must be confirmed with the customer before shipment. Certain JOTEC Productsaortic stent grafts products are specifically designed to meet specifications of a particular patient which can result in a limited backlog of these products. We did not have a supply of handpieces for cardiac laser therapy until the fourth quarter of 2021. We resumed limited sales of handpieces in the fourth quarter of 2021 following the FDA approval of our supplier’s change in manufacturing location through our PMA-supplement.processprocess) or ana PMA. Prior to approval, through an investigational device exemptionexemptions (“IDE”) allow investigational devices to be used in clinical studies in order to collect safety and PMA process. Section 510(k) process, a medical device manufacturer provides the FDA with premarket notification that it intends to begin commercializing a product and showsdemonstrates to the FDA that the product is substantially equivalent to another legally marketed predicate product.device. To be found substantially equivalent to a predicate device, the device must be for the same intended use and have either the same technological characteristics as the predicate or different technological characteristics that do not raise newdifferent questions of safety or effectiveness. In some cases, the submission must include data from clinical studies in order to demonstrate substantial equivalency to a predicate device. Commercialization may commence when the FDA issues a clearance letter finding such substantial equivalence.including:including design, document production, process, labeling and packaging controls, process validation, and other applicable quality control activities. The FDA’s medical device reporting regulation requires that a device manufacturer provide information to the FDA on death or serious injuries alleged to have been associated with the use of its products, as well as product malfunctions that would likely cause or contribute to death or serious injury if the malfunction were to recur. The FDA further requires that certain medical devices that may not be sold in the US follow certain procedures before they are exported. The FDA periodically inspects our facilities to review our compliance with these and other regulations and has authority to seize non-complying medical devices, enjoin and/or impose civil penalties on manufacturers and distributors marketing non-complying medical devices, criminally prosecute violators, and order recalls in certain instances.CardioGenesis cardiac laser therapy, E-vita Open Plus, E-VitaE-vita Open Neo, NEO, E-vita Thoracic 3G, E-tegra, E-liac, E-nya, E-nside, the NEXUS Products, and AMDS. CryoPatch SG is classified as a Class II medical device. We obtained 510(k) clearance from the FDA to commercialize the CryoValve SGPV; however, these tissues are not officially classified as Class II or III medical devices.InBeginning in December 2019 we learned thatand most recently in the fall 2023, the FDA is preparingindicted that it was planning to issue a proposed rule for reclassification of more than minimally manipulated (“MMM”) allograft heart valves, which could include our CryoValve SGPV, from unclassified medical devices reviewed through the 510(k) process to Class III (PMA) medical devices. Following aany comment period and subsequent publication of a final rule, should the CryoValve SGPV be determined to be MMM or classified as a Class III device, we currently expect to have approximately thirty months to submit a PMA application, after which the FDA will determine if, and for how long, we may continue to provide these tissues to customers during its review of the PMA application. To date,Although this proposed rule change has, to our knowledge, remained on the FDAHHS's unified regulatory agenda since 2019, no final rule has not issued a final rule. been published at this time. See also Part I, Item 1A, “Risk Factors—Factors—Industry Risks—Risks— Reclassification by the FDA of CryoValve SGPV may make it commercially infeasible to continue processing the CryoValve SGPV”. SGPV.”EEAEuropean Economic Area (“EEA”) recognizes a single medical device approval (the CE Mark) which allows for distribution of an approved product throughout the EEA without additional general applications in each country. Individual EEA members, however, reserve the right to require additional labeling or information to address particular patient safety issues prior to allowing marketing. Third-partiesThird parties called “Notified Bodies” award the CE Mark. These Notified Bodies are approved and subject to review by the “Competent Authorities” of their respective countries. Our Notified Bodies perform periodic on-site inspections to independently review our compliance with systems and regulatory requirements. A number of countries outside of the EEA accept the CE Mark in lieu of marketing submissions as an addendum to that country’s application process. We have CE Marks for On-X heart valves, On-X AAP, On-X Chord-X sutures, E-vita Open Plus, E-vita Open Neo, E-vita Thoracic 3G,NEO, E-tegra, E-liac, E-nya, E-nside, AMDS, and other devices. In addition, E-ventus BX and NEXUS, which we distribute, have CE Marks.We work with a numberorganizations officially designated asdevices. The Medical Device Regulation (“MDR”) replaced MDD on May 26, 2021 and places stricter requirements on manufacturers and the European Notified Bodies who have been designated by the various European Union Member States to perform assessments of compliance to the MDD and MDR for our various product lines. These organizations include LNE/G-Med (“G-Med”), Deutscher Kraftfahrzeug-Überwachungs-Verein (“DEKRA”), the British Standards Institute (“BSI”), and DQS Holding GmbH (“DQS”). These organizations as well as Lloyd’s Register Quality Assurance Limited (“LRQA”) also perform assessments and issue certifications affirming compliance to quality system standard ISO 13485:2016. In addition, weMDR. We work with auditing organizations BSIa number of notified bodies and DEKRA to perform assessments affirming compliancethe transition from the MDD to the Medical Device Single Audit Program (“MDSAP”), which certifies conformance to the regulations of five key jurisdictions: the US, Japan, Australia, Canada, and Brazil. bodiesBodies (with a valid declaration and CE marking under MDD) will continue to be valid in the UK market until June 30, 2023. Going forward, all2028. General medical devices marketed inand custom-made devices under MDR compliance can be placed on the UK will require UK Conformity Assessed (“UKCA”) Marks certifiedmarket until June 30, 2030. As of September 2023 the Swiss government (Swissmedic) declared Class III and IIb devices with a valid CE Mark issued under the MDD can remain on the Swiss market until December 31, 2027 so long as the manufacturer maintains a QMS in compliance with EU MDR and has a formal application with a notified body for an MDR CE Mark by May 26, 2024. See Part I, Item 1A, “Risk Factors—Industry Risks—Our products and tissues are highly regulated and subject to significant quality and regulatory risks,” for a UK Approved Body (the re-designationdiscussion of risks related to the UK Notified Body)transition to MDR.LRQAone of our notified bodies, Lloyd's Register Quality Assurance Limited (“LRQA”) informed us that it would no longer provide Notified Body services for medical devices effective September 2019. The governing German competent authority, the Regierungspraesidium-Tubingen,Regierungspräsidium Tübingen, granted us an extended grace period until December 31, 2021 to transfer LRQA-issued certifications for BioGlue and PhotoFix to a new Notified Body. WeAlthough our BioGlue CE Mark has been successfully transferred to our new Notified Body, we are currentlystill in the process of transferring BioGlue and PhotoFix to our new Notified Body, DEKRA. While positive progress has been made, DEKRA has been unablefailure to schedule andtimely complete the last audit, a Phase 2 onsite audit, for our registration due to COVID-19 restrictions on travel, staffing shortages, and workload related to the transition to the MDR. We currently have sufficient inventory on the markettransfer or any other delays in the EU to cover customer demand for a period of the transition. We also are currently requesting derogations from certain individual European countries to allow us to continue to commercialize BioGlue in those countries if our inventory is insufficient to cover demand and until we can complete the certification process with DEKRA. Failure to obtain such derogationsMDR transition, may have a material, adverse effect on our ability to supply demandPhotoFix in affected jurisdictions and have a material, adverse impact on our business. See also Part I, Item 1A, “Risk Factors—Industry Risks—Our products and tissues are highly regulated and subject to significant quality and regulatory risks,,” for a discussion of the risks related to LRQA’s decision.decision, the MDR transition, and Brexit.
third-partiesthird parties for transport, treatment, and disposal of biomedical waste.ourcertain On-X products, are sterilized using ethylene oxide (“EtO”). Although we have a small-scale EtO facility in Austin, Texas, we rely primarily on large-scale EtO facilities to sterilize our products. In addition, some of our suppliers use, or rely upon third parties to use, EtO to sterilize some of our product components. Concerns about the release of EtO into the environment at unsafe levels have led to various regulatory enforcement activities and legal actions against EtO facilities, including resulting in closures and temporary closures, as well as proposals increasing regulations related to EtO. Although we believe we are in compliance with applicable laws and regulations, regarding the disposal of our waste resulting from tissue preservation activities, as well as in our other production and sterilization activities, the failure by us, or the companies with which we contract, to comply fully with any such regulations could result in an imposition of penalties, fines, or sanctions, which could materially, adversely affect our business. See also, Part I, Item 1A, “Risk Factors—Legal, Quality, and Industry Risks—Regulatory Risks—Someenforcement activities or private litigation regarding the use of ethylene oxide (“EtO”), which is used to sterilize some of our products and technologies are subject to significant intellectual property risks and uncertainty,components, could have a material, adverse impact on us,” for additional discussion of risks related to our use of EtO sterilization. We do not currently anticipate any material capital expenditures required for compliance with these laws and regulations relating to our waste disposal and sterilization activities will require any material capital expenditures.activities.Research and Development and Clinical Research
orand services, orand to expand the use of our current products and services through expanded indications orand product orand tissue enhancements. Our research and development strategy is to allocate most of our available resources among our core market areas based on the potential market size, estimated development time and cost, and the expected efficacy for any potential product or service offering. To the extent we identify new non-core products or additional non-core applications for our core products, we may attempt to license these products to corporate partners for further development or seek funding from outside sources to continue commercial development. We may also attempt to acquire or license additional strategically complementary products or technologies from third-parties to supplement our product lines.laboratory ordepartment and at universities orand clinics where we sponsor research projects. We also conduct preclinical and clinical studies at universities, medical centers, hospitals, and other third-party locations under contract with us. Research is inherently risky, and any potential products or tissuesservices under development ultimately may not be deemed safe or effective or worth commercializing for other reasons and, therefore, may not generate a return on investment for us. Our clinical research department also collects and maintains clinical data on the use and effectiveness of our products and services. We use this data to gain regulatory approvals to market the products and services, to inform third-partiesthird parties on the benefits of our products and services, and to help direct our continuing improvement efforts.2021, 2020,2023, 2022, and 20192021 we spent approximately $35.5$28.7 million, $24.2$38.9 million, and $23.0$35.5 million, respectively, on research and development activities on new and existing products. These amounts accounted for approximately 12%8%, 10%12%, and 8%12% of our revenues for each of 2023, 2022, and 2021, 2020, and 2019, respectively.orand investigating several new products and technologies, as well as changes and enhancements to our existing products and services. Our strategies for driving growth include new product approvals orand indications, global expansion, and business development. These activities will likely require additional research, new clinical studies, and/or compilation of clinical data.April 2022,2024, the pending application will expire and no longer be eligible for allowance, requiring the Company to restart or decide to abandon the approval process.We are currently conducting a clinical trial to assess reduced levels of required anticoagulation or warfarin for the On-X mitral heart valve. Trial results were submitted for regulatory review in 2021 with anticipated FDA and CE Mark approvals in 2022.in 2022.through 2027.The PROACT Xa clinical trial is in its enrollment phase to determine if patients with an On-X aortic heart valve can be maintained safely and effectively on apixaban rather than on warfarin. The trial has enrolled more than half of the patients and we anticipate enrollment to be complete in 2022.submitted theobtained approval for a PMA tofrom the FDA during the third quarterin May 2023.2021. See also Part I, Item 1A, “Risk FactorsContents—Operational Risks—Our investment in PerClot is subject to significant risks, including our ability to fully realize our investment by obtaining FDA approval and to successfully commercialize PerClot in the US either directly or indirectly.”will beare conducting a pivotal clinical trial (PERSEVERE) to gain approval to commercialize the AMDS hybrid prosthesis in the US for treatment of acute DeBakey type I aortic dissections. We received IDE approval in the fourth quarter of 2021 and anticipate study initiation and first patientcompleted enrollment of the required patients in the firstfourth quarter of 2022.2023.OPENOpen NEO, representing our next-generation hybrid stent graft system used in the treatment of patients with either an aneurysm or dissection in the aortic arch and in the descending thoracic aorta. The FDA granted Breakthrough Device Designation in the third quarter of 2019 for the E-nside and E-xtra Design Multibranch TAAA devices. technology licensing rights provide us with important competitive advantages. We currently own rights to numerous US and foreign patents and pending patent applications relating to our technology for various product lines. There can be no assurance that any pending applications will ultimately be issued as patents. We have also obtained rights through license and distribution agreements for additional products and technologies, including NEXUS.the NEXUS Products. In the aggregate, these intellectual property assets and licenses are of material importance to our businesses; however, with the exception of BioGlue as discussed below, we believe that no single intellectual property asset or license is material in relation to any segment of our business or to our business as a whole.third-parties,third parties with whom we have entered into confidentiality agreements, will effectively prevent disclosure of our confidential information or provide meaningful protection for our confidential information if there is unauthorized use or disclosure, or that our trade secrets or proprietary information will not be independently developed by our competitors.Risks—Risks—Some of our products and technologies are subject to significant intellectual property risks and uncertainty,” for a discussion of risks related to our patents, licenses, and other proprietary rights.20212023 we had approximately 1,3001,500 employees. Most of our employees are located in Kennesaw, Georgia; Austin, Texas; and Hechingen, Germany. None of our employees are covered by a collective bargaining agreement, and weWe have never experienced a work stoppage or interruption due to labor disputes. Our employees located in Hechingen, Germany have a Works Council.Council, and our employees in Brazil are affiliated with a union in connection with compensation-related collective bargaining. We believe our relations with our employees worldwide and with the Works Council in Germany and union in Brazil are good.over the past year.in recent years. We have programs and processes in place to help ensure that our compensation, benefits programs, and work environment attract and retain such personnel, and we strive to enhance those programs and processes to respond to the increasingly competitive market for talent. We also strive to offer competitive equitable pay, comprehensive benefits, and services that retain and meet the varying needs of our employees. The principal purposes of our equity and cash incentive plans and non-officer incentive plans are to attract, retain, motivate, and reward our employees.theour Company. Employees are encouraged to approach their supervisors if they believe violations of policies have occurred. Employees are also able to confidentially and anonymously report any such violations through an online form or telephone hotline hosted by a third-party provider.inclusiondiversity and diversityinclusion enables us to create, develop, and fully leverage the strengths of our workforce to achieve our business objectives. Approximately 58%61% of our global employees are female, and approximately 35%36% of our US based employees are from an underrepresented ethnic or racial community.GlobalChief Diversity Officer to manage and oversee the Company’s diversity and inclusion efforts and goals. health, and well-being of our employees around the world is a key priority. Throughout the COVID-19 pandemic, we have remained focusedenhanced our focus on the health and safety of our employees by implementing and enforcing certain COVID-related safety protocols. We provided employees with protective equipment, required the wearing of masks, increased cleaning procedures, provided cleaning supplies, implemented remote work where possible, enhanced our IT systems to facilitate remote work, and improved our cybersecurity protocols.See also Part II, Item 7, “Effects of COVID-19” for discussion about COVID-19’s impact on our employees, and Part I, Item 1A, “Risk Factors—Operational Risks—We are dependent on our specialized workforce” for discussion about Human Capital risks.Available Information
thisour website.and (iv) our Code of Ethics for Senior Financial Officers.Officers; (v) our Insider Trading Policy; (vi) our Corporate Responsibility Report (ESG); and (vii) our Foreign Corrupt Practices Act (“FCPA”) Policy. We also intend to disclose any amendments to our Codes of Conduct, or waivers of our Codes of Conduct on behalf of our Chief Executive Officer, Chief Financial Officer, or Chief Accounting Officer, on the Corporate Governance portion of our website. All of these corporate governance materials are also available free of charge in print to shareholders who request them in writing to: Jean F. Holloway, General Counsel, Chief Compliance Officer, and Corporate Secretary, 1655 Roberts Blvd NW, Kennesaw, GA 30144.COVID-19, and similar outbreaks, could have a material, adverse impact on us.Since early 2020, businesses, communities, and governments worldwide have taken, and continue to take, a wide range of actions to mitigate the spread and impact of COVID-19, leading to an unprecedented impact on the global economy. Hospitals and other healthcare providers have adopted differing approaches to address the surge and resurgence of COVID-19 cases, including their impact on healthcare workers, such as postponing elective and non-emergent procedures, restricting access to their facilities, cancelling elective procedures, or re-allocating scarce resources to some critically ill patients. Although some areas have seen a decline in COVID-19 cases, the potential for additional impact from new variants of COVID-19 and longer than anticipated timelines for widespread therapeutic and vaccine availability and acceptance remain. These conditions have and could continue to impact our activities, including:Our product sales. Certain regions experienced an impact on revenues in 2021 due to the COVID-19 pandemic. In addition to COVID-19’s impact on procedure volumes, including an impact on procedure volumes due in part to COVID-19-related healthcare staffing shortages, we have begun to observe additional downstream effects on our business, including an increase in delays or difficulty in collecting certain outstanding receivables, particularly with certain governmental payors in regions heavily impacted by COVID-19. The extent to which our financial performance will be impacted by the pandemic in 2022 and beyond will depend largely on future developments, including changes in hospital utilization rates and staffing, the prevalence and severity of new variants, global availability and acceptance of COVID-19 vaccines and their effectiveness against variants, and the prevalence of public and private vaccine mandates. COVID-19’s continued or increased impact on our financial performance may also increase the risks we face with respect to managing our indebtedness.Our business operations. In 2020 we took several steps to address the impact of COVID-19 on our employees, cash consumption, and operations, including reducing expenditures and delaying investments. The reductions and delays we adopted could adversely impact our business operations or delay our recovery from the effects of the pandemic. Although we have begun to scale back many of these steps in most geographies, the COVID-19 virus and its variants remain highly contagious and our efforts to contain the spread of COVID-19 and its variants among our employees, including our key personnel, and to protect our supply chain, may not succeed. COVID-19 also continues to impact our business partners, including the various regulators and notified bodies that we rely on, which increases the regulatory risks we face, and specifically, the risks we face with respect to timely review and approval of new and renewal certifications, clearances, and approvals for our products.Our manufacturing operations. The COVID-19 pandemic has continued to impact the global supply chain; the pandemic’s impact on workforces, global mobility, material availability, demand, and shipping and reorder time and reliability has reportedly continued or worsened in many cases. Although we have yet to experience any material effects of this impact on our supply chain or operations, we face an increasing risk that upstream disruptions may occur. Risks relating to the lingering effects of global supply chain disruptions may even continue after COVID-19’s risk as a global pandemic has subsided.Our workforce. As some global economies have begun to emerge from the COVID-19 downturn, the expiration of COVID-related hiring freezes, increased opportunities for remote work, the Great Resignation and increasing compensation pressure have resulted in a war for talent and an unprecedent number of career changes. The resulting worker shortages at all levels have impacted supply chains and distribution channels and employers’ ability to adequately staff their operations. This has impacted not only our own ability to attract and retain employees, but also the ability of our customers who face increasing staffing pressures throughout their healthcare organizations.Our research and development projects. In 2020 and parts of 2021 we reduced spending on research and development projects, including clinical research projects. These reductions could adversely impact future revenue, and additional reductions in spending could be implemented, further impacting future revenue. In addition, our ability to conduct our ongoing research and development projects in markets that are affected by COVID-19 has been, and could continue to be, adversely impacted. Enrollment and timelines for our clinical trials have been, and might continue to be, impacted as healthcare providers reprioritize resources, address staffing shortages, and limit access to healthcare facilities or as patients decline to participate or are hesitant to voluntarily visit healthcare facilities. In addition, staffing shortages and COVID-19-related impacts on government and regulatory agencies have slowed and might continue to slow timelines for regulatory actions, including approvals.If COVID-19 or its variants continue to spread, if efforts to contain COVID-19 or its variants continue or are unsuccessful, if we experience new outbreaks of COVID-19 in areas previously successful in containing its spread, if staffing shortages impact us, governmental or regulatory bodies, or our customers, if vaccine mandates become more prevalent, or if COVID-19, its variants, or disruptions to the global supply chain impact our supply chain or employee productivity, it could materially, adversely affect our revenues, financial condition, profitability, and cash flows. The nature and extent of these developments are highly uncertain and unpredictable and may vary greatly by region. These adverse developments or a prolonged period of uncertainty could adversely affect our financial performance.We are subject to a variety of risks due to our international operations and continued global expansion.
•Greater difficulties and costs associated with staffing at all levels, establishing and maintaining internal controls, managing foreign operations and distributor relationships, and selling directly to customers;•Broader exposure to corruption and expanded compliance obligations, including under the Foreign Corrupt Practices Act, the UK Bribery Law, local anti-corruption laws, Office of Foreign Asset Control administered sanction programs, the European Union’s General Data Protection Regulation, and other emerging corruption and data privacy regulations;•Overlapping and potentially conflicting, or unexpected changes in, international legal and regulatory requirements or reimbursement policies and programs;•Longer and more expensive collection cycles in certain countries, particularly those in which our primary customers are government-funded hospitals;•Changes in currency exchange rates, particularly fluctuations in the Euro as compared to the US Dollar;Dollar and other inflationary pressures;•Potential adverse financial impact and negative erosion of our operating profit margin over time due to increasing inflationary pressures, particularlyincluding impact felt through our supply chain; our exposure may be increased through our limited ability to raise prices and through global expansion where business occurs with, or pricing is set directly by, government entities, or we are party to long term pricing agreements with governments or local distributors, impacting our ability to pass on rising costs;•Potential adverse tax consequences of overlapping tax structures;structures or potential changes in domestic and international tax policy, laws, and treaties; and•Potential adverse financial and regulatory consequences resulting from Brexit.exitItalian government stated that the spending ceiling for medical devices at the national and regional levels had been exceeded, requiring medical device companies to pay back alleged overpayments the government claims companies received between 2015 and 2018. Currently, Artivion’s repayment exposure for this period is estimated at approximately €400,000, which is subject to change as judicial challenges and negotiations between us, industry, US government representatives, and the Italian government are ongoing.UKwars in Ukraine or the Middle East, or increased export controls or additional sanctions imposed on or by impacted countries, their allies, or related entities could adversely affect our financial performance. Although we do not have any direct operations in Russia, Ukraine, Israel, or Gaza, the NEXUS and NEXUS DUO (the “NEXUS Products”) are solely manufactured by Endospan in Herzliya, Israel. Although we have not experienced any material disruption of supply from Endospan, the European Union,conflict in and around Israel is rapidly evolving. Ultimately, it is difficult to predict the ultimate course of these wars and we may face business operations and supply chain disruptions as a result, including disruptions related to shortages of materials and finished goods, higher costs of materials and freight, freight delays, increased energy costs or “Brexit.”We operate in highly competitive market segments, face competition from large, well-established medical device companies and tissue service providers with greater resources and we may not be able to compete effectively.
participants.participants, including the introduction of novel products and therapies aimed at unrelated disease states or even overall patient health. In addition, such products and therapies like the recently introduced GLP-1 drugs, which we believe have or will have little to no actual impact on demand for our products, can lead to investor and customer confusion and impact the perceived demand for our products. We face intense competition in virtually all of our product lines. A significant percentage of market revenues from competitive products are generated by Baxter, International, Inc.; Ethicon (a Johnson & Johnson Company);, Medtronic, Inc.;plc, Abbott Laboratories;Laboratories, Edwards Lifesciences Corp.;, C.R. Bard, Inc., a (a subsidiary of Becton, Dickinson and Company;Company), Integra Life Sciences Holdings; LifeNet; CORCYM (completed acquisition of the LivaNova heart valve business in June 2021);Holdings, LifeNet, Corcym, Anteris Technologies, Inc.;, Elutia (formerly Aziyo Biologics;Biologics), Cook Medical;Medical, Gore & Associates;Associates, Terumo, Aortic Corp.; LeMaitre Vascular, Inc.;, Maquet, Inc.;, Pfizer, Inc.;, and BioCer Entwicklungs-GmbH. Several of our competitors enjoy competitive advantages over us, including:•Greater financial and other resources for research and development, commercialization, acquisitions, and litigation and to weather the impacts of COVID-19 and increased workforce competition;•Greater name recognition as well as more recognizable trademarks for products similar to products that we sell;•More established record of obtaining and maintaining regulatory product clearances or approvals;•More established relationships with healthcare providers and payors;•Lower cost of goods sold or preservation costs; and•Larger direct sales forces and more established distribution networks.•Source sufficient quantities of some human tissue or address potential excess supply of others. We rely primarily upon the efforts of third-partiesthird parties to educate the public and foster a willingness to donate tissue. Factors beyond our control such as supply, regulatory changes, negative publicity concerning methods of tissue recovery or disease transmission from donated tissue, or public opinion of the donor process as well as our own reputation in the industry can negatively impact the supply of tissue;•Mitigate sufficiently the risk that tissue can become contaminated during processing; that processed tissue cannot be end-sterilized and hence carries an inherent risk of infection or disease transmission or that our quality controls can eliminate that risk.As an example of this risk, in the fourth quarter of 2020 we became aware that a supplier shipped to us a lot of saline solution that we use in our tissue processing that contained some contamination. The contamination was identified by our routine quality controls. While we were able to mitigate the impact of this contamination through our own efforts and additional testing that was reviewed with the FDA, the contaminated solution impacted a small percentage of the tissue processed with this lot of solution, requiring us to write-off approximately $826,000 in contaminated tissues in the fourth quarter of 2020. The written off and temporarily quarantined tissue impacted our ability to fully meet demand for certain tissues and sizes in the fourth quarter of 2020, the first quarter of 2021, and to a lesser extent the second quarter of 2021. Our inability to meet some demand for tissue in the third quarter resulted in part from a shortage of trained staff capable of meeting the increased demand for releasing this quarantined tissue. See also, Part I, Item 1A, “Risk Factors—Operational Risks— We are dependent on our specialized workforce.” Surgical Adhesive (“BioGlue”) is a significant source of our revenues, and as such, any risk adversely affecting our BioGlue products or business would likely be material to our financial results. We face the following risks relatedrelating to BioGlue:•Competing effectively with our major and start up competitors, as they may have advantages over us in terms of cost structure, supply chain, pricing, sales force footprint, and brand recognition;•We may be unable to obtain approval to commercialize BioGlue in certain non USnon-US countries as fast as our competitors do of their products or at all. We also may not be able to capitalize on new BioGlue approvals, including for new indications, in non USnon-US countries; and•BioGlue contains a bovine blood protein. Animal-based products are subject to increased scrutiny from the public and regulators, who may seek to impose additional regulations, regulatory hurdles or product bans in certain countries on such products; BioGlue is a mature product and other companies may use the inventions disclosed in expired BioGlue patents to develop and make competing products;products. challenges securing certain related derogations ultimately impacted the availability of BioGlue faces potential adverse regulatory consequences resultingin certain European markets and other markets reliant on the CE Mark, impacting our revenue from the exit of the UK from the European Union, or “Brexit.”BioGlue in those markets. See also, Part I, Item 1A, “Risk Factors—Industry Risks— Our products and tissues are highly regulated and subject to significant quality and regulatory risks.” (further discussing the impact of and risks relating to the BioGlue CE Mark). stents and stent grafts and are subject to a variety of related risks. stents and stent grafts are a significant source of our revenues, and as such, any risk adversely affecting aortic stents and stent grafts would likely be material to our financial results. We face the following risks relating to aortic stents and stent grafts related risks based on our ability to:•Compete effectively with some of our major competitors, as they may have advantages over us in terms of cost structure, supply chain, pricing, sales force footprint, and brand recognition;•Develop innovative, high quality, and in-demand aortic repair products;•Respond adequately to enhanced regulatory requirements and enforcement activities, and particularly, our ability to obtain regulatory approvals and renewals globally;•Meet demand and manage inventory for aortic stents and stent grafts as we seek to expand our business globally; and•Maintain a productive working relationship with our Works Council in Germany.•Compete effectively with some of our major competitors, as they may have advantages over us in terms of cost structure, supply chain, pricing, sales force footprint, and brand recognition;•Take further market share in the mechanical heart valve market based on the FDA’s approved lower International Normalized Ratio (“INR”)INR indication for the On-X aortic heart valve or complete the associated FDA mandated post-approval studies;•Address clinical trial data or changes in technology that may reduce the demand for mechanical heart valves, such as data regarding transcatheter aortic valve replacement, or “TAVR” devices;•Manage risks associated with less favorable contract terms for On-X products on consignment at hospitals; and•Respond adequately to enhanced international regulatory requirements or enforcement activities; andactivities.Our charges resulting from acquisitions, restructurings, and integrations may materially, adversely affect the market value of our common stock.
•We may incur addedadditional amortization expense over the estimated useful lives of some acquired intangible assets;•We may incur additional depreciation expense as a result of recording purchased tangible assets;•We may be required to incur material charges relating to any impairment of goodwill and intangible assets;•Cost of sales may increase temporarily if acquired inventory is recorded at fair market value;•If acquisition consideration consists of earn-outs, our earnings may be affected by changes in estimates of future contingent consideration; or•Earnings may be affected by transaction and integration costs, which are expensed immediately.in the fourth quarter of 2021, we fully impaired the value of thea securities purchase option agreement with Endospan Option (“Endospan Option”) and fully wrote-down the value of thean agreement for a secured loan from Artivion to Endospan Loan,(“Endospan Loan”), primarily driven by a decrease in forecasted operating results. This impairment, and other potential risks like those mentioned above, may adversely affect the market value of our common stock.in processin-process materials orand expense the costs of manufacturing or preservation.2021.202 As a further example of this risk, our supplier of TMR handpieces was informed in the fourth quarter of 2021 that the sole-source manufacturer of tubing used in the handpiece assembly had gone out of business, requiring us to work with our supplier to identify and qualify a new supplier before a disruption in handpiece availability occurs.has continuedthe wars in Ukraine and the Gaza Strip, work force shortages, exchange rates, and inflation continue to impact the global supply chain; the pandemic’stheir impact on workforces, global mobility, material availability, demand, and shipping and reorder timetimes and reliability has reportedly continued or worsened in many cases. The ongoing wars may add to or exacerbate challenges faced by the global supply chain. See Part I, Item 1A, “Risk Factors – Business and Economic Risks – We are subject to a variety of risks due to our international operations and continued global expansion.” Although we have yet to experience any material effects of this impact on our supply chain or operations, we face an increasing risk that upstream disruptions may occur. Risks relating to the lingering effects of global supply chain disruptions may even continue after COVID-19’s risk as a global pandemic hasand the wars in Ukraine and Gaza have subsided.We are dependent on single and sole-source suppliers and single facilities.
also be forced to purchase alternative materials, supplies, or services with unfavorable terms due to diminished bargaining power.has beenwas unable to fully resume production due to supply-related factors outside of our control. Due to thesecontrol and other supplier issues, we had virtually no supplyeventually abandoned the business as of handpiecesJune 2023. As a result, we wrote-off all of our CardioGenesis cardiac laser therapy assets and recorded an expense of $390,000 during the first three quarterstwelve months ended December 31, 2023 on our Consolidated Statements of 2021. Although handpiece supply resumed on a limited basis during the last quarter of 2021, we remain dependent on a sole-source manufacturer for these handpieces.single sourcesingle-source suppliers.OPOsorgan and tissue procurement organizations (“OPOs”) and tissue banks. We must rely on the OPOs and tissue banks that we work with to educate the public on the need for donation, to foster a willingness to donate tissue, to follow our donor screening and procurement procedures, and to send donated tissue to us. We have active relationships with 59approximately 60 OPOs and tissue banks throughout the US. As with any vendor, we believe these relationships with our OPOs are critical in the preservation services industry and that the breadth of these existing relationships provides us with a significant advantage over potential new entrants to this market. We also use various raw materials, including medicines and solutions, in our tissue processing. Some of these raw materials are manufactured by single suppliers or by a small group of suppliers.endovascularaortic stent graft systems consist of two main product components: the stent graft and the delivery system. The stent graft is manufactured out offrom several different raw materials that are manufactured by JOTEC andinternally or at various external suppliers, including single suppliers. The delivery systems we manufacture are manufactured by JOTEC fromcomprised of several different raw materials with different processing techniques. Primaryand subassemblies. Our internal manufacturing processes are the assemblyinclude injection molding and machining of injection molded parts and machine drilledplastic parts, suturing of stent grafts, processing of Nitinol, and weaving of textiles. Our conventional polyester grafts consist of two main product components: polyester fabric and collagen coating. The polyester fabric is manufactured by JOTEC out ofwoven from a few different yarns that are supplied by an external supplier. The collagen suspension we manufacture is manufactured by JOTEC outcomprised of a collagenous tissue that is supplied by a single supplier. OurThe conventional ePTFE grafts we manufacture are manufactured by JOTEC outcomprised of various raw materials supplied by several suppliers. For some products the ePTFE grafts are heparin coated. For these products, the heparin suspension we manufacture is manufactured by JOTEC outcomprised of a heparin solution that is also supplied by an external supplier.also conduct all of our ownhave three internal manufacturing operations at three facilities: Austin, Texas for On-X products, Hechingen, Germany for JOTEC Products,internally manufactured aortic stent grafts, and Kennesaw, Georgia for all other products and services. The NEXUS product is solelyCertain aortic stent graft assemblies are manufactured for us by Endospana contract manufacturer in Herzelia, Israel, and theSlovakia. The AMDS product is solely manufactured by a supplier in Charlotte, North Carolina.Carolina, and the NEXUS Products are solely manufactured by Endospan in Herzliya, Israel. If one of these suppliers or facilities ceases operations temporarily or permanently, for any reason including a pandemic, war, work stoppage, or climate change related event, our business could be substantially disrupted.We are dependent on our specialized workforce.
Our field-based workforce is increasingly being subject to public and private vaccine mandates, including mandates without exception, which may impact unvaccinated personnel’s ability to fulfill or stay in their roles. Our business and future operating results, including production at our manufacturing and tissue processing facilities, also depend in significant part on our ability to attract and retain qualified management, operations, processing, marketing, sales, and support personnel. Our primary facilities are in Kennesaw, Georgia; Austin, Texas; and Hechingen, Germany, where the supply of qualified medical device and tissue processing and other personnel is limited, competition for such personnel is significant, and we cannot ensure that we will be successful in attracting or retaining them. We face risks if we lose any key employees to other employers or due to severe illness, death, or retirement, if any of our key employees fail to perform adequately, or if we are unable to attract and retain skilled employees. This risk was exacerbated during 2021,by the pandemic and is expectedcontinues to continue, as the competitionbe impacted by changes in macroeconomic conditions. Competition for talent in the medical device industry and in the workforce generally has intensified substantially. As some global economies have begun to emerge from the COVID-19 downturn, the expiration of COVID-19 related hiring freezes, the Great Resignation, increased opportunities for remote work, and increasing compensation pressure have resulted in a war for talent and an unprecedent number of career changes. The resulting competition and worker shortages at all levels have impacted supply chains and distribution channels and our ability to attract and retain the specialized workforce necessary for our business and operations.•Issue additional equity securities that would dilute our stockholders’ ownership interest;•Use cash we may need in the future to operate our business;•Structure the transaction resulting in unfavorable tax consequences, such as a stock purchase that does not permit a step-up in basis for the assets acquired;•Be unable to realize the anticipated benefits of the transaction; or•Assume material unknown liabilities associated with the acquired business.On December 1, 2017 we acquired JOTEC AG, a Swiss entity that we converted to JOTEC GmbH and subsequently merged with our Swiss acquisition entity, Jolly Buyer Acquisition GmbH and its subsidiaries;•On September 11, 2019 we entered into various agreements with Endospan, Ltd. (“Endospan”), an Israeli medical device manufacturer (the “Endospan Transaction”). The Endospan Transaction included an exclusive distribution agreement for NEXUS in Europe, the NEXUS stent graft system (“NEXUS”) in Europe; an agreement (“Endospan Loan”) for a secured loan from Artivion to Endospan;Loan, and a security purchase option agreement for Artivion to purchase all the then outstanding Endospan securities from Endospan’s existing securityholderssecurity holders upon FDA approval of NEXUS;the NEXUS Products;•On September 2, 2020 we acquired 100% of the outstanding shares of Ascyrus, Medical LLC (“Ascyrus”), the developer of the Ascyrus Medical Dissection Stent (“AMDS”);AMDS; and•On July 28, 2021 we entered into various agreements with Baxter International, Inc. (“Baxter”) and Starch Medical, Inc. (“SMI”)SMI related to the sale of our PerClot assets to Baxter and the termination of our existing material agreements with SMI.•Leverage our global infrastructure to sell and cross-market the acquired products;•Drive adoption of the NEXUS Products and AMDS in the European and other markets, including our ability to manage the substantial requirements for NEXUS procedures for product training, implant support, and proctoring;proctoring requirements for NEXUS procedures;•Bring acquired products to the US market, including AMDS and the JOTEC Products;our acquired aortic stent grafts;•Harness the JOTECaortic stent graft product pipeline and our research and development capabilities;•Obtain regulatory approvals in relevant markets, including our ability to timely obtain FDA PMA for PerClot as contemplated under the terms of the Baxter Transaction, to obtain Conformité Européene Mark (“CE Mark”) product certification for pipeline products, and to obtain or maintain certificationCE Mark product certifications for pipeline and current products at all;products;•Execute on development and clinical trial timelines for acquired products;•Manage global inventories, including our ability to manage inventories for product lines with large numbers of product configurations and manage manufacturing and demand cycles to avoid excess inventory obsolescence due to shelf life expiration, particularly for processed tissues and aortic stent and stent graft products;grafts;•Carry, service, and manage significant debt and repayment obligations; and•Manage the unforeseen risks and uncertainties related to these transactions, including any related to intellectual property rights.NEXUS;the NEXUS Products; (d) meet quality and regulatory requirements;requirements for the NEXUS Products; (e) manage any intellectual property risks and uncertainties associated with NEXUS;the NEXUS Products; (f) obtain FDA approval of NEXUS;the NEXUS Products; (g) remain a going concern; and (g)(h) develop the NEXUS Products, and other product improvements to meet competitive threats and physician demand. As an example of this risk, the forecasted operating results related to NEXUS decreased, in the fourth quarter of 2021, resulting in an impairment into the carrying value of the Endospan Option, and a full write-down of the value of the Endospan Loan, reflecting decreased expectations with respect to the anticipated benefits of the Endospan Transaction.“AORT.”“AORT”. We may face unanticipated disruptions to our business arising from the Corporate Rebrand, and it may expose us to additional risks, including:•Disruptions to our day-to-day business operations including disruptions to our ability to receive or our customers’ ability to make timely payments;Disruptions to access tounanticipated delays accessing certain markets or segments due to delays or other issues with regulatory approvals, clinical trials, or other updates arising from or related to the Corporate Rebrand;Unanticipated delays or other impact on our pending regulatory applications or clinical trials arising from the Corporate Rebrand;•Confusion within the marketplace, particularly with multiple points of contact in our downstream product flow involving purchasing and accounts payable departments and end users;•Intellectual property risks associated with the adoption of a new corporate identity and trade dress; and•Loss of goodwillbrand equity associated with our legacy brands, including our CryoLife and JOTEC brands that will become less prominent over time.personalpersonnel data, intellectual property, and, in some instances, patient data). Our information technology and information security systems and records are potentially vulnerable to security breaches, service interruptions, data loss, or malicious attacks resulting from inadvertent or intentional actions by our employees, vendors, or other third parties. In addition, due toas a result of changes implemented during the COVID-19 pandemic, we now have implemented remote work arrangements for some employees, and those employees may use outside technology and systems that are vulnerable to security breaches, service interruptions, data loss or malicious attacks, including by third parties.As an example of these risks, on November 1, 2019 we were notified that we had become a victim of a business e-mail compromise. During the fourth quarter of 2019, a company email account was compromised by a third-party impersonator and a payment intended for one of our US vendors in the amount of $2.6 million was fraudulently re-directed into an individual bank account controlled by this third-party impersonator. Our cyber-insurance covered all but $25,000 of the unrecovered losses from this compromise.losses.losses, particularly in light of rapid improvements in information processing technology accompanying developments in, among other areas, artificial intelligence platforms. We have limited cyber-insurance coverage that may not cover all possible events, and this insurance is subject to deductibles and coverage limitations. Any security breaches, service interruptions, or data losses could adversely affect our business operations or result in the loss of critical or sensitive confidential information or intellectual property, or in financial, legal, business, and reputational harm to us or allow third parties to gain material, inside information that they may use to trade in our securities.•Our products and tissues allegedly have caused, and may in the future cause, patient injury, which has exposed, and could in the future expose, us to liability claims that could lead to additional regulatory scrutiny;•Our manufacturing and tissue processing operations are subject to regulatory scrutiny, inspections and enforcement actions, and regulatory agencies could require us to change or modify our operations or take other action, such as issuing product recalls or holds;•Regulatory and quality requirements are subject to change, which could adversely affect our ability to sell our products or distribute tissues; and•Adverse publicity associated with our products, processed tissues, or our industry could lead to a decreased use of our products or tissues, increased regulatory scrutiny, or product or tissue processing liability claims.Further,these risks, on May 25, 2017, the European Union adopted a new Medical Device Regulation (MDR 2017/745) (“MDR”)regulations governing medical devices (the MDR), which waswere to be fully implemented on May 26, 2021. The MDR places stricter requirements on manufacturers and European Notified Bodies regarding, among other things, product classifications and pre- and post-market clinical studies for product clearances and approvals which could result in product reclassifications or the imposition of other regulatory requirements that could delay, impede, or prevent our ability to commercialize existing, improved, or new products in the European Economic Area (“EEA”) and other markets that require CE Marking. Additionally, to the extent the MDR places stricter requirements on manufacturers of custom-made devices, those new requirements could delay, impede, or otherwise impact the availability of our E-xtra Design Engineering services and custom-made products. Finally, COVID-19 hassignificantly impacted the predictability and timelines associated with the MDR transition.MDDMedical Device Directive (“MDD”) certifications. Our inability to obtain certifications for changes under the transitional provisions of the MDR’s Article 120 or successfully submit proposed changes requiring MDR evaluation will delay implementation of those changes which could adversely impact our ability to obtain or renew certifications, clearances, or approvals for our products.the United Kingdom’s exit from the European Union (“Brexit”).Brexit. The UK Medicines and Healthcare Products Regulatory Agency (“MHRA”) has announced that CE Marking will continue to be recognized in the UK and certificates issued by EU-recognized Notified Bodies will continue to be valid in the UK market until the certificates expire or the applicable transition period expires (currently June 30, 2023. Going forward,2028 at the earliest). Upon expiration, all devices marketed in the UK will require UK Conformity Assessed Marks certified by a UK Approved Body (the re-designation of the UK Notified Body).notified bodyNotified Body in the UK, Lloyd’s Register Quality Assurance Limited (“LRQA”),LRQA, informed us that it would no longer provide Notified Body services for medical devices effective September 2019. The governing German competent authority, the Regierungspraesidium-Tubingen, granted us an extended grace period until December 31, 2021 to transfer LRQA-issued certifications for BioGlue and PhotoFix to a new Notified Body. WeAlthough our BioGlue CE Mark has been successfully transferred to our new Notified Body, DEKRA, we are currentlystill in the process of transferring BioGlue and PhotoFix to our new Notified Body, DEKRA. While positive progress has been made, DEKRA has been unablefailure to timely complete the last audit, a Phase 2 onsite audit, for our registration due to COVID-19 restrictions on travel, staffing shortages, and workload related to the transition to the MDR. We currently have sufficient inventory on the market in the EU to cover customer demand for a period of the transition. We also are currently requesting derogations from certain individual European countries to allow us to continue to commercialize BioGlue in those countries until we can complete the certification process with DEKRA. Failure to obtain such derogations before our inventory is depleted,transfer or any other delays in thisthe MDR transition, may have a material, adverse effect on our ability to supply demandPhotoFix in affected jurisdictions, have a material, adverse impact on our business, and may also impact our Medical Device Single Audit Program (“MDSAP”) certifications. Failure to timely obtain new MDSAP certifications following their expiration may impact our ability to distribute covered products in Australia, Brazil, Canada, and Japan.Inwe learned thatand most recently in the fall 2023, the FDA is preparingindicted that it was planning to issue a proposed rule for reclassification of more than minimally manipulated (“MMM”) allograft heart valves to Class III medical devices, which could include our CryoValve SGPV. Following aany comment period and subsequent publication of anya final rule, should the CryoValve SGPV be determined to be MMM or classified as a Class III device, we currently expect to have approximately thirty months to submit an FDAa PMA application, after which the FDA will determine if, and for how long, we may continue to provide these tissues to customers during its review of the PMA application. To date,Although this proposed rule change has, to our knowledge, remained on the FDAHHS's unified regulatory agenda since 2019, no final rule has not issued such a proposed final rule.We may not be successful in obtaining clinical results or regulatory clearances/approvals for new and existing products and services, and our approved products and services may not achieve market acceptance.
satisfy the regulator’s requests and concerns and obtain approval following the review of the updated submission or an extensionthe costs to do so are prohibitive, we ultimately may be unable to sell BioGlue in April 2022, the pending application will expire andChina. Similarly, in November 2023 we announced that we were no longer pursuing a labeling change for our On-X mitral valve in connection with our PROACT Mitral trial due to additional investments that would be eligiblerequired to do so.allowance, requiringvalve thrombosis and thromboembolism. The DSMB found that continuing the Companytrial was unlikely to restart or decideachieve the primary endpoint while possibly exposing patients to abandon the approval process.Regulatoryregarding Ethylene Oxide, which isand private litigation activity relating to processes and materials used to sterilize some ofin our products and components,industry could have a material, adverse impact on us.ourcertain On-X products, are sterilized using Ethylene Oxide (“EtO”).EtO. Although we have a small-scale EtO facility in Austin, Texas, we rely primarily on third-party large-scale EtO facilities to sterilize our products. In addition, some of our suppliers use, or rely upon third parties to use, EtO to sterilize some of our product components. Concerns about the release of EtO into the environment at unsafe levels have led to increased activism and lobbying as well as various regulatory enforcement activities against EtO facilities, including closures and temporary closures, as well aslawsuits against EtO service providers, and proposals increasing regulations related to EtO.EtO, including any required reduction in EtO concentration levels. The number of EtO facilities in the US is limited, and any permanent or temporary closures or disruption to their operations for any reason could delay, impede, or prevent our ability to commercialize our products.activities against us for ouror government regulation regarding the use of EtO could result in financial, legal, business, and reputational harm to us.Healthcare policy changes may have a material, adverse effect on us.
vaccines, and public health continue in light of the COVID-19 pandemic which may have an impact on US law relating to the healthcare industry. Many US healthcare laws, such as the Affordable Care Act, are complex, subject to change, and dependent on interpretation and enforcement decisions from government agencies with broad discretion. The application of these laws to us, our customers, or the specific services and relationships we have with our customers is not always clear. Our failure to anticipate accurately any changes to, or the repeal or invalidation of all or part of the Affordable Care Act and similar or future laws and regulations, or our failure to comply with them, could create liability for us, result in adverse publicity and negatively affect our business, results of operations, and financial condition. As an example, the Executive Branch of the US government recently issued three vaccine mandates that may cover all, or groups of, our US workforce. While the temporary mandate has been withdrawn by the executive branch because the US Supreme Court stayed it, the Executive Branch of the US government has indicated that it intends to issue a similar permanent mandate and it may issue other such mandates. We are currently evaluating the applicability of the remaining two mandates to us. In addition, states and local authorities have begun to issue various forms of vaccine mandates and other COVID-19 related restrictive measures, while others have issued bans of such measures. If we determine that any of these COVID-19 related restrictions apply to us or that they are in conflict with one another, attempted compliance with such laws could cause disruption to our business and in our workforce that could have an impact on our ability to attract or retain talent and increase our costs or could otherwise adversely affect our business and profitability.We are subject to various US and international bribery, anti-kickback, false claims, privacy, transparency, and similar laws, any breach of which could cause a material, adverse effect on our business, financial condition, and profitability.
Codes,codes, it is possible that enforcement authorities may view our relationships as prohibited arrangements that must be restructured or for which we would be subject to other significant civil or criminal penalties or debarment. In any event, any enforcement review of or action against us as a result of such review, regardless of outcome, could be costly and time consuming. Additionally, we cannot predict the impact of any changes in or interpretations of these laws, whether these changes will be retroactive or will have effect on a going-forward basis only.Risks Relating to Our Indebtedness
•Incur or guarantee additional debt or create liens on certain assets;•Pay dividends on or make distributions of our share capital, including repurchasing or redeeming capital stock, or make other restricted payments, including restricted junior payments;•Enter into agreements that restrict our subsidiaries’ ability to pay dividends to us, repay debt owed to us or our subsidiaries, or make loans or advances to us or our other subsidiaries;•Enter into certain transactions with our affiliates including any transaction or merger or consolidation, liquidation, winding-up, or dissolution; convey, sell, lease, exchange, transfer or otherwise dispose of all or any part of our business, assets or property; or sell, assign, or otherwise dispose of any capital stock of any subsidiary;•Amend, supplement, waive, or otherwise modify our or our subsidiariessubsidiaries' organizational documents in a manner that would be materially adverse to the interests of the lenders,lender, or change or amend the terms of documentation regarding junior financing in a manner that would be materially adverse to the interests of the lenders;lender;•Make changes to our and our subsidiaries’ fiscal year without notice to the administrative agent under the agreement;agent;•Enter into agreements which restrict our ability to incur liens;•Engage in any line of business substantially different from that in which we are currently engaged; and•Make certain investments, including strategic acquisitions or joint ventures.•Will not be required to lend any additional amounts to us; and•Could elect to declare all indebtedness outstanding, together with accrued and unpaid interest and fees, to be due and payable and terminate all commitments to extend further credit, if applicable.RelatedRelating to Ownership of our Common StockOur business could be negatively impacted as a result of shareholder activism.
numerous public companies. Shareholder activists from time to time propose to involve themselves in the governance, strategic direction, and operations of a company.companies. Such involvement with us may disrupt our business and divert the attention of our management, and any perceived uncertainties as to our future direction resulting from such involvement could result in the loss of business opportunities, be exploited by our competitors, cause concern for our current or potential customers, cause significant fluctuations in stock price, or make it more difficult to attract and retain qualified personnel and business partners.matters.make.make or we may be challenged by governmental authorities if we choose to make such investments. Failure to meet the expectations of investors, and other stakeholders, or certain governmental authorities in these areas may damage our reputation, impact employee retention, impact the willingness of our customers to do business with us, or otherwise impact our financial results and stock price.1B. 106(a) of Regulation S-K.Unresolved Staff Comments.Provide periodic, but no less than, annual training on cybersecurity, data privacy, and data handling to all employees and contractors with access to our systems;None.Conduct periodic, but no less than, annual cybersecurity management and incident response training for relevant personnel, utilizing Knowbe4 resources;Implement regular phishing simulations and processes for reporting phishing to enhance staff awareness and responsiveness;
and laboratory facilities consist of approximately 190,400 square feet of leased manufacturing, administrative, laboratory, and warehouse space located on a 21.5-acre setting, with an additional 14,400 square feet of off-site warehouse space both located in Kennesaw, Georgia. The manufacturing and tissue processing space includes approximately 20,000 square feet of class 10,000 clean rooms and 8,000 square feet of class 100,000 clean rooms. This extensive clean room environment provides a controlled aseptic environment for manufacturing and tissue preservation. Two back-up emergency generators assure continuity of our manufacturing operations and liquid nitrogen freezers maintain preserved tissue at or below –135–135°C. We manufacture products from our Medical Devices segment, including BioGlue and PhotoFix, and process and preserve tissues from our Preservation Services segment at our headquarters facility. Our corporate headquarters also includes a CardioGenesis cardiac laser therapymaintenance and evaluation laboratory space.broadcasts from and to anywhere in the world.worldwide broadcasts. The Ronald C. Elkins Learning Center provides visiting surgeons with a hands-on training environment for surgical and implantation techniques for our technology platforms.80,000156,000 square feet of leased manufacturing, administrative, laboratory, and warehouse space. In 2021space where we opened an additional 76,000 square foot manufacturing, administrative, laboratory, and warehouse space.We also lease a facility, which consists of 15,600 square feet of combined manufacturing and office space in Atlanta, Georgia, which we sublet to a third-party. This facility was sublet beginning in 2018. additional office and warehouse space in various countries in which we operate direct sales subsidiaries, including in Brazil, Greece, Italy, Poland, Spain, Switzerland, and the United Kingdom.
2023 2023 High Low 2022 High Low First quarter $ 22.04 $ 16.56 Second quarter 23.07 15.44 Third quarter 23.43 12.90 Fourth quarter 14.30 9.64 18, 202216, 2024 we had 210175 shareholders of record.2021, 2020,2023, 2022, or 2019.On December 1, 2017 we entered into a Credit and Guaranty Agreement (the “Credit Agreement”), among Artivion, as borrower, CryoLife International, Inc., On-X Life Technologies Holdings, Inc., On-X Life Technologies, Inc., AuraZyme Pharmaceuticals, Inc., as guarantor subsidiaries, the financial institutions party thereto from time to time as lenders, and Deutsche Bank AG New York Branch, as administrative agent and collateral agent. The Credit Agreement prohibits the payment of certain restricted payments, including cash dividends. See also Part II, Item 8, Note 11 of the “Notes to Consolidated Financial Statements” for further discussion of the Credit Agreement.The following table provides information about purchases we madequarterthree months ended December 31, 2021 of equity securities that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934.Issuer Purchases of Equity SecuritiesCommon StockThe common shares purchased during the quarter ended December 31, 2021 were tendered to us in payment of taxes on stock compensation and were not part of a publicly announced plan or program.Selected Financial Data.On November 19, 2020 the SEC adopted certain amendments to Regulation S-K, which are intended to modernize, simplify, and enhance certain financial disclosure requirements. Among other topics of focus, the amendments eliminated the requirements of Item 301, Selected Financial Data, which required certain public companies to provide the last five years of selected financial data in tabular form. We have elected to comply with the provision of the amendment allowing certain registrants to stop providing selected financial data.doesdo not include certain items related to the year ended December 31, 2019,2021, including year-to-year comparisons between the year ended December 31, 20202022 and the year ended December 31, 2019.2021. For a comparison of our results of operations for the fiscal years ended December 31, 20202022 and December 31, 2019,2021, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2020,2022, filed with the SEC on February 23, 2021.2023.stents and stent grafts, surgical sealants, On-X® mechanical heart valves and related surgical products, and implantable cardiac and vascular human tissues. Aortic stents and stent grafts include JOTEC®aortic arch stent grafts, abdominal stent grafts, and surgical products (collectively, “JOTECsynthetic vascular grafts. Aortic arch stent grafts include our E-vita Open NEO, E-vita Open Plus, AMDS, NEXUS, NEXUS DUO (the “NEXUS Products”), the Ascyrus Medical Dissection Stent (“AMDS”) hybrid prosthesis, and the NEXUS® endovascularE-vita Thoracic 3G products. Abdominal stent graft system (“NEXUS”).grafts include our E-xtra Design Engineering, E-nside, E-tegra, E-ventus BX, and E-liac products. Surgical sealants include BioGlue® Surgical Adhesive (“BioGlue”) products. In addition to these four major product families, we sell or distribute PhotoFix® bovine surgical patches and CardioGenesis® cardiac laser therapy Therion® chorioamniotic allografts (previously marketed(prior to our abandonment of the business as NeoPatch®),of June 30, 2023). We began to manufacture and supply PerClot® hemostatic powder (prior toduring the sale to a subsidiarysecond quarter of 2023 (as part of the Transitional Manufacturing and Supply Agreement (“TMSA”) of the Baxter International, Inc (“Baxter”))Transaction, described below).20212023 we reported annual revenues of $298.8$354.0 million, increasing 18%13% over the prior year, largelyyear. Excluding the effects of foreign exchange, revenues increased 12% over the prior year. The increase in revenues was due to increases in revenues from allaortic stent grafts, On-X products, preservation services, other products, and preservation services.surgical sealants. For the year ended December 31, 20212023 we reported a net loss of $14.8$30.7 million. See the “Results of Operations” section below for additional analysis of the fourth quarter and full year 20212023 results. See Part I, Item 1, “Business,” for further discussion of our business and activities during 2021.Sale of PerClotOn July 28, 2021 we entered into an asset purchase agreement and other ancillary agreements related to the sale of PerClot, a polysaccharide hemostatic agent used in surgery (“PerClot”) to Baxter, and an agreement to terminate all of our material agreements with Starch Medical, Inc. (“SMI”) related to PerClot (collectively the “Baxter Transaction”). Under the terms of the Baxter Transaction, Baxter will pay an aggregate of up to $60.8 million in consideration (we will receive up to $45.8 million and SMI will receive up to $15.0 million), consisting of (i) $25.0 million at closing, of which $6.0 million was paid to SMI; (ii) up to $25.0 million upon our receipt of Premarket Approval (“PMA”) approval from the US Food and Drug Administration (the “FDA”) for PerClot and our transfer of the PMA to Baxter, of which up to $6.0 million is payable to SMI, subject to certain reductions for delay in PMA approval; and (iii) up to $10.0 million upon Baxter’s achievement of certain cumulative worldwide net sales of PerClot prior to December 31, 2026 and December 31, 2027, of which up to $3.0 million is payable to SMI. In addition, at the conclusion of our manufacturing and supply services for Baxter, Baxter will pay us $780,000 upon transfer of our PerClot manufacturing equipment. Under the terms of the Baxter Transaction, we will continue to provide to Baxter certain transition and manufacturing and supply services relating to the sale of SMI PerClot outside of the US and manufacture and supply of PerClot to Baxter post PMA approval.Effects of COVID-19In December 2019 an outbreak of a respiratory illness caused by a new coronavirus named “2019-nCoV” (“COVID-19”) was detected, and by March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 outbreak a “pandemic.”Beginning in March 2020 we took steps to address the potential impact of COVID-19 on our employees and operations, and to preserve cash, including reducing expenditures and delaying investments. These steps included, but were not limited to, implementing specific protocols to minimize workplace exposures to COVID-19 by our employees; implementing remote work arrangements for most employees we deemed able to do so; restricting business travel; implementing hiring restrictions; reducing planned expenditures on some pending clinical trials; imposing senior management cash salary reductions in exchange for cash payments in the second quarter of 2021; requiring our Board of Directors to accept Artivion stock instead of cash compensation for a six month period through October 2020; and suspending management merit increases for seven months in 2020.Our efforts to protect our supply chain and reduce the spread of COVID-19 among our employees, including our work-from-home arrangements, were successful in 2020 and 2021 as we continued to operate all manufacturing sites at full production. These efforts have not materially affected our ability to maintain our business operations, including the operation of financial reporting systems, internal control over financial reporting, or disclosure controls and procedures; however, there is no guarantee that these efforts and arrangements, if they are continued, will continue to be successful in the future. Further, our reductions or delays in expenditures slowed our progress on certain key R&D initiatives and could in the future continue to adversely impact our business operations or further delay our recovery from the pandemic.Although we have scaled back many of our COVID-19 mitigation efforts, we continue to monitor the impact of the COVID-19 pandemic and the emergence of new variants on our business and recognize that COVID-19 and its effects could continue to negatively impact our business and results of operations beyond 2021. As an example, the COVID-19 pandemic reportedly has impacted the global supply chain. Although we have yet to experience any material effects of this impact on our supply chain or operations, we face an increasing risk that upstream disruptions may occur or worsen. As global economies continue to recover from the COVID-19 downturn, the expiration of COVID-19 related hiring freezes, increased opportunities for remote work, and increasing compensation pressure have resulted in a war for talent and an unprecedent number of retirements or career changes. The resulting worker shortages at all levels have impacted supply chains and distribution channels and employers’ and our own ability to adequately staff operations. Impact from these shortages during 2021, including a shortage of trained staff capable of meeting the increased demand associated with releasing quarantined tissue, have impacted, and may impact our operations going forward. Hospitals and other healthcare providers have also experienced staffing shortages impacting our business including increased restrictions on elective and non-emergent procedures, restrictions on access to healthcare facilities, cancellation of elective procedures, and the re-allocation of scarce resources to some critically ill patients. Portions of our operations are being impacted by public and private vaccine mandates, which can impact hospital staffing, impact our specialized workforce, and impact the global supply chain, all of which can directly or indirectly impact our product sales, business operations, manufacturing operations, workforce, and research and development projects.The extent to which our operations and financial performance will be impacted by the pandemic in and beyond 2022 will depend largely on future developments, including changes in hospital utilization rates and staffing, prevalence and severity of new variants, the impact of vaccine mandates or vaccine encouragement programs on the spread of COVID-19 and its variants, global availability and acceptance of vaccines and their effectiveness against variants, the prevalence of vaccine mandates generally, disruptions to workforce availability, and any continuing impact on the global supply chain. If COVID-19 or its variants become more contagious, if efforts to further contain the effects of COVID-19 or its variants, including vaccine mandates or adoption, are unsuccessful, if COVID-19, its variants, or disruptions to the global supply chain impact our supply chain or employee availability or productivity, or if we continue to experience periods of uncertainty due to COVID-19 or its variants, it could materially, adversely affect our revenues, financial condition, profitability, and cash flows.See the “Risk Factors” identified in Part I, Item 1A of this form 10-K for risks related to COVID-19.marketnet realizable value on a first-in, first-outfirst-in, first-out basis and are deferred until revenue is recognized. Upon shipment of tissue to an implanting facility, revenue is recognized, and the related deferred preservation costs are expensed as cost of preservation services. Cost of preservation services also includes, as applicable, lower of cost or marketnet realizable value write-downs and impairments for tissues not deemed to be recoverable, and includes, as incurred, idle facility expense, excessive spoilage, extra freight, and re-handling costs.freight-infreight-in charges), and indirect costs (including allocations of costs from support departments and facility allocations). Fixed production overhead costs are allocated based on actual tissue processing levels, to the extent that they are within the range of the facility’s normal capacity.reevaluatere-evaluate these estimates periodically. Actual yields could differ significantly from our estimates, which could result in a change in tissues available for shipment and could increase or decrease the balance of deferred preservation costs. These changes could result in additional cost of preservation services expense or could increase per tissue preservation costs, which would impact gross margins on tissue preservation services in future periods.marketnet realizable value. We also evaluate our deferred preservation costs for costs not deemed to be recoverable, including tissues not expected to ship prior to the expiration date of their packaging. Lower of cost or marketnet realizable value write-downs are recorded if the tissue processing costs incurred exceed the estimated market value of the tissue services, based on recent average service fees at the time of the evaluation. Impairment write-downs are recorded based on the book value of tissues deemed to be impaired. Actual results may differ from these estimates. Write-downs of deferred preservation costs are expensed as cost of preservation services, and these write-downs are permanent impairments that create a new cost basis, which cannot be restored to its previous levels if our estimates change.We recorded write-downs to our deferred preservation costs totaling $575,000, $1.7 million, and $787,000 for the years ended December 31, 2021, 2020, and 2019, respectively, due primarily to tissues not expected to ship prior to the expiration date of the packaging. In addition, write-offs during the year ended December 31, 2020 included $826,000 of non-conforming tissues resulting from the contaminated saline solution. See “Results of Operations,” for further discussion of contaminated saline solution.We record certain financial instruments at - Contingent Considerationon a recurring basis, including cash equivalents, and certain restricted securities. We may make an irrevocable election to measure other financial instruments at fair value on an instrument-by-instrument basis. Fair value financial instruments are recorded in accordance with the fair value measurement framework.We also measure certain assets and liabilities at fair value on a non-recurring basis. These non-recurring valuations include evaluating assets such as certain financial assets, long-lived assets, and non-amortizing intangible assets for impairment, allocating value to assets in an acquired asset group and applying accounting for business combinations and the initial recognitionestimate of liabilities such as contingent consideration. We use the fair value measurement framework to value these assets and liabilities and report these fair values in the periods in which they are recorded or written down. measurement framework includes a fairof the contingent consideration liability is estimated by discounting to present value hierarchy that prioritizes observable and unobservable inputs usedthe contingent payments expected to measure fair values in their broad levels. These levels from highest to lowest priority are as follows:Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities;Level 2: Quoted prices in active markets for similar assets or liabilities or observable prices that arebe made based on inputs not quoted in active markets, but corroborated by market data; andLevel 3: Unobservable inputs or valuation techniques that are used when little or no market dataa probability-weighted scenario approach. A discount rate is available.The determination of fair valueapplied based on our unsecured credit spread and the assessment ofterm commensurate risk-free rate to the additional consideration to be paid, and then we apply a measurement’s placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to our unobservable estimates and assumptions. Our assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include: estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. We may also engage external advisors to assist in determining fair value, as appropriate.Although we believe that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values.Deferred Income TaxesDeferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and tax return purposes. We assess the recoverability of our deferred tax assets and provide a valuation allowance against our deferred tax assets when, as a result of this analysis, we believe it is more likely than not that some portion or all of our deferred tax assets will not be realized.Assessing the recoverability of deferred tax assets involves judgment and complexity, including the consideration of prudent and feasible tax planning. Estimates and judgments used in the determinationrisk-based estimate of the need for a valuation allowance and in calculating the amountprobability of a needed valuation allowance include, but are not limitedachieving each scenario to the following:The ability to carry back deferred tax attributes to a prior tax year;Timing of the anticipated reversal of book/tax temporary differences;Projected future operating results;Anticipated future state tax apportionment;Timing and amounts of anticipated future taxable income;Evaluation of statutory limits regarding usage of certain tax assets; andEvaluation of the statutory periods over which certain tax assets can be utilized.Significant changes in the factors above, or other factors, could affect our ability to use our deferred tax assets. Such changes could have a material, adverse impact on our profitability, financial position, and cash flows. We will continue to assess the recoverability of our deferred tax assets, as necessary, when we experience changes that could materially affect our prior determination of the recoverability of our deferred tax assets.Valuation of Acquired Assets or BusinessesAs part of our corporate strategy, we are seeking to identify and capitalize upon acquisition opportunities of complementary product lines and companies. We evaluate and account for acquired patents, licenses, distribution rights, and other tangible or intangible assets as the purchase of an asset or asset group, or as a business combination, as appropriate. The determination of whether the purchase of a group of assets should be accounted for as an asset group or as a business combination requires judgment based on the weight of available evidence.For the purchase of an asset group, we allocate the cost of the asset group, including transaction costs, to the individual assets purchased based on their relative estimated fair values. In-process research and development acquired as part of an asset group is expensed upon acquisition. We account for business combinations using the acquisition method. Under this method, the allocation of the purchase price is based oncalculate the fair value of the tangible and identifiable intangible assets acquired and the liabilities assumed as of the date of the acquisition. The excess of the purchase price over the estimatedcontingent consideration. This fair value measurement was based on unobservable inputs, including management estimates and assumptions about the future achievement of the tangible net assetsmilestones and identifiable intangible assetsfuture estimate of revenues, and is, recordedtherefore, classified as goodwill. Transaction costs related to a business combination are expensed as incurred. In-process research and development acquired as part of a business combination is accounted for asan indefinite-lived intangible asset until the related research and development project gains regulatory approval or is discontinued.We typically engage external advisors to assist in determiningLevel 3 within the fair value of acquired asset groups or business combinations, using valuation methodologies such as: the excess earnings, the discounted cash flow, or the relief from royalty methods. The determination of fair value in accordance with the fair value measurement framework requires significant judgments and estimates, including, but not limited to: timing of product life cycles, estimates of future revenues, estimates of profitability for new or acquired products, cost estimates for new or changed manufacturing processes, estimates of the cost or timing of obtaining regulatory approvals, estimates of the success of competitive products, and discount rates. We, in consultation with our advisor(s), make these estimates based on our prior experiences and industry knowledge. We believe that our estimates are reasonable, but actual results could differ significantly from our estimates. A significant change in our estimates used to value acquired asset groups or business combinations could result in future write-downs of tangible or intangible assets acquired by us and could, therefore, materially impact our financial position and profitability. If the value of the liabilities assumed by us, including contingent liabilities, is determined to be significantly different from the amounts previously recorded in purchase accounting, we may need to record additional expenses or write-downs in future periods, which could materially impact our financial position and profitability.20212023 Compared to Year Ended December 31, 2020InTables in thousands)Revenues for the
Twelve Months Ended December 31,Revenues for the
Twelve Months Ended December 31,Revenues as a Percentage of Total Revenues for the
Twelve Months Ended December 31,2023 2023 2022 Percent
Change2023 2022 Aortic stent grafts Aortic stent grafts Aortic stent grafts $ 107,469 $ 92,752 16% 31% 29% On-X On-X 74,528 63,904 17% 21% 20% Surgical sealants 68,016 65,379 65,379 4% 4% 19% 21% Other 11,172 8,318 8,318 34% 34% 3% Total products 261,185 230,353 230,353 13% 13% 74% 73% Preservation services Preservation services 92,819 83,436 11% 26% 27% Total $ 354,004 $ $ 313,789 13% 13% 100% 18%13% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.2022. The increase in revenues for the twelve months ended December 31, 20212023 was due to increasesan increase in revenues from allaortic stent grafts, On-X products, preservation services, other products, and preservation services. On a constant currency basis,surgical sealants. Excluding the effects of foreign exchange, revenues increased 16%12% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.2022. Revenues for the twelve months ended December 31, 2021 and 20202022 were negatively impacted in certain regions by delays or cancellations of some surgical procedures as a result of reduced hospital capacity and staffing and hospital restrictions due to the COVID-19 pandemic. Additionally, reduced hospital staffingpandemic and restricted access resulting from COVID-19 have impactedlocal labor disputes.adoption rates for newly acquired or newly released products. The revenue impact from COVID-19 was smaller and varied regionally during the three and twelve months ended December 31, 2021 as compared to the three and twelve months ended December 31, 2020 with the largest negative impact during the three months ended June 30, 2020.Revenues for the
Twelve Months Ended December 31,Percent
Change
From Prior
Year2023 2022 US GAAP US GAAP Exchange Rate Effect Constant Currency Constant Currency Products: Aortic stent grafts $ 107,469 $ 92,752 $ 1,587 $ 94,339 14% On-X 74,528 63,904 61 63,965 17% Surgical sealants 68,016 65,379 236 65,615 4% Other 11,172 8,318 4 8,322 34% Total products 261,185 230,353 1,888 232,241 12% Preservation services 92,819 83,436 (88) 83,348 11% Total $ 354,004 $ 313,789 $ 1,800 $ 315,589 12% 20212023 is presented below.24%13% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.2022. The increase was due to an increase in revenues for the twelve months ended December 31, 2021 was due to increases in revenues from all products.aortic stent grafts, On-X products, other products, and surgical sealants. A discussion of the changes in product revenues for aortic stents and stent grafts, On-X products, surgical sealants, On-X, and other product revenues is presented below.Polish Zlotys,Canadian Dollars, and Swiss Francs Brazilian Reals, and Canadian Dollars, with a concentration denominated in Euros. Each currency is subject to exchange rate fluctuations. For the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020,2022, the US Dollar weakened in comparison to major currencies, resulting in revenue increases when these foreign currency denominated transactions were translated into US Dollars. Future changes in these exchange rates could have a material, adverse effect on our revenues denominated in these currencies. Additionally, our sales to many distributors around the world are denominated in US Dollars, and although these sales are not directly impacted by currency exchange rates, we believe that some of our distributors may delay or reduce purchases of products in US Dollars depending on the relative price of these goods in their local currencies. Stents and Stent Grafts stents and stent grafts including JOTEC,include aortic arch stent grafts, abdominal stent grafts, synthetic vascular grafts, and original equipment manufacturing (“OEM”) aortic stent graft products. Aortic arch stent grafts include our E-vita Open NEO, E-vita Open Plus, AMDS, the NEXUS Products, and NEXUS products,E-vita Thoracic 3G products. Abdominal stent grafts include our E-xtra Design Engineering, E-nside, E-tegra, E-ventus BX, and E-liac products. Aortic stent grafts are used in endovascular and open vascular surgery as well as for the treatment of complex aortic arch, thoracic, and thoracicabdominal aortic diseases. Our aortic stents and stent grafts are primarily distributed in international markets.On September 11, 2019 Artivion and its wholly-owned subsidiary JOTEC entered into exclusive distribution and loan agreements with Endospan Ltd. (“Endospan”)Israeli corporation, underincrease in average sales prices, which JOTEC obtained exclusive distribution rights for Endospan’s NEXUS productsincreased revenues by 3%, and accessories in certain countries in Europe.On September 2, 2020 Artivion entered into an agreement to acquire allthe effect of foreign exchange rates, which increased revenues by 2%.equity interestssales of Ascyrus Medical LLC (“Ascyrus”). Ascyrus developed the AMDS, an aortic arch remodeling device usedstent grafts increased 14% for the treatmenttwelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022. The increase in revenues was partially due to improved conditions from the COVID-19 pandemic, as well as increased market adoption of acute Type A aortic dissections. The AMDS is currently distributedcertain products for the twelve months ended December 31, 2023, as compared to the twelve months ended December 31, 2022. Revenues for the twelve months ended December 31, 2023 increased in all geographies, with the most significant increase in Europe, the Middle East, and Africa (collectively, “EMEA”), Canada, Asia Pacific (“APAC”), and Latin America (“LATAM”), and is included as a component of aortic stents and stent grafts revenues from the date of the acquisition.Aortic stents and stent grafts revenues increased 38%. The revenue increase in EMEA for the twelve months ended December 31, 20212023 was primarily due to an increase in buying patterns in direct (to hospitals) markets.2020.Aortic stents and stent grafts revenues, excluding OEM, increased 38% for the twelve months ended December 31, 2021 as compared to the twelve months ended December 31, 2020.2022. This increase was primarily due to an increase in volume of units sold, which increased revenues by 37%11%, and the effect of foreign exchange rates,an increase in average sales prices, which increased revenues by 4%, partially offset by a decrease in average6%.prices of certainOn-X products in certain regions, which decreased revenues by 3%.On a constant currency basis, revenues for aortic stents and stent grafts, excluding OEM, increased 33%17% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.2022. The increase in revenues was partially due to improved conditions from the COVID-19 pandemic for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.2022. Revenues for the twelve months ended December 31, 20212023 increased primarily in EMEA.all geographies, with the most significant increases in North America and Asia Pacific (“APAC”). The revenue increase in EMEA during the twelve months ended December 31, 2021 is primarily due to an increaserevenues in sales of newly launched JOTEC Products. RevenuesNorth America for the twelve months ended December 31, 2021 were2023 was also positively impacted by increasedcustomer buying patterns. The increase in revenues fromin APAC for the AMDS as a result of the Ascyrus acquisition in the third quarter of 2020. Aortic stents and stent graftstwelve months ended December 31, 2023 was also impacted by distributor buying patterns. On-X OEM sales accounted for less than 1% of product revenues for the three and twelve months ended December 31, 20212023 and 2020.14%4% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.2022. This increase in revenues was primarily due to an increase in average sales prices in certain regions, which increased revenues by 3%, and an increase in the volume of milliliters sold, which increased revenues by 13%, and the effect of foreign exchange rates, which increased revenues by 1%.On a constant basis, revenues from the sales of surgical sealants increased 13%4% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.2022. The increase in revenues was primarily due to revenue increases in all geographies, except for revenue decreases in EMEA.20212023, as compared to the twelve months ended December 31, 2020 was primarily due2022. During 2022 customers accelerated orders in certain countries in anticipation of temporary commercialization restrictions resulting from the expiration of our BioGlue CE Mark during our transition to increasesa new Notified Body. We received renewal of our BioGlue CE Mark and completed our Notified Body transition late in North America, EMEA, and LATAM, partially offset by decreases in APAC. The revenue increase in these markets was primarily due to an increasethe fourth quarter of 2022.procedures due to improved conditions related to the COVID-19 pandemic during the twelve months ended December 31, 2021 as compared to the twelve months ended December 31, 2020. Revenue decreases for the twelve months ended December 31, 2021 in APAC was primarily due to changes in distributor buying patterns in this market.See Part I Item 1A, “Risk Factors—Operational Risks— We may not be successful in obtaining necessary clinical results or regulatory clearances/approvals for new and existing products and services, and our approved products and services may not achieve market acceptance.”Domestic BioGlue revenuessealants accounted for 51%48% and 49% of total surgical sealant revenues for the twelve months ended December 31, 20212023 and 50%2022, respectively.total BioGlue revenues from PhotoFix, PerClot (as part of the TMSA of the Baxter Transaction described below), and CardioGenesis cardiac laser therapy (prior to our abandonment of that business as of June 2023).2020.On-XThe On-X catalogue of products includes the On-X prosthetic aortic and mitral heart valves and the On-X ascending aortic prosthesis (“AAP”) for heart valve replacement. On-X product revenues also include revenues from the distribution of CarbonAid® CO2 diffusion catheters and from the sale of Chord-X® ePTFE sutures for mitral chordal replacement. On-X also generates revenue from pyrolytic carbon coating products produced for OEM customers.On-X product revenues increased 19% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.On-X product revenues, excluding OEM, increased 20% for the twelve months ended December 31, 2021 as compared to the twelve months ended December 31, 2020. This increase was primarily due to an increase in volume of units sold, which increased revenues by 23%, and the effect of foreign exchange rates which increased revenues by 1%, partially offset by a decrease in average sales prices, which decreased revenues by 4%.On a constant currency basis, On-X revenues, excluding OEM, increased 19% for the twelve months ended December 31, 2021 as compared to the twelve months ended December 31, 2020. The increase in revenues for the twelve months ended December 31, 2021 as compared to the twelve months ended December 31, 2020 was primarily due to revenue increases in North America, APAC, and EMEA. The revenue increases in these markets were partially due to improved conditions from the COVID-19 pandemic for the twelve months ended December 31, 2021 as compared to the twelve months ended December 31, 2020. Revenues were also positively impacted in the North American market due to increases in market share, in EMEA due to an increase of shipments in direct and indirect markets, and in APAC due to growth in distributor markets. On-X OEM sales accounted for less than 1% of product revenues for the twelve months ended December 31, 2021 and 2020.Domestic revenues from On-X accounted for 62% of total On-X revenues for the twelve months ended December 31, 2021, and 65% of On-X revenues for the twelve months ended December 31, 2020.OtherOther revenues are comprised of PhotoFix, PerClot (prior to the Baxter Transaction), and CardioGenesis cardiac laser therapy product revenues. Other revenues increased 8% for the twelve months ended December 31, 2021 as compared to the twelve months ended December 31, 2020.20212023 was primarily due to an increase in PhotoFixPerClot and to a lesser extent CardioGenesis cardiac laser therapyPhotoFix product revenues, partially offset by decreased CardioGenesis revenues as a decrease in PerClot product revenues. The increase in PhotoFix revenues was primarily due to an increase in volumeresult of units sold forour abandonment of the twelve months ended December 31, 2021. The increase in CardioGenesis cardiac laser therapy product revenues for the twelve months ended December 31, 2021 was primarily due to our ability to restart selling handpieces during the fourth quarterbusiness as of 2021, as further described below. The decrease in PerClot product revenues for the twelve months ended December 31, 2021 was due to the Baxter Transaction, described above.DuringIn February 2023 our supplier of handpieces informed us that it was exiting the nine months ended Septemberbusiness and would no longer be supplying handpieces effective immediately. The sole-source manufacturer of tubing used in the handpiece assembly had gone out of business and a new supplier had yet to be identified and qualified. We evaluated the impact of this disruption on our CardioGenesis cardiac laser therapy business and possible avenues for resumption of supply including the evaluation of alternate suppliers and handpiece manufacturers. As of June 30, 20212023 we were unable to identify an alternative source of supply or handpiece manufacturer and do not foresee a resumption of this business in the future. As a result, we wrote-off all of our CardioGenesis cardiac laser therapy assets and recorded an expense of $390,000 during the twelve months ended December 31, 20202023 on our Consolidated Statements of Operations and Comprehensive Loss.had minimal revenues from the CardioGenesis cardiac laser therapy product line as we did not have a supply of handpieces dueentered into an asset purchase agreement, TMSA, and other ancillary agreements related to the FDA’s reviewsale of PerClot, a polysaccharide hemostatic agent used in surgery, to a subsidiary of Baxter International, Inc. (“Baxter”), and an agreement to terminate all of our supplier’s changematerial agreements with Starch Medical, Inc. (“SMI”) related to PerClot (collectively the “Baxter Transaction”). On May 23, 2023 the US Food and Drug Administration granted Premarket Approval (“PMA”) of PerClot for use to control bleeding in certain open and laparoscopic surgical procedures. Pursuant to the terms of the TMSA of the Baxter Transaction, we transferred the ownership of the PMA to Baxter following approval and began manufacturing location. After obtaining approval, our supplier resumed manufacturingand supplying PerClot for Baxter for a limited supplyperiod of handpieces allowing us21 months, subject to resume limited sales during the fourth quarter of 2021.In the fourth quarter of 2020 we became aware that a supplier shipped to us a saline solution lot that we use in our tissue processing that contained some contamination in a small number of bottles of the solution lot. The contamination was identified by our in-process quality controls. The contaminated solution was estimated to have impacted a small percentage of tissue processed with this solution lot, causing us to write-off approximately $826,000 of tissue in the fourth quarter of 2020. An additional $5.0 million of tissue was quarantined in process pending further testing. Upon completion, and FDA acceptance of the testing, we began releasing tissue meeting our release criteria late in the second quarter of 2021.We believe that the written-off and quarantined tissue impacted the availability of tissue for distribution, which had a negative impact on revenue in the first quarter of 2021 and, to a lesser extent, the second quarter of 2021. Our ability to continue to release this quarantined and other tissue in the third quarter was negatively impacted by trained staffing availability.4%11% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020. revenues for the twelve months ended December 31, 2021 was primarily due to a 5% and 3% increase in cardiac and vascular tissue revenues, respectively. The increase in cardiac tissue revenues was primarily due to an increase in cardiac tissue shipments,average sales prices, which increased revenues by 6%12%, partially offset by a decrease in average service fees,tissues shipped, which decreased revenues by 1%. The increase in vascular tissue revenues was primarily due to an increase in vascular tissue shipments, which increased revenues by 4%, partially offset by a decrease in average service fees, which decreased revenues by 1%.
Twelve Months Ended
December 31,2023 2022 Cost of products $ 84,595 $ 72,166 30%17% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.2022. Cost of products for the twelve months ended December 31, 20212023 and 20202022 included costs related to aortic stents and stent grafts, On-X, surgical sealants, On-X, and other products.20212023 was primarily due to an increase in shipments due to improved conditions from the COVID-19 pandemic, JOTEC product launches in late 2020, AMDS which was acquiredvolume of On-X products and aortic stent grafts shipped, and an increase in the third quartercost of 2020,aortic stent grafts, surgical sealants, and write-downs of certainOn-X products shipped, as compared to the twelve months ended December 31, 2020.Twelve Months Ended
December 31,2023 2022 Cost of preservation services $ 40,233 $ 39,100 2%3% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.2022. Cost of preservation services includesincluded costs for cardiac and vascular tissue preservation services.20212023 was primarily due to an increase in shipments due to improved conditions from the COVID-19 pandemicprocessing cost of tissues shipped, as compared to the twelve months ended December 31, 2020.Twelve Months Ended
December 31,Twelve Months Ended
December 31,2023 2023 2022 Gross margin as a percentage of total revenues 65 % 65 % 18%13% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020. 2022.20212023, as compared to the twelve months ended December 31, 20202022 was primarilyalso due to favorable pricingan increase in average sales prices of certain tissues, On-X products, and certain aortic stent grafts shipped and the mix and volume of certain aortic stent grafts, On-X, and surgical sealant products shipped, partially offset by an increase in the volumecost of all products sold.shipped. Gross margin as a percentage of total revenues remainedwas flat for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020 primarily due to2022. Gross margin as a percentage of total revenues was positively impacted by favorable gross marginsprices of newly launched JOTEC Productscertain tissues shipped and AMDS,a favorable mix of On-X products sold,and certain aortic stent grafts shipped, offset by write-downsan increase in the cost of certain products.
Twelve Months Ended
December 31,Twelve Months Ended
December 31,2023 2023 2022 General, administrative, and marketing expenses as a percentage of total revenues General, administrative, and marketing expenses as a percentage of total revenues 59 % 50 % 20%33% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.2022. The increase in General, administrative, and marketing expenses for the twelve months ended December 31, 20212023 was primarily due to an increase in personnel, commission, amortization, and business development expenses.expenses, personnel-related expenses, travel, and marketing.$16.1$25.0 million of business development expensesexpense for the twelve months ended December 31, 20212023, as compared to $6.2$7.7 million of business development income for the twelve months ended December 31, 2020.Business2022. We incurred $23.5 million of business development expensesexpense during the twelve months ended December 31, 2021 included $4.9 million2023 related to the impairment of the Endospan Option and $9.7 million of fair value adjustments for the contingent consideration related to our future payments to Ascyrus contingent consideration. BusinessMedical LLC (“Ascyrus”), the developer of AMDS, who we acquired in 2020, as compared to $9.0 million of business development expensesincome during the twelve months ended December 31, 2020 primarily consisted of fair value adjustments for the Ascyrus contingent consideration.Twelve Months Ended
December 31,Twelve Months Ended
December 31,2023 2023 2022 Research and development expenses as a percentage of total revenues Research and development expenses as a percentage of total revenues 8 % 12 % increased 47%decreased 26% for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.2022. Research and development spending for the twelve months ended December 31, 20212023 was primarily focused on clinical work to gain regulatory approvals for certain aortic stent grafts, and to a lesser extent, On-X products. Research and development spending for the twelve months ended December 31, 2022 was primarily focused on clinical work to gain regulatory approvals for On-X JOTEC,products, certain aortic stent grafts, and PerClot products.spendingoperating expenses on the Consolidated Statements of Operations and Comprehensive Loss for the twelve months ended December 31, 2020 was primarily focused on2022. The majority of these costs included administrative costs that we paid during the fourth quarter of 2022 and the first quarter of 2023, as well as the estimated cost of clinical workdrugs purchased for patients participating in the study that were not expected to gain regulatory approvalbe recovered.On-Xthe twelve months ended December 31, 2023 and JOTEC Products.20212023 consisted of the net $15.9$14.3 million gain from the sale of PerClot assetsreceived as part of the Baxter Transaction on July 28, 2021.$16.9$25.3 million and $16.7$18.2 million for the twelve months ended December 31, 20212023 and 2020,2022, respectively. Interest expense for the twelve months ended December 31, 20212023 and 20202022 relates to interest on debt and uncertain tax positions.Other Expense (Income), NetOtherdebt. The increase in interest expense net was $6.1 million and $3.1 million for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2022, was primarily due to an increase in the interest rate on our term loan.2020, respectively. 2022. Other expense, net for the twelve months ended December 31, 20212023 primarily includesincluded a $5.0 million expense related to a payment to Endospan for achievement of certain milestones related to the NEXUS Products, partially offset by realized and unrealized effects of foreign currency gains and losses. See Part II, Item 8, Note 4 - “Agreements with Endospan” of the “Notes to Consolidated Financial Statements” for further information on our agreements with Endospan. Other expense, net for the twelve months ended December 31, 20202022 primarily includesincluded realized and unrealized effects of foreign currency gains and losses and fair value adjustmentslosses.Twelve Months Ended
December 31,2023 2022 Loss before income taxes $ (21,586) $ (14,984) Income tax expense 9,104 4,208 Net loss $ (30,690) $ (19,192) Diluted loss per common share $ (0.75) $ (0.48) Diluted weighted-average common shares outstanding 40,743 40,032 20212023 and 2020.2022. The loss before income taxes for the twelve months ended December 31, 20212023 was primarily due to business development, expenses primarily related toimpacted by the change in fair value of our financial instruments, an increase in certain operating expenses to support revenue expansion, and an increase in interest expense. The loss before income taxes for the twelve months ended December 31, 2022 was impacted by an increase in certain operating expenses to support revenue expansion and an increase in investments in the research and development pipeline, andpipeline. The loss before income taxes was partially offset by the change in fair value of the Ascyrus contingent consideration for the twelve months ended December 31, 2022. Revenues for the twelve months ended December 31, 2022 were also unfavorably impacted by delays andor cancellations of some surgical procedures as a result of reduced hospital capacity and staffing and hospital restrictions due in part to the COVID-19 pandemic. break-evenan expense of 42% and 28% for the twelve months ended December 31, 2021 as compared to a benefit of 3% for the twelve months ended December 31, 2020.2023 and 2022, respectively. The change in the tax rate for the twelve months ended December 31, 2021 is2023 was primarily due to changes in pre-tax book loss, an increase in the excess tax benefit related to stock compensation, the estimated current year valuation allowance, a settlement of prior year tax return items, and a reductionan increase in the benefit related to uncertain tax position statute expirations for the twelve months ended December 31, 20212023, as compared to the twelve months ended December 31, 2020.20212023 was primarily impactedaffected by excessan increase in the valuation allowance on our deferred tax benefits on stockassets, nondeductible executive compensation, income taxes in certain profitable foreign jurisdictions, and additional tax expense for uncertain tax positions. These tax expenses were partially offset by the research and development tax credit non-deductible executive compensation, changes in our valuation allowance against our net deferred tax assets, and changes in our uncertain tax position liabilities.20202022 was primarily impactedaffected by changesan increase in ourthe valuation allowance againston our net deferred tax assets, nondeductible executive compensation, and changes in ouradditional tax expense for uncertain tax position liabilities.In response topositions. These tax expenses were partially offset by the COVID-19 pandemic, the US government enacted the Coronavirus Aid, Relief,research and Economic Security Act, (“CARES Act”) on March 27, 2020. The CARES Act provided various forms of relief and assistance to U.S. businesses. We recorded a reduction to income taxes payable and deferreddevelopment tax assets of approximately $1.3 million for the change to the 2019 Section 163(j) interest expense deduction limitation for the three months ended March 31, 2020. See Part II, Item 8, Note 9 of the “Notes to Consolidated Financial Statements” of this Form 10-K for further discussion of our interest expense deduction limitation and carryforward.20212023 and 2020.2022. Net loss and diluted loss per common share for the twelve months ended December 31, 20212023 was primarily due to an increase in loss before income taxes, as discussed above.SeasonalityAsresultnon-GAAP financial measure. We define constant currency revenues as revenues minus the exchange rate effect. We define exchange rate effect as the year-over-year impact of foreign currency movements using current period foreign currency rates applied to prior period transactional currency amounts.uncertaintyCompany, as a component in compensation metrics, and as a basis for strategic planning.impacts of the COVID-19 pandemic and the resulting shifts of timing in some revenue, our historically observable seasonality of revenues has been impacted or obscured in 2020 and 2021 and potentially beyond.JOTEC Productsmost of our aortic stent grafts is seasonal, with a decline in demand generally occurring in the third quarter due to the summer holiday season in Europe. We are uncertain whether the demand for AMDS and the NEXUS products and On-X products is seasonal, with a decline in demand generally occurring in the third quarter followed by stronger demand in the fourth quarter. We believe that this trend may be due to the summer holiday season in Europe and the US.20212023 net working capital (current assets of $247.7$280.7 million less current liabilities of $45.0$57.9 million) was $202.7$222.8 million, with a current ratio (current assets divided by current liabilities) of 65 to 1, as compared to net working capital of $174.1$197.6 million and a current ratio of 45 to 1 at December 31, 2020.202220212023 were for general working capital needs, capital expenditures for facilities and equipment, interest and principal payments under our Credit Agreement (defined below), interest payments under our Convertible Senior Notes (defined below), a milestone payment related to the Ascyrus acquisition,capital expenditures for facilities and equipment, repurchases of stock to cover tax withholdings.withholdings, and payment to Endospan for achievement of certain milestones related to the NEXUS Products. We funded our cash requirements through our existing cash reserves and proceeds from stock option exercises, and the Baxter Transaction described above.Credit Agreementnew Initial Term Loan Facility and Convertible Senior Notes (described in “Significant Sources and Uses of Liquidity” section below), expenditures for clinical trials, research and development expenditures, general working capital needs, capital expenditures, and other corporate purposes and may include cash to fund business development activities including obligations in the Endospan andagreements related to the Ascyrus agreements.transaction. These items may have a significant effect on our future cash flows during the next twelve months. Subject to the terms of our CreditInitial Term Loan Agreement, we may seek additional borrowing capacity or financing, pursuant to our current or any future shelf registration statement, for general corporate purposes or to fund other future cash requirements. If we undertake any further significant business development activity, we may need to finance such activities by obtaining additional debt financing or using a registration statement to sell equity securities. There can be no assurance that we will be able to obtain any additional debt or equity financing at the time needed or that such financing will be available on terms that are favorable or acceptable to us.(“the Revolving(the "Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Agreement”). We and each of our existing domestic subsidiaries (subject to certain exceptions and exclusions) guarantee the obligations under the Credit Agreement (the “Guarantors”). The Credit Agreement is secured by a security interest in substantially all existing and after-acquired real and personal property (subject to certain exceptions and exclusions) of us and the Guarantors.In March 2020 partlyThe Term Loan Facility, as a precautionary measure to increase cash and maintain maximum financial flexibility during the uncertainty in global markets resulting from the COVID-19 pandemic, we borrowed the entire amount available under our $30.0 million Revolving Credit Facility at an aggregate interest rate of 5.20%. On June 29, 2020 we used a portion of the net proceeds from the issuance of Convertible Senior Notes, as discussed below, to repay the $30.0 million outstanding under our Revolving Credit Facility.Onamended on June 2, 2021, we entered into an amendment to our Credit Agreement to extend the maturity dates of both the Company’s Term Loan and its Revolving Credit Facility. As part of the amendment, the maturity dates of both the Company’s Term Loan and its Revolving Credit Facility were each extended by two and one-half years, until June 1, 2027 and June 1, 2025, respectively, subject to earlier springing maturities if our 4.25% Convertible Senior Notes, described below, remain outstanding on April 1, 2025 and December 31, 2024, respectively. With respect to the Term Loan, if the Convertible Senior Notes remain outstanding on April 1, 2025, the Term Loan’s maturity date will be April 1, 2025, or, if the Convertible Senior Notes’ own maturity date has been extended, the earlier of (i) 91 days prior to the Convertible Senior Notes’ new maturity date and (ii) June 1, 2027. In the case of the Revolving Credit Facility, if the Convertible Senior Notes are still outstanding on December 31, 2024, the Revolving Credit Facility’s maturity date will be either December 31, 2024 or, if the Convertible Senior Notes’ own maturity date has been extended, the earlier of (i) 182 days prior to the Convertible Senior Notes’ new maturity date and (ii) June 1, 2025. Under the amendment, the Term Loan Facility bears interest, at our option, at a floating annual rate equal to either the base rate, plus a margin of 2.50%, or LIBOR, plus a margin of 3.50%. Prioramendment,final maturity date. We have the optionalright to prepay loans under the Ares Credit Agreement in whole or in part at any time, provided that any prepayment of loans under the Term Loan Facilities (or loans under the Revolving Credit Facility to the extent of reducing the balance of outstanding loans below $30.0 million) will be subject to a prepayment premium of 5.00% if the prepayment occurs prior to January 18, 2025 and 1.00% if the prepayment occurs thereafter and prior to January 18, 2026. Amounts repaid in respect of loans under the Initial Term Loan Facilities may not be reborrowed. Amounts repaid in respect of loans under the Revolving Credit Facility may be reborrowed. Loans under the Term Loan Facilities bear interest, at our option, at a floating annual rate was equal to either the base rate plus a margin of 2.25%,5.50% or LIBOR,SOFR plus a margin of 3.25%6.50%; beginning with the second fiscal quarter of 2025, the margin may step down to 5.25% and 6.25%, respectively, based on our total net leverage ratio at such time. Loans under the Revolving Credit Facility bear interest, at our option, at a floating annual rate equal to either the base rate plus a margin of 3.00% or SOFR plus a margin of 4.00%. The net proceeds from this offering, after deducting initial purchasers’ discounts and costs directly related to this offering, were approximately $96.5 million. On January 1, 2021 we adopted ASU 2020-06 and adjusted the carrying balance of the Convertible Senior Notes to notional. The Convertible Senior Notes balance was $100.0 million recorded in Long-term debt on the Consolidated Balance Sheets as of December 31, 2021. The Convertible Senior Notes may be settled in cash, stock, or a combination thereof, solely at our discretion. The initial conversion rate of the Convertible Senior Notes is 42.6203 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $23.46 per share, subject to adjustments. We use the if-converted method for assumed conversion of the Convertible Senior Notes for the diluted earnings per share calculation. The fair value and the effective interest rate of the Convertible Senior Notes as of December 31, 20212023 was approximately $116.0$106.4 million and 5.05%, respectively. The fair value was based on market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy.The interest expense recognized on the Convertible Senior Notes includes approximately $4.9 million for the aggregateTable of the contractual coupon interest, and the amortization of the debt issuance during the twelve months ended December 31, 2021. Interest on the Convertible Senior Notes began accruing upon issuance and is payable semi-annually.Contentscannotbecame eligible to redeem the Convertible Senior Notes beforebeginning on July 5, 2023.2023, following the expiration of their non-redemption period. We canare able to redeem them on or after July 5, 2023,the Convertible Senior Notes in whole or in part, at our option, if the last reported sale price per share of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. We may redeem for cash all or part of the Convertible Senior Notes at a redemption price equal to 100% of the principal amount of the redeemable Convertible Senior Notes, plus accrued and unpaid interest to, but excluding, the redemption date. No principal payments are due on the Convertible Senior Notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the Convertible Senior Notes do not contain any financial covenants and do not restrict us from conducting significant restructuring transactions or issuing or repurchasing any of its other securities.We have benefited from various aspects of the CARES Act including a decrease in the amount of interest expense limitation in 2020 and the deferment of a portion of the 2020 employer’s portion of social security tax into 2021 and 2022.20212023 approximately 36%31% of our cash and cash equivalents were held in foreign jurisdictions.Year Ended December 31, Year Ended December 31, 2023 2023 2022 Operating activities Operating activities Effect of exchange rate changes on cash and cash equivalents Increase (decrease) in cash and cash equivalents used inprovided by operating activities was $2.6$18.8 million for the twelve months ended December 31, 20212023, as compared to net cash provided byused in operating activities of $12.4$5.2 million for the twelve months ended December 31, 2020.(loss) income,loss, which is then adjusted to remove non-cash items, items classified as investing and financing cash flows, and for changes in operating assets and liabilities from the prior year end. For the twelve months ended December 31, 20212023 these non-cash items primarily included $24.0 million in depreciation and amortization expenses, $15.9$23.5 million of gain from the sale of non-financial assets, $10.7 million in non-cash compensation, $8.9 million in fair value adjustments of financial instruments, $23.1 million of depreciation and $7.5amortization expenses, $14.4 million inof non-cash compensation, $14.3 million of gain from sale of non-financial assets, $7.4 million of lease expense.20212023 these changes included unfavorable adjustmentsthe favorable effect of $18.4$1.7 million due to the timing differences between the recording of accounts payable and other current liabilities, $535,000 due to a decrease in prepaid expenses and other assets, partially offset by $14.4 million due to an increase in inventory balances and deferred preservation costs $11.6and the unfavorable effect of $4.1 million due to the timing differences between recording receivables and the receipt of cash, unfavorable effectcash.$1.9 million Contentsdue to timing differences between the recording of accounts payable and other current liabilities, and $1.4 million due to an increase in prepaid expenses and other assets.provided byused in investing activities was $5.7$502,000 and $10.7 million for the twelve months ended December 31, 2021 as compared to2023 and 2022, respectively. During the twelve months ended December 31, 2023 cash flows used in investing activities primarily included $7.4 million of $73.1cash used for capital expenditures, $5.0 million for the payment related to our agreement with Endospan, partially offset by $14.3 million of proceeds from the sale of non-financial assets.2020. During the twelve months ended December 31, 2021 cash flows provided by investing activities included $19.0 million of net proceeds from the sale of non-financial assets, partially offset by $13.1 million of cash used for capital expenditures. During the twelve months ended December 31, 2020 cash flows used in investing activities included $59.1 million of payments related to the Ascyrus Acquisition, net of cash acquired, $7.3 million in capital expenditures, and $5.0 million in cash payments related to the Endospan agreements.Net Cash Flows from Financing ActivitiesNet cash used in financing activities was $12.2 million for the twelve months ended December 31, 2021 as compared to net cash provided by financing activities of $93.6 million for the twelve months ended December 31, 2020.2022. The current year cash used inprovided by financing activities was primarily due to $8.2 million related to the Ascyrus milestone payment, $3.1 million repayment of debt, $2.2 million payment of debt issuance costs, and $1.9 million for repurchases of common stock to cover tax withholdings, partially offset by $3.8$4.0 million of proceeds from exercise of stock options and issuances of common stock.Net cash providedstock, $3.6 million of proceeds from financing insurance premiums, partially offset by financing activities was $93.6$2.8 million for the twelve months ended December 31, 2020. Cash provided by financing activities was primarily due to the $100.0 million cash proceeds from the issuance of the Convertible Senior Notes partially offset by $3.6 millionrepayment of debt issuance costs associated with these Convertible Senior Notes. Duringand $2.5 million for the twelve months ended December 31, 2020, we borrowed and subsequently repaid $30.0 million from the Revolving Credit Facility.$317.6$320.5 million of scheduled principal payments and $66.1$139.0 million in anticipated interest payments primarily related to our Initial Term Loan Facility, Revolving Credit Agreement,Facility, Convertible Senior Notes, and JOTECother governmental loans.We are obliged to make a $5.0 million third tranche payment under our loan agreement with Endospan upon receipt of certification that certain clinical trial milestones have been achieved. See “Overview” identified in Part II, Item 8, Note 3 of the “Notes to Consolidated Financial Statements” of this Form 10-K. Transaction, we may be required to pay up to $9.0$3.0 million to SMI if certain milestones are met. See “Overview” identified in Part II, Item 8, Note 2 of the “Notes to Consolidated Financial Statements” of this Form 10-K.20212023 and 20202022 were $13.1$7.4 million and $7.3$9.0 million, respectively. Capital expenditures in the twelve months ended December 31, 20212023 were primarily related to leasehold improvements needed to support our business, routine purchases of manufacturing and tissue processing equipment, computer software, leasehold improvements needed to support our business, and computer software and equipment.$55.0$58.9 million as of December 31, 2021,2023, and interest paid on the outstanding balances, if any, of our variable rate Revolving Credit Facility, Term Loan Facility, and Convertible Senior Notes. A 10% adverse change in interest rates, as compared to the rates experienced by us infor the twelve months ended December 31, 20212023 affecting our cash and cash equivalents, Term Loan Facility, Revolving Credit Facility, and Convertible Senior Notes would not have had a material impact on our financial position, profitability, or cash flows.$5.5 million, gain of $1.9$3.1 million, and a loss of $1.2$5.5 million, for the years ended December 31, 2023, 2022, and 2021, 2020, and 2019, respectively. Losses incurred during 2021 were primarily related to cross currency intercompany receivables and payables resulting from large inventory transfers during 2021, impacted by fluctuations in the US dollar relative to other currencies.and stent grafts, surgical sealants, On-X products, and other product revenues are denominated in Euros, Brazilian Reals, Polish Zlotys, British Pounds, Swiss Francs, Polish Zlotys, Canadian Dollars, and Brazilian RealsSwiss Francs and a portion of our General, administrative, and marketing expenses are denominated in Euros, Brazilian Reals, Polish Zlotys, British Pounds, Swiss Francs, Polish Zlotys, Canadian Dollars, Brazilian Reals,Swiss Francs, and Singapore Dollars. These foreign currency transactions are sensitive to changes in exchange rates. In this regard, changes in exchange rates could cause a change in the US Dollar equivalent of net income from transactions conducted in other currencies. As a result, we could recognize a reduction in revenues or an increase in expenses related to a change in exchange rates.2021 affecting our balances denominated in foreign currencies2023 could impact our financial position or cash flows by approximately $8.0$7.0 million. An additional 10% adverse change in exchange rates from the weighted-average exchange rates experienced by us for the twelve months ended December 31, 20212023 affecting our revenue and expense transactions denominated in foreign currencies, would not have had a material impact on our financial position profitability, or cash flows.
ControlControls over Financial Reportingcontrolcontrols over financial reporting as defined in Rules 13a-15(f)13a-15(f) and 15d-15(f)15d-15(f) under the Securities Exchange Act of 1934. Artivion’s internal control system was designed to provide reasonable assurance to Artivion’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.controlcontrols over financial reporting as of December 31, 2021.2023. In making this assessment, we used the criteria set forth in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, we have determined that, as of December 31, 2021,2023, our internal controlcontrols over financial reporting was effective based on those criteria.controlcontrols over financial reporting as of December 31, 2021.22, 2022
20212023 and 2020,2022, the related consolidated statements of operations and comprehensive loss, shareholders' equity and cash flows and shareholders' equity for each of the three years in the period ended December 31, 2021,2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20212023 and 2020,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021,2023, in conformity with U.S. generally accepted accounting principles.2021,2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 22, 202223, 2024 expressed an unqualified opinion thereon.
Deferred Preservation Costs2021,2023, the Company’s deferred preservation costs, net, balance was $42.9$49.8 million. As discussed in Note 1 to the consolidated financial statements, the calculation of deferred preservation costs involves judgment and complexity and uses the same principles as inventory costing. Donated human tissue is procured from deceased human donors by organ and tissue procurement organizations (“OPOs”) and tissue banks, that provide the tissue to the Company for processing, preservation, and distribution. Deferred preservation costs consist primarily of the procurement fees charged by the OPOs and tissue banks, direct labor and materials (including salary and fringe benefits, laboratory supplies and expenses, and freight-in charges), and indirect costs (including allocations of costs from support departments and facility allocations). Fixed production overhead costs are allocated based on actual tissue processing levels, to the extent that they are within the range of the facility’s normal capacity. These costs are then allocated among the tissues processed during the period based on cost drivers, such as the number of donors or number of tissues processed. The Company applies a yield estimate to all tissues in process and in quarantine to estimate the portion of tissues that will ultimately become implantable. Estimated yields are based on the Company’s actual historical yield experience with similar tissues and these estimates are evaluated periodically to determine whether the appropriate historical volume and time periods are being used to calculate the yields applied to in-process tissues to determine the equivalent units on hand at each period end.methodologycosting model to determine the amount of preservation costs deferred, including the estimation of the number of in-process tissue equivalent units based on historical volumes and yields by tissue type that is utilized to determine the number of tissues in process that will ultimately become implantable to which the deferred costs will be applied.How We Addressed the Matter in Our Audit capitalizeddeferred and the accuracy of the calculation of deferred preservation costs by agreeing the amounts to and testing the underlying reports and analyses supporting the calculation of costs to be capitalized.deferred. We tested the yield estimates applied to determine the equivalent units of in-process tissues by understanding and testing the historical information utilized and comparing the yields utilized in the period end model to those historical results. We also compared the reconciliation of the ending balance of deferred preservation costs as calculated in the Company’s deferred preservation cost calculation model to amounts recorded in the general ledger.Company‘sCompany's auditor since 2013.22, 2022
2021,2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Artivion, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021,2023, based on the COSO criteria.20212023 and 2020,2022, the related consolidated statements of operations and comprehensive loss, shareholders' equity and cash flows and shareholders' equity for each of the three years in the period ended December 31, 2021,2023, and the related notes and our report dated February 22, 202223, 2024 expressed an unqualified opinion thereon.22, 2022BalanceBalance Sheets
December 31, 2023 2022 ASSETS Current assets: Cash and cash equivalents $ 58,940 $ 39,351 Trade receivables, net 71,796 61,820 Other receivables 2,342 7,764 Inventories, net 81,976 74,478 Deferred preservation costs, net 49,804 46,371 Prepaid expenses and other 15,810 17,550 Total current assets 280,668 247,334 Goodwill 247,337 243,631 Acquired technology, net 142,593 151,263 Operating lease right-of-use assets, net 43,822 41,859 Property and equipment, net 38,358 38,674 Other intangibles, net 29,638 31,384 Deferred income taxes 1,087 1,314 Other long-term assets 8,894 7,339 Total assets $ 792,397 $ 762,798 December 31, December 31, 2023 2023 2022 Current liabilities: Current liabilities: Accounts payable Accounts payable Accrued compensation Current maturities of operating leases Current portion of long-term debt Total current liabilities Total current liabilities Long-term debt Long-term debt Non-current finance lease obligations Total liabilities Total liabilities Commitments and contingencies Commitments and contingencies Shareholders' equity: Shareholders' equity: Preferred stock $0.01 par value per share, 5,000 shares authorized, no shares issued Preferred stock $0.01 par value per share, 5,000 shares authorized, no shares issued Preferred stock $0.01 par value per share, 5,000 shares authorized, no shares issued Common stock $0.01 par value per share, 75,000 shares authorized, 42,569 and 41,830 shares issued as of December 31, 2023 and 2022, respectively Retained deficit Accumulated other comprehensive loss Treasury stock at cost, 1,487 shares as of December 31, 2023 and 2022 Total shareholders' equity Total shareholders' equity Total liabilities and shareholders' equity Total liabilities and shareholders' equity
OperationsOperations and Comprehensive LossYear Ended December 31, Year Ended December 31, 2023 2023 2022 2021 Products Products Cost of products and preservation services: Cost of products and preservation services: Products Products Gross margin Gross margin Operating expenses: Operating expenses: General, administrative, and marketing General, administrative, and marketing Interest expense Interest expense Loss before income taxes Loss before income taxes Loss before income taxes Income tax expense Net loss Net loss Net loss Loss per share: Loss per share: Loss per share: Basic Basic Weighted-average common shares outstanding: Weighted-average common shares outstanding: Basic Basic Net loss Net loss Net loss Other comprehensive income (loss): Foreign currency translation adjustments Foreign currency translation adjustments
StatementsStatements of Cash FlowsYear Ended December 31, 2023 2022 2021 Net cash flows from operating activities: Net loss $ (30,690) $ (19,192) $ (14,834) Adjustments to reconcile net loss to net cash from operating activities: Change in fair value of contingent consideration 23,490 (9,000) 8,870 Depreciation and amortization 23,076 22,442 23,977 Non-cash compensation 14,422 12,344 10,711 Non-cash lease expense 7,354 7,432 7,521 Fair value adjustment of long-term loan 5,000 — 409 Write-down of inventories and deferred preservation costs 4,785 4,374 5,377 Non-cash interest expense 1,858 1,832 2,005 Write-off of Endospan Option — — 4,944 Deferred income taxes (1,385) (1,717) (4,470) Gain on sale of non-financial assets (14,250) — (15,923) Other 1,358 2,268 2,060 Changes in operating assets and liabilities: Accounts payable, accrued expenses, and other liabilities 1,682 (1,958) (1,893) Prepaid expenses and other assets 535 (2,234) (1,404) Receivables (4,050) (13,340) (11,560) Inventories and deferred preservation costs (14,360) (8,404) (18,375) Net cash flows provided by (used in) operating activities 18,825 (5,153) (2,585) Net cash flows from investing activities: Proceeds from sale of non-financial assets, net 14,250 — 19,000 Payments for Endospan agreement (5,000) — — Capital expenditures (7,430) (9,016) (13,091) Other (2,322) (1,699) (249) Net cash flows (used in) provided by investing activities (502) (10,715) 5,660 Net cash flows from financing activities: Proceeds from exercise of stock options and issuance of common stock 3,955 3,368 3,756 Proceeds from financing insurance premiums 3,558 — — Payment of contingent consideration — — (8,200) Payment of debt issuance costs (249) — (2,219) Redemption and repurchase of stock to cover tax withholdings (559) (1,795) (1,914) Principal payments on short-term notes payable (2,531) — (299) Repayment of debt (2,772) (2,753) (2,786) Other (537) (459) (561) Net cash flows provided by (used in) financing activities 865 (1,639) (12,223) Effect of exchange rate changes on cash and cash equivalents 401 1,848 2,200 Increase (decrease) in cash and cash equivalents 19,589 (15,659) (6,948) Cash and cash equivalents, beginning of year 39,351 55,010 61,958 Cash and cash equivalents, end of year $ 58,940 $ 39,351 $ 55,010 StatementsStatements of Shareholders’ EquityCommon
StockCommon
StockAdditional
Paid In
CapitalRetained
Earnings (Deficit)Accumulated
Other
Comprehensive Income (Loss)Treasury
StockTotal
Shareholders'
EquityShares Balance at December 31, 2020 Balance at December 31, 2020 Other comprehensive loss, net of tax Net loss Other comprehensive loss, net of tax Equity compensation Equity compensation Equity compensation Exercise of options Employee stock purchase plan Redemption and repurchase of stock to cover tax withholdings Balance at December 31, 2022 Net loss Other comprehensive income, net of tax Equity compensation Exercise of options Employee stock purchase plan Redemption and repurchase of stock to cover tax withholdings Balance at December 31, 2023 stents and stent grafts, surgical sealants, On-X® mechanical heart valves and related surgical products (“On-X” products), and implantable cardiac and vascular human tissues. Aortic stents and stent grafts include JOTEC®aortic arch stent grafts, abdominal stent grafts, and surgical products (collectively, “JOTEC Products”),synthetic vascular grafts. Aortic arch stent grafts include our E-vita Open NEO, E-vita Open Plus, the Ascyrus Medical Dissection Stent (“AMDS”) hybrid prosthesis,, and the NEXUS® endovascular stent graft system (“NEXUS”), the NEXUS DUO.TM aortic arch stent graft (“NEXUS DUO”), and E-vita Thoracic 3G products. Abdominal stent grafts include our E-xtra Design Engineering (including Artivex), E-nside, E-tegra, E-ventus BX, and E-liac products. Surgical sealants include our BioGlue Surgical sealants include BioGlue® Surgical Adhesive products (“BioGlue”) products. . In addition to these four major product families, we sell or distribute PhotoFix® bovine surgical patches (“PhotoFix”) and CardioGenesis® cardiac laser therapy Therion® chorioamniotic allografts (previously marketed(prior to our abandonment of the business as NeoPatch®),of June 30, 2023). We began to manufacture and supply PerClot® hemostatic powder (prior to(“PerClot”) during the sale to a subsidiarysecond quarter of 2023 (as part of the Transitional Manufacturing and Supply Agreement (“TMSA”) of the Baxter International, Inc (“Baxter”))Transaction, described below).$5.5 million, a gain of $1.8$3.1 million, and a loss of $1.2$5.5 million for the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, respectively. Our assets and liabilities denominated in foreign currencies are recognized at the exchange rate in effect at the time of each transaction. At period end, the assets and liabilities are translated at the exchange rate in effect as of the balance sheet date and are recorded as a separate component of accumulatedAccumulated other comprehensive loss in the shareholders' equity section of our Consolidated Balance Sheets.instruments)instruments including contingent consideration), and other items as appropriate.
order, except in rare credit related circumstances.order. We do not have any material performance obligations where we are acting as an agent for another entity.stents and stent grafts,, surgical sealants, On-X products, and other medical devices, are typically recognized at the time the product is shipped, at which time the title passes to the customer, and there are no further performance obligations. Revenues from consignment are recognized when the medical device is implanted.we receive a notification of implantation. We recognize revenues for preservation services when tissue is shipped to the customer.WarrantyOur general product warranties do not extend beyond an assurance that the products or services delivered will be consistent with stated specifications and do not include separate performance obligations. Warranties included with our CardioGenesis cardiac laser products provide for annual maintenance services, which are priced separately and are recognized as revenues at the stand-alone price over the service period, whether invoiced separately or recognized based on our allocation of the transaction price.other than as identified for E-xtra Design Engineering products, therefore, the value of unsatisfied performance obligations at the end of any reporting period is immaterial.For performance obligations provided through our E-xtra Design Engineering product line, we determine the value of our enforceable right to payment based on the time required and costs incurred for design services and manufacture of the in-process device in relation to the total inputs required to complete the device.$1.0$1.9 million, $1.1$1.6 million, and $1.7$1.0 million for the years ended December 31, 2023, 2022, and 2021, 2020, and 2019, respectively.Stock-Based restricted securities, accounts receivable, notes receivable, accounts payable, and debt obligations. The financial assets’ and liabilities’, such as receivables and accounts payable, carrying values approximate their fair value due to their short-term duration, and the carrying value of their debt obligations approximate fair value as they contain variable interest rates that approximate market values. Other financial instruments are recorded as discussed in the sections below.basis, including cash equivalents and certain restricted securities.basis. We may make an irrevocable election to measure other financial instruments at fair value on an instrument-by-instrument basis. Fair value financial instruments are recorded in accordance with the fair value measurement framework.long-livedlong-lived assets, and non-amortizingindefinite lived intangible assets for impairment, allocating value to assets in an acquired asset group, applying accounting for business combinations, and the initial recognition of liabilities such as contingent consideration. We use the fair value measurement framework to value these assets and labilitiesliabilities and report these fair values in the periods in which they are recorded or written down.•Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities;•Level 2: Quoted prices in active markets for similar assets or liabilities or observable prices that are based on inputs not quoted onin active markets, but corroborated by market data; and•Level 3: Unobservable inputs or valuation techniques that are used when little or no market data is available. with maturity dates of three months or less at the time of acquisition. The carrying value of cash equivalents approximates fair value. We maintain depository accounts with certain financial institutions. Although these depository accounts may exceed government insured depository limits, we have evaluated the credit worthiness of these applicable financial institutions and determined the risk of material financial loss due to the exposure of such credit risk to be minimal.2023 2022 2021 Cash paid during the year for: Interest $ 23,332 $ 14,243 $ 14,407 Income taxes 4,865 9,244 5,483 Non-cash investing and financing activities: Operating lease right-of-use assets $ 6,181 $ 1,803 $ 31,726 Issuance of common stock for contingent consideration — — 10,000 $1.1$1.9 million and $973,000$1.3 million as of December 31, 20212023 and 2020,2022, respectively.stents and stent grafts;grafts; surgical sealants; On-X products;CardioGenesis laser consoles, handpieces, and accessories; PerClot before the Baxter Transaction defined below; PhotoFix; other medical devices; work-in-process; and raw materials. Inventories for finished goods are valued at the lower of cost or marketnet realizable value on a first-in, first-outfirst-in, first-out basis and raw materials are valued on a moving average cost basis. Typically, upon shipment or upon notification of implant of a medical device on consignment, revenue is recognized, and the related inventory costs are expensed as cost of products. Cost of products also includes, as applicable, lower of cost or marketnet realizable value of write-downs and impairments for products not deemed to be recoverable and, as incurred, idle facility expense, excessive spoilage, extra freight, and re-handling costs.marketnet realizable value. We also evaluate our inventory for costs not deemed to be recoverable, including inventory not expected to ship prior to its expiration. Lower of cost or marketnet realizable value write-downs are recorded if the book value exceeds the estimated net realizable value of the inventory, based on recent sales prices at the time of the evaluation. Impairment write-downs are recorded based on the book value of inventory deemed to be impaired. Actual results may differ from these estimates. Write-downs of inventory are expensed as cost of products, and these write-downs are permanent impairments that create a new cost basis, which cannot be restored to its previous levels if our estimates change.$4.8$4.4 million, $1.7$4.0 million, and $601,000$4.8 million for the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, respectively. The 2021 write-down was2023 write-downs were primarily related to JOTECraw materials, aortic stent grafts inventory, and On-X ascending aortic prosthesis (“AAP”) inventory. The 2020 write-down was2022 and 2021 write-downs were primarily related to JOTECaortic stent grafts inventory and On-X AAP inventory, and BioGlue inventory not expected to ship prior to the expiration date. The 2019 write-down was primarily related to PerClot inventory not expected to ship prior to the expiration date.marketnet realizable value on a first-in, first-outfirst-in, first-out basis and are deferred until revenue is recognized. Upon shipment of tissue to an implanting facility, revenue is recognized, and the related deferred preservation costs are expensed as cost of preservation services. Cost of preservation services also includes, as applicable, lower of cost or marketnet realizable value write-downs and impairments for tissues not deemed to be recoverable, and includes, as incurred, idle facility expense, excessive spoilage, extra freight, and re-handling costs.freight-infreight-in charges), and indirect costs (including allocations of costs from support departments and facility allocations). Fixed production overhead costs are allocated based on actual tissue processing levels, to the extent that they are within the range of the facility’s normal capacity.reevaluatere-evaluate these estimates periodically. Actual yields could differ significantly from our estimates, which could result in a change in tissues available for shipment and could increase or decrease the balance of deferred preservation costs. These changes could result in additional cost of preservation services expense or could increase per tissue preservation costs, which would impact gross margins on tissue preservation services in future periods.marketnet realizable value. We also evaluate our deferred preservation costs for costs not deemed to be recoverable, including tissues not expected to ship prior to the expiration date of their packaging. Lower of cost or marketnet realizable value write-downs are recorded if the tissue processing costs incurred exceed the estimated market value of the tissue services, based on recent average service fees at the time of the evaluation. Impairment write-downs are recorded based on the book value of tissues deemed to be impaired. Actual results may differ from these estimates. Write-downs of deferred preservation costs are expensed as cost of preservation services, and these write-downs are permanent impairments that create a new cost basis, which cannot be restored to its previous levels if our estimates change.$575,000, $1.7 million,$393,000, $369,000, and $787,000$575,000 for the years ended December 31, 2023, 2022, and 2021, 2020, and 2019, respectively, primarily due primarily to tissues not expected to ship prior to the expiration date of the packaging. In addition, write-offs during the year ended December 31, 2020 included $826,000 of non-conforming tissues resulting from contaminated saline solution.straight-linestraight-line basis. Leasehold improvements are amortized on a straight-linestraight-line basis over the remaining lease term at the time the assets are capitalized or the estimated useful lives of the assets, whichever is shorter.iswas as follows (in thousands):2023 2022 Equipment and software $ 66,618 $ 72,480 Leasehold improvements 49,107 47,384 Furniture and fixtures 7,555 7,148 Total property and equipment 123,280 127,012 Less accumulated depreciation and amortization (84,922) (88,338) Property and equipment, net $ 38,358 $ 38,674 iswas as follows (in thousands):2023 2022 2021 Depreciation expense $ 7,878 $ 7,132 $ 7,157 trademarks, and other intangible assets, as discussed in Note 8.7. Our goodwill is attributable to a segment or segments of our business, as appropriate, as the related acquired business that generated the goodwill is integrated into our operations. Upon divestiture of a component of our business, the goodwill related to the reporting unitsegment is allocated to the divested business using the relative fair value allocation method.non-amortizingindefinite lived intangible assets for impairment on an annual basis during the fourth quarter of the year, and, if necessary, during interim periods if factors indicate that an impairment review is warranted. As of October 31, 20212023 and 2020,2022 our non-amortizingindefinite lived intangible assets consisted of goodwill, in-process research and development, and acquired procurement contracts and agreements, and trademarks.agreements. We performed a qualitative analysis of our non-amortizingindefinite lived intangible assets as of October 31, 2021 and 20202023 and determined that the fair value of the assetsasset groups and the fair value of the reporting unit more likely than not exceeded their associated carrying values and were, therefore, not impaired.Non-AmortizingIndefinite Lived Intangible Assets” below.-Lived Assets and Non-AmortizingIndefinite Lived Intangible Assets•Significant underperformance relative to expected historical or projected future operating results;•Significant negative industry or economic trends;•Significant decline in our stock price for a sustained period; or•Significant decline in our market capitalization relative to net book value.2021, 2020,2023, 2022, and 20192021 we did 0tnot record an impairment of our long-lived assets as there were no indicators of impairment or the sum of the undiscounted future cash flows exceeded the carrying value of the long-lived asset (asset group).10.9. Certain of our leases contain escalation clauses, rent concessions, and renewal options for additional periods.claims-madeclaims-made insurance policies to mitigate our financial exposure to product and tissue processing liability claims. Claims-madeClaims-made insurance policies generally cover only those asserted claims and incidents that are reported to the insurance carrier while the policy is in effect. Thus, a claims-madeclaims-made policy does not generally represent a transfer of risk for claims and incidents that have been incurred but not reported to the insurance carrier during the policy period. Any punitive damage components of claims are uninsured.frequency-severityfrequency-severity approach to estimate our unreported product and tissue processing liability claims, whereby projected losses are calculated by multiplying the estimated number of claims by the estimated average cost per claim. The estimated claims are determined based on the reported claim development method and the Bornhuetter-FergusonBornhuetter-Ferguson method using a blend of our historical claim experience and industry data. The estimated cost per claim is calculated using a lognormal claims model blending our historical average cost per claim with industry claims data. We use a number of assumptions in order to estimate the unreported loss liability including: the future claim reporting time lag, the frequency of reported claims, the average cost per claim, and the maximum liability per claim. We believe that the assumptions we use provide a reasonable basis for our calculation. However, the accuracy of the estimates is limited by various factors, including, but not limited to, our specific conditions, uncertainties surrounding the assumptions used, and the scarcity of industry data directly relevant to our business activities. Due to these factors, actual results may differ significantly from our assumptions and from the amounts accrued.long-termlong-term liabilities and record the related recoverable insurance amounts as a component of Other long-termlong-term assets. The amounts recorded represent our estimate of the probable losses and anticipated recoveries for unreported claims related to products sold and services performed prior to the balance sheet date.long-termlong-term liabilities on our Consolidated Balance Sheets. Gains from legal contingencies are recorded when the contingency is resolved.98 for further discussion of our liabilities for uncertain tax positions.•The ability to carry back deferred tax asset attributes to a prior tax year;•Timing of the anticipated reversal of book/tax temporary differences;•Projected future operating results;•Anticipated future state tax apportionment;•Timing and amounts of anticipated future taxable income;•Evaluation of statutory limits regarding usage of certain tax assets; and•Evaluation of the statutory periods over which certain tax assets can be utilized.Valuation of Acquired Assets or BusinessesAs part of our corporate strategy, we are seeking to identify and capitalize upon acquisition opportunities of complementary product lines and companies. We evaluate and account for acquired patents, licenses, distribution rights, and other tangible or intangible assets as the purchase of an asset or asset group, or as a business combination, as appropriate. The determination of whether the purchase of a group of assets should be accounted for as an asset group or as a business combination requires judgment based on the weight of available evidence.For the purchase of an asset group, we allocate the cost of the asset group, including transaction costs, to the individual assets purchased based on their relative estimated fair values. In-process research and development acquired as part of an asset group is expensed upon acquisition.We account for business combinations using the acquisition method. Under this method, the allocation of the purchase price is based on the fair value of the tangible and identifiable intangible assets acquired and the liabilities assumed as of the date of the acquisition. The excess of the purchase price over the estimated fair value of the tangible net assets and identifiable intangible assets is recorded as goodwill. The identifiable intangible assets typically consist of developed technology, trade names, customer relationships, and in-process research and development costs. Transaction costs related to business combinations are expensed as incurred. In-process research and development acquired as part of a business combination is accounted for as an indefinite-lived intangible asset until the related research and development project gains regulatory approval or is discontinued.We typically engage external advisors to assist us in determining the fair value of acquired asset groups or business combinations, using valuation methodologies such as: the excess earnings, the discounted cash flow, Monte Carlo, or the relief from royalty methods. The determination of fair value in accordance with the fair value measurement framework requires significant judgments and estimates, including, but not limited to: timing of product life cycles, estimates of future revenues, estimates of profitability for new or acquired products, cost estimates for new or changed manufacturing processes, estimates of the cost or timing of obtaining regulatory approvals, estimates of the success of competitive products, and discount rates and represent Level 3 measurements. We, in consultation with our advisors, make these estimates based on our prior experiences and industry knowledge. We believe that our estimates are reasonable, but actual results could differ significantly from our estimates. A significant change in our estimates used to value acquired asset groups or business combinations could result in future write-downs of tangible or intangible assets acquired by us and, therefore, could materially impact our financial position and profitability. If the value of the liabilities assumed by us, including contingent liabilities, is determined to be significantly different from the amounts previously recorded in purchase accounting, we may need to record additional expenses or write-downs in future periods, which could materially impact our financial position and profitability.AugustMarch 2020 the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) Update No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). The update simplifies the accounting for convertible instruments by eliminating two accounting models (i.e., the cash conversion model and beneficial conversion feature model) and reducing the number of embedded conversion features that could be recognized separately from the host contract. ASU 2020-06 also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. On January 1, 2021 we adopted ASU 2020-06 using the modified retrospective approach and recorded $20.4 million to increase long-term debt, $3.2 million to reduce retained earnings, and $16.4 million to reduce additional paid-in capital included on the Consolidated Balance Sheets. See Note 11 for further discussion of convertible debt.In December 2019 the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify accounting principles generally accepted in the United States of America (“GAAP”) for other areas of Topic 740 by clarifying and amending existing guidance. The amendments are effective for public entities in fiscal years beginning after December 15, 2020 including interim periods within those fiscal years. We adopted ASU 2019-12 on January 1, 2021 and the adoption did not have a material impact on our financial condition or results of operations.As of January 1, 2020 we adopted the Accounting Standards Codification (“ASC”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The purpose of Update No. 2016-13 is to replace the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates. Update No. 2016-13 is effective for annual periods beginning after December 15, 2019. The adoption of ASU 2016-13 did not result in a material effect on the Company’s financial condition, results of operations, or cash flows.As of January 1, 2019 we adopted the ASC Topic 842, Leases (“ASC 842”). The final guidance requires lessees to recognize a right-of-use asset and a lease liability for all leases (with the exception of short-term leases) at the commencement date and recognize expenses on their income statements similar to former Topic 840, Leases. We used the modified retrospective approach, which allows application of the standard at the adoption date rather than at the beginning of the earliest comparative period presented. The adoption of this standard resulted in the recognition of operating lease agreements with a net present value of $22.7 million and corresponding right-of-use assets obtained in the same amount at January 1, 2019. See Note 9 for further discussion of leases.Not Yet EffectiveIn March 2020 the FASB issued ASU 2020-04, Reference Rate Reform Topic 848 (“ASC 848”). The amendments in this ASU were put forth in response to the market transition from the LIBOR and other interbank offered rates to alternative reference rates. US GAAP requires entities to evaluate whether a contract modification, such as the replacement or change of a reference rate, results in the establishment of a new contract or continuation of an existing contract. ASC 848 allows an entity to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform. The standard provides this temporary election through December 31, 2022 and cannot be applied to contract modifications that occur after December 31, 2022. In January 2021 the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848). The objective of the new reference rate reform standard is to clarify the scope of Topic 848 and provide explicit guidance to help companies applying optional expedients and exceptions. We adopted ASU 2020-04 and ASU 2021-01 on a prospective basis in fiscal year 2022. The adoption of ASU 2020-04 and ASU 2021-01 did not have a material impact on our financial condition or results of operations.immediately for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all entities that have applied optional expedients and exceptions. prior periods presented in the financial statements. We are in the process ofcurrently evaluating the effect thatimpacts of the adoption of this standard will have on our financial position and results of operations. new standard.$60.8$54.5 million in consideration (we will receive up to $45.8$41.0 million and SMI will receive up to $15.0$13.5 million), consisting of (i) $25.0 million at closing, of which $6.0 million was paid to SMI; (ii) up to $25.0$18.8 million upon our receipt of Premarket Approval (“PMA”) from the US Food and Drug Administration (the “FDA”) for PerClot and our transfer of the PMA to Baxter, of which up$4.5 million was paid to $6.0 million is payable to SMI, subject to certain reductions for delay in PMA approval;SMI; and (iii) up to $10.0 million upon Baxter’s achievement of certain cumulative worldwide net sales of PerClot prior to December 31, 2026 and December 31, 2027, of which up to $3.0 million is payable to SMI. In addition, at the conclusion of our manufacturing and supply services for Baxter, Baxter will pay $780,000 upon transfer of our PerClot manufacturing equipment. Under the terms of the Baxter Transaction, we will continue to provide to Baxter certain transition and manufacturing and supply services relating to the sale of SMI PerClot outside of the US andUS. Within the terms of the TMSA, we will manufacture and supply of PerClot tofor Baxter post PMA approval.for a contractual period of 21 months, subject to short-term renewal provisions.Upon closing of the acquisition on September 2, 2020 we paid $82.4 million consisting of $62.4 million in cash consideration and $20.0 million in shares of Artivion common stock. The number of shares issued was based on a 10-day moving volume weighted average closing price of a share of Artivion common stock as of the date immediately prior to closing, resulting in an issuance of 991,800 shares of Artivion common stock.in cash and equity up to $120.0$100.0 million to the former shareholders of Ascyrus upon the achievement of certain milestones and the sales-based additional earnout described above. As of On September 2, 2020 the fair value of the total potential purchase consideration of $200.0 million was calculated to be $137.8 million, which includesincluded the total purchase consideration, as well as the contingent consideration liability discussed below. Our allocation of the purchase consideration was allocated to Ascyrus’s tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated fair values as of September 2, 2020.approximately 9% andapproximately 7% and estimated future achievement of milestone dates between 2025 and 2026 to calculate the fair value of contingent consideration as of December 31, 2021.2023. We will remeasure this liability at each reporting date and will record changes in the fair value of the contingent consideration in General, administrative, and marketing expenses on the Consolidated Statements of Operations and Comprehensive Loss. Increases or decreases in the fair value of the contingent consideration liability can result from changes in passage of time, discount rates, the timing and amount of our revenue estimates, and the timing and expectation of regulatory approvals.recorded $9.5recorded a fair value increase of $23.5 million and $4.5 million ina fair value adjustmentsreduction of $9.0 million for the yeartwelve months ended December 31, 20212023 and 2020,2022, respectively, in General, administrative, and marketing expenses on the Consolidated Statements of Operations and Comprehensive Loss, as a result of this assessment. We recorded the$49.4$63.9 million and $40.4 million was included in OtherOther long-term liabilities as of December 31, 20212023 and $16.4 million and $43.5 million in Current liabilities and Other long-term liabilities,2022, respectively, as of December 31, 2020 in the Consolidated Balance Sheets.We recorded $62.4 million of goodwill, all of which was deductible for tax purposes, based on the amount by which the total purchase consideration price exceeded the fair value of the net assets acquired and liabilities assumed. Goodwill from this transaction primarily relates to synergies expected from the acquisition and has been allocated to our Medical devices reporting unit. The allocation of assets acquired and liabilities assumed is based on the information available that would have been known as of the acquisition date.The September 2, 2020 final allocation of purchase price consideration consisted of the following (in thousands):ConsiderationCash paid for acquisition$62,359Common stock issued20,000Contingent consideration55,407Fair value of total consideration$137,766Purchase Price AllocationCash and cash equivalents$4,017Intangible assets72,600Net other assets/liabilities acquired(1,267)Goodwill62,416Net assets acquired$137,766Pro forma financial information related to the Ascyrus Agreement has not been provided as it is not material to our consolidated results of operations. The results of operations of the Ascyrus acquisition are included in results of operations from the date of acquisition and were not significant for the years ended December 31, 2021 and 2020. The results of operations of the Ascyrus acquisition are included in our Medical devices reportable segment.or after FDA approval of NEXUS, with such option expiring if not exercised within 90 days after receiving notice that Endospan has received approval from the FDA for NEXUS.3three tranches of $5.0 million each.TheIn May 2023 we funded the third tranche is required to be fundedpayment of $5.0 million upon the certification of enrollment of at least 50% of the required number of patients in the primary arm of the FDA approved clinical trial for NEXUS, in each case subject to Endospan’s continued compliance with the Endospan Loan and certain other conditions. If a termination fee becomes payable by Endospan under the Endospan Distribution Agreement, it will be added to the amount payable to Artivion under the Endospan Loan.NEXUS.An additionalThe second tranche payment of $5.0 million was funded in September 2020. An additional $5.0 million was funded in May 2023 as part of the secondthird tranche payment described above. We evaluated Endospan for VIE classification as of December 31, 20212023 and determined that Endospan meets the criteria of a non-consolidating VIE. Our payments to date, including any loans, guarantees, and other subordinated financial support related to this VIE, totaled $20.0$25.0 million as of December 31, 2021,2023, representing our maximum exposure to loss, and were not individually significant to our consolidated financial statements.was recorded at $5.5of $1.8 million and $8.0$3.5 million was included in Other Intangibles,intangibles, net in the Consolidated Balance Sheets as of December 31, 2021,2023 and 2020,2022, respectively.In the fourth quarter of 2021 we fully impaired the value of the Endospan Option primarily driven by a decrease in forecasted operating results. We recorded $4.9 million impairment expense included in General, administrative, and marketing expense on the Consolidated Statements of Operations and Comprehensive Loss. The value of the Endospan Option was $4.9 million as of December 31, 2020.thethis fair value adjustment, we recorded an expense of $409,000 in Other Expenseexpense, net on the Consolidated Statements of Operations and Comprehensive Loss asduring twelve months ended December 31, 2021. In May 2023 we funded a $5.0 million third tranche payment and determined that the loan continued to have no fair value. Consequently, we recorded an expense of $5.0 million in Other expense, net on the Consolidated Statements of Operations and Comprehensive Loss during the twelve months ended December 31, 2023. We did not record a loan fair value adjustment during the twelve months ended December 31, 2022.2021. The2021 we fully impaired the value of the Endospan Loan was $409,000 asOption primarily driven by a decrease in forecasted operating results. We recorded $4.9 million impairment expense included in General, administrative, and marketing expense on the Consolidated Statements of Operations and Comprehensive Loss during the twelve months ended December 31, 2020.2021.iswas as follows (in thousands):December 31, 2023 December 31, 2023 Level 1 Level 2 Level 3 Total Money market funds Money market funds Certificates of deposit Long-term liabilities: Long-term liabilities: Contingent consideration Contingent consideration December 31, 2022 December 31, 2022 Level 1 Level 2 Level 3 Total Money market funds Long-term liabilities: Long-term liabilities: Contingent consideration Contingent consideration We recordedThe estimated market value of all cash equivalents is equal to cost basis as there were no gross realized gains or losses on cash equivalents for the Endospan Loan, classified as Level 3, as a resultyears ended December 31, 2023, 2022, and 2021.an agreement with Endospan in September 2019. Thethe contingent consideration component of the Ascyrus acquisition was updated using Level 3 inputs. See Note 3 and Note 4 for further discussion of the Ascyrus acquisition, and the Endospan Loan, respectively.acquisition. Changes in fair value of Level 3 assets and liabilities are listed in the tables below (in thousands):
Contingent Consideration Balance as of December 31, 2022 $ (40,400) Change in valuation (23,490) Balance as of December 31, 2023 $ (63,890) Cash Equivalents and Restricted Cash and SecuritiesThe following is a summary of cash equivalents and marketable securities (in thousands):As of December 31, 2020 $546,000 of our money market funds were designated as short-term restricted securities due to a contractual commitment to hold the securities as pledged collateral relating primarily to international tax obligations.There were 0 gross realized gains or losses on cash equivalents or restricted securities for the years ended December 31, 2021, 2020, and 2019. As of December 31, 2020 $546,000 of our restricted securities had a maturity date within three months.7. Inventories net and Deferred Preservation Costs,20212023 and 2020 are2022 were comprised of the following (in thousands):2023 2022 Raw materials and supplies $ 36,907 $ 36,715 Work-in-process 12,687 10,476 Finished goods 32,382 27,287 Total inventories, net $ 81,976 $ 74,478 20212023 and 2020 are2022 were comprised of the following (in thousands):2023 2022 Cardiac tissues $ 24,823 $ 21,799 Vascular tissues 24,981 24,572 Total deferred preservation costs, net $ 49,804 $ 46,371 JOTEC Products,aortic stent grafts, and AMDS products at international hospital locations. We retain title and control over this consignment inventory until the devicenotice of implantation is implanted,received, at which time we invoice the hospital and recognize revenue. As of December 31, 20212023 we had $12.9$10.7 million in consignment inventory, with approximately 43%44% in domestic locations and 57%56% in foreign locations. As of December 31, 20202022 we had $11.9$12.7 million in consignment inventory, with approximately 47%41% in domestic locations and 53%59% in foreign locations.$3.2$3.0 million and $3.5$2.2 million as of December 31, 20212023 and 2020,2022, respectively.8.7. Goodwill and Other Intangible Assets20212023 and 20202022 the carrying values of our indefinite lived intangible assets arewere as follows (in thousands):2023 2023 2022 The companyWe evaluate our goodwill and indefinite lived intangible assets for impairment on an annual basis during the fourth quarter of the year, and, if necessary, during interim periods if factors indicate that an impairment review is warranted. We did 0tnot record any impairment of indefinite lived intangible assets, including goodwill, during the twelve months ended December 31, 20212023, 2022, and 2020.2021. In-process research and development, procurement contracts and agreements and trademarks are included in Other intangibles, net on the consolidated balance sheetsConsolidated Balance Sheets as of December 31, 20212023 and 2020. We believe that our trademarks have indefinite useful lives as we currently anticipate that these trademarks will contribute to our cash flows indefinitely. 20212023 and 20202022 the value of our goodwill, all of which iswas related to our Medical Devices reporting unit, issegment, was as follows (in thousands):Medical Devices Segment 2023 2022 Balance as of January 1, $ 243,631 $ 250,000 Foreign currency translation 3,706 (6,369) Balance as of December 31, $ 247,337 $ 243,631 20212023 and 20202022 the gross carrying values, accumulated amortization, and approximate amortization periodsperiod of our definite lived intangible assets arewere as follows (dollars in thousands)(in thousands, except weighted average useful life):
December 31, 2023 Gross Carrying
ValueAccumulated
AmortizationNet Carrying
ValueWeighted Average
Useful Life
(Years)Acquired technology $ 201,897 $ 59,304 $ 142,593 18.2 Other intangibles: Customer lists and relationships 28,729 10,334 18,395 21.6 Distribution and manufacturing rights and know-how 9,608 7,807 1,801 5.0 Patents 4,365 3,225 1,140 17.0 Other 7,815 3,680 4,135 5.0 Total other intangibles $ 50,517 $ 25,046 $ 25,471 10.0 December 31, 2022 Gross Carrying
ValueAccumulated
AmortizationNet Carrying
ValueWeighted Average
Useful Life
(Years)Acquired technology $ 198,420 $ 47,157 $ 151,263 18.2 Other intangibles: Customer lists and relationships 31,030 11,100 19,930 20.5 Distribution and manufacturing rights and know-how 9,274 5,796 3,478 5.0 Patents 4,246 3,180 1,066 17.0 Other 5,360 2,543 2,817 4.4 Total other intangibles $ 49,910 $ 22,619 $ 27,291 10.3 iswas as follows (in thousands):2023 2022 2021 Amortization expense $ 15,198 $ 15,310 $ 16,820 20212023 scheduled amortization of intangible assets for the next five years is as follows (in thousands):2024 2025 2026 2027 2028 Total Amortization expense $ 15,121 $ 13,200 $ 12,972 $ 12,866 $ 12,644 $ 66,803
(Loss) incomeconsistsconsisted of the following (in thousands):2023 2023 2022 2021 Loss before income taxes (benefit) consistsconsisted of the following (in thousands):2023 2022 2021 Current: Federal $ 5,573 $ 1,606 $ 1,896 State 1,004 367 551 Foreign 3,851 3,120 3,391 10,428 5,093 5,838 Deferred: Federal $ 222 $ 236 $ (2,801) State 157 234 (307) Foreign (1,703) (1,355) (2,723) (1,324) (885) (5,831) Income tax expense $ 9,104 $ 4,208 $ 7 (benefit) in 2021, 20202023, 2022, and 20192021 included our federal, state, and foreign tax obligations. Our effective income tax rate was a tax expense of 42% and 28% for the year ended December 31, 2023 and 2022, respectively. Our effective income tax rate was break-even for the year ended December 31, 2021. effective income tax was a tax benefit of 3% and 5%rate for the yearsyear ended December 31, 20202023 was primarily affected by an increase in the valuation allowance on our deferred tax assets, nondeductible executive compensation, income taxes in certain profitable foreign jurisdictions, and 2019, respectively.additional tax expense for uncertain tax positions, partially offset by the research and development tax credit and foreign derived intangible income deduction. Our income tax rate for the year ended December 31, 2022 was primarily affected by an increase in the valuation allowance on our deferred tax assets, nondeductible executive compensation, and additional tax expense for uncertain tax positions, partially offset by the research and development tax credit. Our income tax rate for the year ended December 31, 2021 was primarily impactedaffected by excess tax benefits on stock compensation,an increase in the research and development tax credit, non-deductible executive compensation, changes in our valuation allowance againston our net deferred tax assets, foreign expense items, nondeductible executive compensation, and changes in ouradditional tax expense for uncertain tax position liabilities. Our income tax ratefor the year ended December 31, 2020 was primarily impacted by changes in oura valuation allowance against our net deferred tax assets and changes in our uncertain tax position liabilities. Our income tax rate for theon prior year ended December 31, 2019 was primarily impacted by excess tax benefits on stock compensation,items, the research and development tax credit, and changes in ourreleases of uncertain tax position liabilities.positions.2021, 2020,2023, 2022, and 20192021 to pretax income as a result of the following (in thousands):2023 2023 2022 2021 Tax benefit at statutory rate Increase (reduction) in income taxes resulting from: Increase (reduction) in income taxes resulting from: Valuation allowance change Valuation allowance change Equity compensation Foreign interest disallowance Foreign derived intangible income deduction Provision to return adjustments Total income tax expense made upcomprised of intangible assets acquired in previous years, unrealized gainsfinance and losses,operating leases, and capital leases.arewere as follows (in thousands):2023 2022 Deferred tax assets: Finance and operating leases $ 13,254 $ 12,581 Excess interest carryforward 6,438 5,559 Unrealized gains and losses 5,424 — Loan revaluation 3,859 2,633 Loss carryforwards 3,205 9,660 Stock compensation 2,761 2,463 Accrued expenses 2,567 1,734 Deferred compensation 1,790 1,317 Property 1,786 1,310 Credit carryforwards 336 503 Inventory and deferred preservation costs write-downs 302 764 Other 1,422 1,650 Less valuation allowance (32,860) (17,942) Total deferred tax assets, net 10,284 22,232 2023 2022 Deferred tax liabilities: Unrealized gains and losses — (6,624) Prepaid items (370) (323) Debt costs (626) (818) Finance and operating leases (12,777) (12,217) Intangible assets (16,106) (24,601) Other (1,169) (834) Total deferred tax liabilities (31,048) (45,417) Total deferred tax liabilities, net $ (20,764) $ (23,185) 2023 2022 2021 Beginning balance $ 17,942 $ 13,282 $ 7,170 Additions in estimates recorded to deferred income tax expense, net 9,809 4,660 1,505 Additions related to Other comprehensive income, net 5,109 — 4,607 Ending balance $ 32,860 $ 17,942 $ 13,282 20212023 and 20202022 we maintained a net deferred tax liability of $26.4$20.8 million and $33.3$23.2 million, respectively. As of December 31, 20212023 and 20202022 we maintained valuation allowances against our deferred tax assets of $13.3$32.9 million and $7.2$17.9 million, respectively, primarily related to net operating loss carryforwards and disallowed excess interest carryforwards.20212023 we had approximately $2.0$1.3 million of federal net operating loss carryforwards related to the acquisitions of Cardiogenesis and Hemosphere thatfor which we anticipate partially utilizing before expiration,have a full valuation allowance against, approximately $3.0$1.5 million of state net operating loss carryforwards that will begincontinue to expire in 2022,2024, approximately $1.8 million$443,000 of foreign net operating loss carryforwards that will begin to expire in 2025,, and approximately $500,000$293,000 in research and development tax credit carryforwards that will begin to expire in 2030,, and $110,000approximately $81,000 in credits from other jurisdictions that mostly expire in 2027.20212023 we had a deferred tax asset of $3.5$6.4 million of disallowed interest expense deduction carryforwards as a result of the interest deductibility rule imposed by the “Tax Cuts and Jobs Act” of 2017 (“Tax Act”), and later modified by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). This deferred tax asset can be carried forward indefinitely. This rule disallows interest expense to the extent it exceeds 30% of adjusted taxable income, modified to be 50% in 2020 and 2019 by the CARES Act.income. For the years ended December 31, 20212023 and 20202022 our interest deduction was limited to $11.7$20.4 million and $15.8$8.1 million, respectively.During the twelve months ended December 31, 2021 we corrected certain immaterial prior year errors primarily related to the release of a valuation allowance, reduction of income taxes payable, and an increase in the tax reserve. On correcting the errors, we recorded an income tax benefit of $2.1 million. subsidiaries with the exception of one of its German subsidiaries. As of December 31, 20212023 we had a deferred tax liability of $175,000$119,000 for the tax effects of this outside basis difference in its the Consolidated Statements of Operations and Comprehensive Loss.iswas as follows (in thousands):2023 2022 2021 Beginning balance $ 4,508 $ 4,089 $ 2,574 Increase related to current year tax positions 2,728 847 1,661 Increase (decrease) for foreign exchange differences 116 (145) (121) Increase related to prior year tax positions 26 20 386 Decrease due to the lapsing of statutes of limitations (158) (200) (241) Decrease related to prior year tax positions (508) (103) (170) Decrease due to settlements of prior year tax positions (1,880) — — Ending balance $ 4,832 $ 4,508 $ 4,089 $220,000$372,000 and $261,000$358,000 related to interest and penalties on uncertain tax positions on our Consolidated Balance Sheets as of December 31, 20212023 and 2020,2022, respectively. We included expense of $6,500 for December 31, 2023, expense of $145,000 for December 31, 2022, and income of $35,000 and $180,000 for December 31, 2021, and 2020, respectively, and expense of $27,000 for December 31, 2019 for interest and penalties related to unrecognized tax benefits in our Consolidated Statements of Operations and Comprehensive Loss.20212023 our uncertain tax liability of $4.3$5.2 million, including interest and penalties, was recorded as a reduction to deferred tax assets of $300,000,$100,000, and a non-current liability of $4.0$5.1 million on our Consolidated Balance Sheets. The amount of uncertain tax liabilities that are expected to affect our tax rate if recognized were $3.2$4.4 million, $2.6$3.6 million, and $3.5$3.2 million for the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, respectively. As of December 31, 20202022 our total uncertain tax liability, including interest and penalties of $2.8$4.9 million, was recorded as a reduction to deferred tax assets of $300,000$100,000 and as a non-current liability of $2.5$4.8 million on our Consolidated Balance Sheets.$185,000$100,000 of our uncertain tax liability will be recognized in 20222024 due to the lapsing of various federal and state and foreign statutes of limitations, of which substantially all would affect the tax rate.20182020 and forward generally remain open to examination by the major taxing jurisdictions to which we are subject. However, certain returns from years prior to 2018,2020, in which net operating losses and tax credits have arisen, are still open for examination by the tax authorities.10.Companycompany vehicles; and leases on a variety of office and other equipment.On January 6, 2021 we executed a modificationextend the lease of our headquarters located in Kennesaw, Georgia. This modification resulted in an increaseleases included in the present value of future lease obligations and corresponding right-of-use asset of $23.3 million, using a discount rate of 6.41%.On June 1, 2021 we began occupancy of the newly constructed addition to our leased JOTEC headquarters located in Hechingen, Germany. This lease resulted in an increase in the present value of future lease obligations and corresponding right-of-use asset of $9.8 million, using a discount rate of 5.46%.Supplemental consolidated balance sheet information related to leasesConsolidated Balance Sheets was as follows (in thousands, except lease term and discount rate):
Operating leases: December 31, 2023 December 31, 2022 Operating lease right-of-use assets, net $ 43,822 $ 41,859 Current maturities of operating leases $ 3,395 $ 3,308 Non-current maturities of operating leases 43,977 41,257 Total operating lease liabilities $ 47,372 $ 44,565 Finance leases: Property and equipment, at cost $ 6,862 $ 6,408 Accumulated amortization (3,136) (2,498) Property and equipment, net $ 3,726 $ 3,910 Current maturities of finance leases $ 582 $ 513 Non-current maturities of finance leases 3,405 3,644 Total finance lease liabilities $ 3,987 $ 4,157 Weighted average remaining lease term (in years): Operating leases 10.4 11.9 Finance leases 6.8 7.8 Weighted average discount rate: Operating leases 6.3% 5.9% Finance leases 2.2% 2.1% liabilities and non-current maturities of finance leases are included as a component of Other long-term liabilities on our Consolidated Balance Sheets. A summary of lease expenses for our finance and operating leases included in General, administrative, and marketing expenses on our Consolidated Statements of Operations and Comprehensive Loss arewas as follows (in thousands):December 31, 2023 December 31, 2022 Amortization of property and equipment $ 542 $ 518 Interest expense on finance leases 84 89 Total finance lease expense 626 607 7,354 7,432 Sublease income (278) (306) Total lease expense $ 7,702 $ 7,733 _____________________$6.6$7.5 million in 2019.2021. The operating lease expense included right-of-use asset amortization and interest expense on the lease liability.supplemental cash flow information isrelated to leases was as follows (in thousands):Cash paid for amounts included in the measurement of lease liabilities: 2023 2022 and sublease rental income are as follows (in thousands):
Finance
LeasesOperating
Leases2024 $ 655 $ 6,302 2025 648 7,085 2026 627 6,539 2027 617 6,058 2028 599 5,862 Thereafter 1,136 33,920 Total minimum lease payments $ 4,282 $ 65,766 Less amount representing interest (295) (18,394) Present value of net minimum lease payments 3,987 47,372 Less current maturities (582) (3,395) Lease obligations, less current maturities $ 3,405 $ 43,977 11. Debt(“the Revolving(the “Revolving Credit Facility” and, together with the Term Loan Facility, the “Credit Agreement”). We and each of our existing domestic subsidiaries (subject to certain exceptions and exclusions) guarantee the obligations under the Credit Agreement (the “Guarantors”). The Credit Agreement is secured by a security interest in substantially all existing and after-acquired real and personal property (subject to certain exceptions and exclusions) of us and the Guarantors.In October 2018 we finalized an amendment to the Credit Agreement to reprice interest rates, resulting in a reduction in the interest rate margins over base rates on the Term Loan Facility. The loan under the Term Loan Facility bears interest, at our option, at a floating annual rate equal to either the base rate, plus a margin of 2.25%, or LIBOR, plus a margin of 3.25%. Prior to the repricing, the optional floating annual rate was equal to either the base rate plus a margin of 3.00%, or LIBOR, plus a margin of 4.00%. The loan under the Revolving Credit Facility bears interest, at our option, at a floating annual rate equal to either the base rate, plus a margin of between 3.00% and 3.25%, depending on our consolidated leverage ratio, or LIBOR, plus a margin of between 4.00% and 4.25%, depending on our consolidated leverage ratio. While a payment event of default or bankruptcy event of default exists, we are obligated to pay a per annum default rate of interest of 2.00% in excess of the interest rate otherwise payable with respect to the overdue principal amount of any loans outstanding and overdue interest payments and other overdue fees and amounts. We are obligated to pay an unused commitment fee equal to 0.50% of the unutilized portion of the revolving loans. In addition, we are also obligated to pay other customary fees for a credit facility of this size and type. containsand its subsequent amendments contain certain customary affirmative and negative covenants, including covenants that limit our ability and the ability of our subsidiaries to, among other things, grant liens, incur debt, dispose of assets, make loans and investments, make acquisitions, make certain restricted payments (including cash dividends), merge or consolidate, change business or accounting or reporting practices, in each case subject to customary exceptions for a credit facility of this size and type.In addition, with respect to the Revolving Credit Facility, when the principal amount of loans outstanding thereunder is in excess of 25% of the Revolving Credit Facility, the Credit Agreement requires us to comply with a specified maximum first lien net leverage ratio.In March 2020 partly as a precautionary measure to increase cash and maintain maximum financial flexibility during the current uncertainty in global markets resulting from the COVID-19 pandemic, we borrowed the entire amount available under our $30.0 million Revolving Credit Facility at an aggregate interest rate of 5.20%. On June 29, 2020 we used a portion of the net proceeds from the issuance of Convertible Senior Notes, as discussed below, to repay the $30.0 million outstanding under our Revolving Credit Facility.On April 29, 2020 we entered into an amendment to our Credit Agreement. As part of the amendment, we obtained a waiver of our maximum first lien net leverage ratio covenant through the end of 2020. In addition, the amendment to our Credit Agreement provides that EBITDA, for covenant testing purposes, in each quarter of 2020 will be deemed equal to a fixed value equal to our bank covenant EBITDA in the fourth quarter of 2019, when our first lien net leverage was 3.4x. As a result of these changes, we are subject to a new minimum liquidity covenant. We are also subject to restrictions on certain payments, including cash dividends. We are required to maintain a minimum liquidity of at least $12.0 million as of the last day of any month in 2020, and as of the last day of any quarter through the third quarter of 2021 when our Revolving Credit Facility is drawn in excess of 25% (or $7.5 million) of the amount available as of the last day of any fiscal quarter during that period. Beginning in 2021, if we repay borrowings under our Revolving Credit Facility to 25% or less, no financial maintenance covenants, including the minimum liquidity covenant and the maximum first lien net leverage ratio covenant, are applicable., until June 1, 2027 and June 1, 2025, respectively, subject to earlier springing maturities if our 4.25%. Convertible Senior Notes, described below, remain outstanding on April 1, 2025 and December 31, 2024, respectively. With respect to the Term Loan, if the Convertible Senior Notes remainremained outstanding on April 1, 2025, the Term Loan’s maturity date willwould be April 1, 2025, or, if the Convertible Senior Notes’ own maturity date hashad been extended, the earlier of (i) 91 days prior to the Convertible Senior Notes’ new maturity date and (ii) June 1, 2027. In the case of the Revolving Credit Facility, if the Convertible Senior Notes are still outstanding on December 31, 2024, the Revolving Credit Facility’s maturity date will be either December 31, 2024 or, if the Convertible Senior Notes’ own maturity date has been extended, the earlier of (i) 182 days prior to the Convertible Senior Notes’ new maturity date and (ii) June 1, 2025. Under theIn connection with this amendment, the Term Loan Facility bears interest, at our option, at a floating annual rate equal to either the base rate, plus a margin of 2.50%, or LIBOR, plus a margin of 3.50%. Prior to the amendment, the optional floating annual rate was equal to either the base rate plus a margin of 2.25%, or LIBOR, plus a margin of 3.25%. Wewe paid debt issuance costs of $2.1$2.1 million, of which $1.8$1.8 million will be amortized over the life of the term loan facility and included in current and long-term debt on the Consolidated Balance Sheets. The remaining $361,000 of debt issuance costs and $474,000 of non-cash debt extinguishment costs were recorded in Interest expense on the Consolidated Statements of Operations and Comprehensive Loss.20212023 the aggregate interest rate of the Credit Agreement was 4.50%8.97% per annum.2021.2023. The Convertible Senior Notes may be settled in cash, stock, or a combination thereof, solely at our discretion. The initial conversion rate of the Convertible Senior Notes is 42.6203 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $23.46 per share, subject to adjustments. We use the if-converted method for assumed conversion of the Convertible Senior Notes for the diluted earnings per share calculation. The fair value and the effective interest rate of the Convertible Senior Notes as of December 31, 20212023 was approximately $116.0$106.4 million and 5.05%, respectively. The fair value was based on market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy.duringcosts for the twelve months ended December 31, 2021. The interest expense recognized on the Convertible Senior Notes includes approximately $4.2 million for the aggregate of the contractual coupon interest, the accretion of the debt discount,2022 and the amortization of the debt issuance costs during the twelve months ended December 31, 2020.2021. Interest on the Convertible Senior Notes began accruing upon issuance and is payable semi-annually. As of December 31, 2021 thereThere were $2.5$1.1 million and $1.9 million of unamortized debt issuance costs related to convertible senior notes.notes as of December 31, 2023 and 2022, respectively.5five business day period after any 5five consecutive trading day period in which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (iii) we give a notice of redemption with respect to any or all of the notes, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate events. On or after January 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the foregoing circumstances.cannotbecame eligible to redeem the Convertible Senior Notes beforebeginning on July 5, 2023.2023, following the expiration of their non-redemption period. We canare able to redeem them on or after July 5, 2023,the Convertible Senior Notes in whole or in part, at our option, if the last reported sale price per share of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. We may redeem for cash all or part of the Convertible Senior Notes at a redemption price equal to 100% of the principal amount of the redeemable Convertible Senior Notes, plus accrued and unpaid interest to, but excluding, the redemption date. No principal payments are due on the Convertible Senior Notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the Convertible Senior Notes do not contain any financial covenants and do not restrict us from conducting significant restructuring transactions or issuing or repurchasing any of our other securities. As of December 31, 20212023 and 2022 we are not aware of any current events or market conditions that would allow holders to convert the Convertible Senior Notes. During the twelve months ended December 31, 2020 we used a portion of the proceeds to pay off the $30.0 million outstanding under our Revolving Credit Facility and to finance the Ascyrus transaction and used the remaining funds for general corporate purposes.June 2015April 2014 JOTEC obtained two loans fromthe first loan Sparkasse Zollernalb, which areis government sponsored by the Kreditanstalt für Wiederaufbau Bank (KFW). Both KFW loans have a termThe first loan bears an interest rate of nine years and the interest rates are 2.45% and is scheduled to mature during the first quarter of 2024. In December 2015 JOTEC obtained the second loan Sparkasse Zollernalb sponsored by KFW. The second loan bears an interest rate of 1.40%. and is scheduled to mature during the third quarter of 2025.arewere as follows (in thousands):As of December 31, As of December 31, 2023 2023 2022 20212023 the aggregate maturities of long-term debt for the next five years isare as follows (in thousands):2024 2025 2026 2027 Thereafter Total Maturities $ 2,588 $ 102,458 $ 2,250 $ 204,749 $ — $ 312,045 $16.7 million,in 2023, 2022, and $14.9 million in 2021, 2020, and 2019, respectively. Interest expense includes interest on debt and uncertain tax positions in all periods.12.11. Commitments and Contingencies20212023 and 20202022 represent our estimate of the probable losses and anticipated recoveries for incurred but not reported claims related to products sold and services performed prior to the balance sheet date.20212023, 2022 and 2020 and 3.5% in 2019.2021. Our contributions approximated $2.1$2.6 million, $1.9$2.6 million, and $1.6$2.1 million for the years ended 2021, 2020,2023, 2022, and 2019,2021, respectively. We may make discretionary contributions to the 401(k) Plan,Plan; however, 0no discretionary contributions were made in any of the past three years. is recorded in Other long-term assets on the Consolidated Balance Sheets was $6.6$6.9 million and $6.4$5.5 million as of December 31, 20212023 and 2020,2022, respectively. Changes in the value of participant accounts and changes in the cash surrender value of COLI are recorded as part of our operating expenses and are subject to our normal allocation of expenses to inventory and deferred preservation costs.We recorded deferred compensation liability$378,000 and $68,000 in Other current liabilities and $6.0 million and $5.5 million in Long-term liabilities as of December 31, 2021 and 2020, respectively, in the Consolidated Balance Sheets.14. Revenue RecognitionSources of Revenuesources:•Domestic Hospitals – direct salesNorth America: consists of US and Canada. We market our medical device products and preservation services.International Hospitals –services (predominantly in the US), primarily to physicians through our direct sales representatives who are managed by region managers.products and preservation services.ContentsInternational Distributors – generally these contracts specify aarea thatlocation based on the distributor will service, terms and conditionslocation of the relationship, and purchase targetscustomer for the next calendar year.CardioGenesis Cardiac Laser Console Trials and Sales – CardioGenesis cardiac trialed laser consoles are delivered under separate agreements.For the years ended December 31, 2021, 2020,2023, 2022, and 2019 the sources of revenue2021 were as follows (in thousands):2023 2022 2021 North America 187,603 167,542 157,881 EMEA 114,814 104,119 109,081 APAC 33,577 27,973 21,696 LATAM 18,010 14,155 10,178 Total revenue $ 354,004 $ 313,789 $ 298,836 and geographic disclosure in Note 1816 below.15.20212023 and 2020:Authorized
SharesAuthorized
SharesAvailable for Grant Plan 2023 2022 During 2019 On May 16, 2023 the Company amended the 2009 Equity and Cash Incentive PlanShareholders approved additional 3.0 million shares to increase the authorized sharesbe registered under the plan by 1.9 million shares. Upon the exercise of stock options or grants of RSAs, RSUs, or PSUs, we may issue the required shares out of authorized but unissued common stock or out of treasury stock, at our discretion.20212023 the Compensation Committee of our Board of Directors (the “Committee”) authorized awards from approved stock incentive plans of RSAs to non-employee directors and RSUs and PSUs to certain employees and Company officers, which, counting PSUs at target levels, together totaled 681,000 shares and had an aggregate grant date market value of $9.7 million. Two types of PSUs were granted in 2023, an annual grant with a one-year performance period (“Annual PSU”) and an LTIP PSU grant (the “2023 LTIP PSU”) with a one-year performance period. If the highest performance threshold was met, the Annual PSU granted in 2023 represented the right to receive up to 150% of the target number of shares of common stock. The performance component of the Annual PSU granted in 2023 was based on attaining specified levels of revenue growth and specified levels of EBITDA, as defined in the PSU grant documents, for the 2023 calendar year. The Annual PSU granted in 2023 earned approximately 148% of the target number of shares. If the highest performance threshold was met, the 2023 LTIP PSU grant represented a right to receive up to 200% of the target number of shares of common stock. The 2023 LTIP PSU grant earned approximately 200% of target number of shares.NaNTwo types of PSUs were granted in 2021, an annual grant with a one year performance period (“Annual PSU”)PSU and a special LTIP PSU award (“special(the “2021 LTIP PSU”), each with a one year-year performance period. If the highest performance threshold iswas met, the Annual PSU granted in 2021 represented the right to receive up to 150% of the target number of shares of common stock. The performance component of the Annual PSU awards granted in 2021 iswas based on attaining specified levels of revenue growth and certain non-financial metrics, as defined in the PSU grant documents, for the 2021 calendar year. The Annual PSUsPSU granted in 2021 earned approximately 102%110% of the target number of shares. If the highest performance threshold iswas met, the Special PSUs granted2021 LTIP PSU grant in 2021 representrepresented a right to receive up to 200% of the target number of shares of common stock. The special PSUs granted in 2021 LTIP PSU grant earned approximately 118% of target number of shares.In 2020 the Committee authorized awards from approved stock incentive plans of RSUs to certain employees, RSAs to non-employee Directors, and RSAs and PSUs to certain Company officers, which, counting PSUs at target levels, together totaled 335,000 shares and had an aggregate grant date market value of $8.3 million. If the highest performance threshold is met, the PSU granted in 2020 represented the right to receive up to 150% of the target number of shares of common stock. The performance component of the PSU awards granted in 2020 was based on attaining specified levels of EBITDA, as defined in the PSU grant documents, for the 2020 calendar year. Our actual 2020 EBITDA performance was below the threshold required for any payouts under the 2020 PSU plan which resulted in a $1.1 million reversal of expense in the fourth quarter of 2020. In February 2021 the Committee used structured discretion to determine that the 2020 PSUs were earned and should be paid out at 100% of target resulting in a modification of the award which resulted in $1.3 million of compensation expense during the twelve months ended December 31, 2021 related to these performance awards. This modification resulted in a forfeiture and a subsequent grant of 70,000 PSU shares during the twelve months ended December 31, 2021.In 2019 the Committee authorized awards from approved stock incentive plans of RSAs to non-employee Directors, RSUs to certain employees, and RSAs and PSUs to certain Company officers, which, counting PSUs at target levels, together totaled 507,000 shares and had an aggregate grant date market value of $15.0 million. NaN types of PSUs were granted in 2019, Annual PSUs and a special LTIP PSU grant, which has multiple performance periods over a five-year period. If the highest performance threshold is met, the Annual PSU granted in 2019 represents the right to receive up to 150% of the target number of shares of common stock. The performance component of the Annual PSU awards granted in 2019 was based on attaining specified levels of EBITDA, as defined in the Annual PSU grant documents, for the 2019 calendar year. The Annual PSU granted in 2019 earned approximately 83% of the target number of shares. If the highest performance thresholds are met, the PSUs granted in 2019 under the LTIP represent the right to receive up to 288%, and up to 192% for a certain key executive, of the target number of shares of common stock. The performance component of the LTIP awards granted in 2019 was based on attaining specified levels of adjusted revenue growth and gross margin, as defined in the LTIP grant document, for the years 2019 through 2023. During 2020 we determined that the threshold performance under the first performance period (2019 through 2021) of the LTIP was unlikely to be achieved which resulted in a reversal of $1.9 million in expense in the fourth quarter of 2020.2021, 2020,2023, 2022, and 20192021 for RSAs, RSUs, and PSUs, based on the target number of shares, iswas as follows:RSAs RSAs Shares Weighted
Average
Grant Date
Fair ValueGranted Vested Unvested at December 31, 2022 Unvested at December 31, 2022 Unvested at December 31, 2022 Granted Vested Forfeited Unvested at December 31, 2023 RSUs Shares Weighted
Average
Remaining
Contractual
Term in yearsAggregate
Intrinsic
ValueUnvested at December 31, 2020 212,000 1.02 $ 5,015,000 Granted 144,000 Vested (93,000) Forfeited (39,000) Unvested at December 31, 2021 224,000 0.94 4,558,000 Granted 643,000 Vested (100,000) Forfeited (33,000) Unvested at December 31, 2022 734,000 2.02 8,895,000 Granted 327,000 Vested (125,000) Forfeited (57,000) Unvested at December 31, 2023 879,000 1.41 15,711,000 Vested and expected to vest 879,000 1.41 $ 15,711,000 PSUs Shares Weighted
Average
Remaining
Contractual
Term in yearsAggregate
Intrinsic
ValueUnvested at December 31, 2020 331,000 1.64 $ 7,805,000 Granted 215,000 Vested (60,000) Forfeited (114,000) Unvested at December 31, 2021 372,000 0.90 7,579,000 Granted 182,000 Vested (117,000) Forfeited (97,000) Unvested at December 31, 2022 340,000 0.67 4,121,000 Granted 308,000 Vested (213,000) Forfeited (169,000) Unvested at December 31, 2023 266,000 0.54 4,749,000 Vested and expected to vest 266,000 0.54 $ 4,749,000 2021, 2020,2023, 2022, and 20192021 the total fair value of $7.3$6.4 million, $6.7$5.8 million, and $9.8$7.3 million, respectively, in combined RSAs, RSUs, and PSUs vested.226,000, 212,000,110,000, 1,031,000, and 169,000226,000 shares in 2021, 2020,2023, 2022, and 2019,2021, respectively, with exercise prices equal to the stock prices on the respective grant dates.2020, and 2019 iswas as follows:Shares Weighted
Average
Exercise PriceWeighted
Average
Remaining
Contractual
Term in yearsAggregate
Intrinsic
ValueOutstanding at December 31, 2020 1,241,000 $ 18.16 3.38 $ 8,215,000 Granted 226,000 24.90 Exercised (179,000) 12.02 Forfeited (42,000) 26.00 Outstanding at December 31, 2021 1,246,000 20.00 3.20 4,039,000 Granted 1,031,000 13.29 Exercised (151,000) 11.85 Forfeited (3,000) 21.55 Outstanding at December 31, 2022 2,123,000 17.31 4.56 1,150,000 Granted 110,000 17.54 Exercised (226,000) 11.05 Forfeited (93,000) 12.59 Expired (36,000) 25.55 Outstanding at December 31, 2023 1,878,000 18.16 4.12 4,678,000 Vested and expected to vest 1,878,000 $ 18.16 4.12 $ 4,678,000 Exercisable at December 31, 2023 1,080,000 $ 20.59 3.03 $ 1,714,000 iswas as follows:2023 2023 2022 2021 87,000, 83,000,141,000, 95,000, and 61,00087,000 shares in 2021, 2020,2023, 2022, and 2019,2021, respectively, through our ESPP.weighted-averageweighted-average assumptions were used to determine the fair value of options:2023 2023 2022 2021 Stock
OptionsStock
OptionsESPP
OptionsStock
OptionsESPP
OptionsStock
OptionsESPP
OptionsExpected life of options 5.00 Years 0.50 Years 5.00 Years 0.50 Years 5.00 Years 0.50 Years Expected stock price volatility 0.45 0.57 0.40 0.40 0.45 Risk-free interest rate 4.11% 5.03% 3.58% 1.34% 0.57% 0.07% 2023 2022 2021 RSA, RSU, and PSU expense $ 11,875 $ 10,351 $ 9,023 Stock option and ESPP option expense 3,271 2,591 2,254 Total stock compensation expense $ 15,146 $ 12,942 $ 11,277 $566,000, $592,000,$724,000, $598,000, and $612,000$566,000 in the years ended December 31, 2021, 2020,2023, 2022, and 2019,2021, respectively, of the stock compensation expense into our inventory costs and deferred preservation costs.20212023 we had total unrecognized compensation expense of $9.1 million related to RSAs, RSUs, and PSUs and $2.0$3.1 million related to unvested stock options. As of December 31, 20212023 this expense is expected to be recognized over a weighted-average period of 1.641.66 years for RSUs, 1.571.55 years for stock options, 1.230.51 years for RSAs,PSUs, and 0.900.30 years for PSUs.
16. (Loss) Income15. Loss Per Common Share(loss) incomeloss per common share (in thousands, except per share data):Basic loss per common share 2023 2022 2021 Net loss $ (30,690) $ (19,192) $ (14,834) Net loss allocated to participating securities 123 98 94 Net loss allocated to common shareholders $ (30,567) $ (19,094) $ (14,740) Basic weighted-average common shares outstanding 40,743 40,032 38,983 Basic loss per common share $ (0.75) $ (0.48) $ (0.38) Diluted loss per common share 2023 2022 2021 Net loss $ (30,690) $ (19,192) $ (14,834) Net loss allocated to participating securities 123 98 94 Net loss allocated to common shareholders $ (30,567) $ (19,094) $ (14,740) Diluted weighted-average common shares outstanding 40,743 40,032 38,983 Diluted loss per common share $ (0.75) $ (0.48) $ (0.38) _____________________a We excluded stock options from the calculation of diluted weighted-average common shares outstanding if the per share value, including the sum of (i) the exercise price of the options and (ii) the amount of the compensation cost attributed to future services and not yet recognized, was greater than the average market price of the shares because the inclusion of these stock options would be antidilutive to (loss) incomeloss per common share. For the yearyears ended December 31, 20212023, 2022, and 20202021 all stock options and awards were excluded from the calculation of diluted weighted-average common shares outstanding as these would be antidilutive to the net loss. For the year ended December 31, 2019 stock options to purchase 131,000 shares were excluded from the calculation of diluted weighted-average common shares outstanding.17. Transactions with Related PartiesA member of our Board of Directors and a shareholder of the Company, who joined our Board of Directors during 2018, is the CEO of a hospital that generated product and preservation services revenues of $222,000, $378,000, and $341,000 in 2021, 2020, and 2019, respectively.18.2two reportable segments organized according to our products and services: Medical devicesDevices and Preservation services.Services. The Medical devicesDevices segment includes external revenues from product sales of aortic stents and stent grafts, On-X, surgical sealants, On-X, and other product revenues. Aortic stents and stent grafts include JOTEC,aortic arch stent grafts, abdominal stent grafts, and synthetic vascular grafts. Aortic arch stent grafts include our E-vita Open NEO, E-vita Open Plus, AMDS, the NEXUS Products, and NEXUS product revenues.E-vita Thoracic 3G. Abdominal stent grafts include our E-xtra Design Engineering, E-nside, E-tegra, E-ventus BX, and E-liac products. Surgical sealants include BioGlue Surgical Adhesive product revenues.products. The Preservation Services segment includes external services revenues from the preservation of cardiac and vascular tissues. There are 0no intersegment revenues. 2023 2022 2021 Medical devices Medical devices Cost of products and preservation services: Cost of products and preservation services: Medical devices Medical devices Gross margin: Gross margin: Medical devices Medical devices 2021, 2020,2023, 2022, and 20192021 were as follows (in thousands):2023 2023 2022 2021 Aortic stent grafts Aortic stent grafts Aortic stent grafts On-X Preservation services: Preservation services: 2021, 2020,2023, 2022, and 20192021 were as follows (in thousands):2023 2022 2021 US $ 179,485 $ 161,113 $ 151,151 International 174,519 152,676 147,685 Total revenues $ 354,004 $ 313,789 $ 298,836 For the years ended December 31, 2021, 2020 and 2019, revenuesRevenues attributed to customers in Germany accounted for 10%8% of total revenues.revenues for the year ended December 31, 2023, 9% for the year ended 20212023 and 2020 45%2022 $17.5 million and 54%$18.0 million of our long-livedlong-lived assets were held in the US, respectively, where the corporate headquarters and a portion of our manufacturing facilities are located. Our long-lived international assets were $20.6$20.9 million and $15.1$20.7 million as of December 31, 20212023 and 2020,2022, respectively, of which 97% were located in Hechingen, Germany. At December 31, 20212023 and 2020, $250.02022 $247.3 million and $260.1$243.6 million, respectively, of our goodwill was allocated entirely to our Medical Devices segment.
of Finance Chief Operating Officer, and CFO, do not expect that its Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-makingdecision-making can be faulty, and that breakdown can occur because of simple error or mistake. Our Disclosure Controls have been designed to provide reasonable assurance of achieving their objectives.2021,2023, the CEO and CFO have concluded that our Disclosure Controls were effective at the reasonable assurance level to satisfy their objectives and to ensure that the information required to be disclosed by us in our periodic reports is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding disclosure and is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.Reporting under Sarbanes-Oxley Section 404”Reporting” on page 5956 of this report.6057 of this report.The Securities and Exchange Commission’s general guidance permits the exclusion of an assessment of the effectiveness of a registrant’s disclosure controls and procedures as they relate to its internal control over financial reporting for an acquired business during the first year following such acquisition if, among other circumstances and factors, there is not adequate time between the acquisition date and the date of assessment.20212023 there were no changes in our internal control over financial reporting that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.None.
2021,2023, with the exception of information concerning executive officers listed below.20212023 and their ages, positions with Artivion, and the dates from which they have continually served as executive officers with Artivion. Each of the executive officers of Artivion was elected by the Board of Directors to serve until the Board of Directors’ meeting immediately following the next annual meeting of shareholders or until his or her earlier removal by the Board of Directors or his or her resignation.Name Service as
ExecutiveAge Position NameService as
ExecutiveAgePositionSince 2014 5557Chairman, President, and Chief Executive Officer F. Peter BartholdLance A. Berry, CPASince 202020235751Chief Financial Officer, Executive Vice President, Research and DevelopmentFinanceSince 2015 5759Senior Vice President, Global Sales and Marketing Since 2019 5355Vice President, Human Resources Since 2021 5355Vice President, Regulatory Affairs Since 2015 6466Senior Vice President, General Counsel, Chief Compliance Officer, and Corporate Secretary Since 2006 5153Vice President, and Chief Accounting OfficerD. Ashley Lee, CPASince 200057Executive Vice President, Chief Operating Officer, andChief Financial OfficerDennis B. MaierSince 201748Vice President, OperationsSince 2021 4647Vice President, Global Quality AssuranceSince 2021 6567Senior Vice President, Clinical Research and Chief Medical Officer Robert C. Thomson Since 2023 54 Vice President, Research and Development Florian Tyrs Since 2023 42 Vice President, Global Operations 2030 years of experience in the medical device industry. Prior to joining Artivion, Mr. Mackin served as President of Cardiac Rhythm Disease Management, the then largest operating division of Medtronic, Inc. At Medtronic, he previously held the positions of Vice President, Vascular, Western Europe and Vice President and General Manager, Endovascular Business Unit. Prior to joining Medtronic in 2002, Mr. Mackin worked for six years at Genzyme, Inc. serving as Senior Vice President and General Manager for the Cardiovascular Surgery Business Unit and as Director of Sales, Surgical Products division. Before joining Genzyme, Mr. Mackin spent four years at Deknatel/Snowden-Pencer, Inc. in various roles and three years as a First Lieutenant in the US Army. Mr. Mackin received an MBA from Northwestern University’s Kellogg Graduate School of Management and is a graduate of the US Military Academy at West Point.F. Peter Barthold Lance A. Berry, CPAwas appointed to the position of commenced service as Chief Financial Officer and Executive Vice President, Finance of Research and Development in July 2020. Mr. Barthold has more than 20 years of experience in development, manufacturing, and commercialization of vascular implants.Artivion on December 4, 2023. Prior to this position, hethat, Mr. Berry served as a Directorthe Executive Vice President, Chief Financial and Operations Officer of Research and DevelopmentWright Medical Group N.V., from January 2018. Over his 20 years of experience with JOTEC GmbH2019 until November 2020, when Wright was acquired by Stryker NV. Before becoming Executive Vice President, Chief Financial and Operations Officer, Mr. Berry served in Hechingen, Germany,the following roles at Wright Medical: Senior Vice President, Chief Financial Officer (2009-2018) and Vice President, Corporate Controller (2002-2009). Mr. Barthold servedBerry was employed as a DirectorCertified Public Accountant with Arthur Anderson from 1995 to 2002. Mr. Berry currently serves on the Boards of Researchtwo public companies, Treace Medical Concepts (NASDAQ: TCMI) and Development from 2007 to 2017, as well as a number of other leadership positions. Prior to joining JOTEC, he worked as a project manager at MAFO AGVapotherm (NYSE: VAPO). Mr. Berry received both his Masters and was a research associate at the Institute for Applied ResearchBachelor’s in Reutlingen, Germany. Mr. Barthold holds a graduate engineering degree in Chemistry of Synthetic MaterialsAccounting from the Reutlingen University Reutlingen, Germany in 1993.of Mississippi.ofGlobal Sales and Marketing at CorMatrix, a privately held medical device company creating innovative biomaterial devices to repair damaged heart tissue from March 2012 to September 2015. Prior to CorMatrix, he served for four years as a Vice President of Sales in the Cardiac Rhythm Management Devices business at St. Jude Medical, now part of Abbott Laboratories.Laboratories. Before St. Jude Medical, he served for 14 years with Medtronic in the Cardiac Rhythm Disease Management division in senior sales leadership roles. including 7 years as Vice President Southeast. In his early career he servedheld sales and leadership roles with Roche Diagnostics and Ciba-Geigy Corporation. Mr. Davis received a Bachelor’s degree from Western Carolina University.28more than 30 years of regulatory, clinical, quality, and business experience in the medical device and biologics industry. More specifically, he spent two 2.53 years at the FDA as a scientific reviewer in the cardiovascular devices branch, almost 10 years at Novoste Corporation as the Vice President of Regulatory, Clinical, and Quality, and five years providing regulatory, clinical, and quality consulting services to medical device companies. Mr. Green also has broad business experience, having served as the President and COO of CorMatrix Cardiovascular for several years before ultimately serving as its CEO. After the acquisition of the CorMatrix assets by Aziyo Biologics, Mr. Green continued with Aziyo in several roles, including as the Executive Vice President of Regulatory and Medical Affairs. He started his career serving as a combat medic in the US Army and Army Reserves. Mr. Green has a Bachelor in Biological Sciences and a MastersMaster's in Bioengineering, both from Clemson University.BSBachelor's and Master’s degrees in Accounting from Brigham Young University in Provo, Utah.D. Ashley Lee, CPA has served as Executive Vice President, Chief Operating Officer, and Chief Financial Officer since November 2004. Mr. Lee has been with Artivion since December 1994 serving as Vice President of Finance, Chief Financial Officer, and Treasurer from December 2002 to November 2004; as Vice President, Finance and Chief Financial Officer from April 2000 to December 2002; and as Controller Artivion from December 1994 until April 2000. From 1993 to 1994, Mr. Lee served as the Assistant Director of Finance for Compass Retail, Inc., a wholly-owned subsidiary of Equitable Real Estate. From 1987 to 1993, Mr. Lee was employed as a Certified Public Accountant with Ernst & Young, LLP. Mr. Lee received his BS in Accounting from the University of Mississippi.Dennis B. Maier was appointed to the position of Vice President, Operations in July 2017. Mr. Maier has more than 15 years in the medical device industry. Prior to joining Artivion, he served as the Senior Director of Baxter Healthcare’s direct material global purchasing and supplier management team. He also served as Vice President of Global Sourcing for Hill-Rom. Prior to that, he spent five years with Medtronic leading several Cardiac Rhythm Disease Management (CRDM) manufacturing operations, as well as serving as Director of CRDM Global Commodity management. Mr. Maier also spent eight years with Abbott Vascular and Boston Scientific (both former Guidant Corporation businesses) in a variety of leadership roles. Prior to entering the medical device industry, Mr. Maier worked briefly for Ford Motor Company and served six years as an officer in the U.S Army. He received an MBA from the Krannert Graduate School of Management at Purdue University and a B.S. in Mechanical Engineering from the US Military Academy at West Point.companyCompany since 2000 serving in multiple leadership roles, most recently as Vice President, Quality for the Kennesaw, Georgia manufacturing facility. She is the lead executive for Quality in strategy, diligence, and acquisitions and is responsible for all quality functions at the Company’s three manufacturing facilities in Georgia, Texas, and Hechingen, Germany. Ms. Maney is a member of the American Society of Quality and serves on the Quality Council for the American Association of Tissue Banks. She received her Bachelor of Science in Biology degree from Berry College.BABachelor of Arts from the University of Pennsylvania.2021.2021.2023.2021.2021.
(a)
By 22, 2022By/s/J. Patrick MackinJ. Patrick Mackin
Chairman of the Board of DirectorsSignature Title Date SignatureTitleDatePatrick MackinPATRICK MACKINJ. Patrick MackinChairman of the Board of Directors
February 22, 202223, 2024/s/ LANCE A. BERRY D. Ashley LeeD. Ashley LeeChief Operating Officer, andChief Financial OfficerFebruary 22, 202223, 2024/s/ Amy AMY D. HortonHORTONAmy D. HortonVice President and Chief Accounting Officer
(Principal Accounting Officer)February 22, 202223, 2024/s/ THOMAS F. ACKERMAN Director February 23, 2024 Thomas F. Ackerman Thomas F. Ackerman/s/ DANIEL J BEVEVINO Director February 22, 202223, 2024/s/ MARNA P. BORGSTROM Daniel J. BevevinoDaniel J. BevevinoDirector February 22, 202223, 2024/s/Marna P. BorgstromMarna P. Borgstrom/s/ JAMES W. BULLOCK Director February 22, 202223, 2024/s/James W. BullockJames W. Bullock/s/ JEFFREY H. BURBANK Director February 22, 202223, 2024/s/Jeffrey H. BurbankJeffrey H. Burbank/s/ ELIZABETH A. HOFF Director February 22, 202223, 2024/s/ JON W. SALVESON Harvey MorganHarvey MorganDirector February 22, 202223, 2024/s/ Jon W. Salveson/s/ ANTHONY B. SEMEDO Director February 22, 202223, 2024/s/Anthony B. SemedoAnthony B. SemedoDirectorFebruary 22, 2022
Exhibit
NumberExhibit
NumberDescription4.1 10.110.1††10.210.2††Exhibit
NumberDescription Exhibit
NumberDescription10.3(b) 10.3(c) 10.3(e) 10.3(f)* 10.3(g)* 10.3(h)* 10.3(i)* 10.3(j)* 10.4 10.4(a)10.510.5††10.6†10.6†*10.710.7††10.810.8††10.910.9††Exhibit
NumberDescription 10.1010.10††10.1110.11††10.1210.12††10.1310.13+10.13(b)+ 10.13(c)+ 10.14 10.15 10.16(e)+ 10.17
.Exhibit
NumberDescription__________________________*Filed herewith.**Furnished herewith.† Indicates management contract or compensatory plan or arrangement.∞ Indicates that the 2018 form was used in 2019, and 2020, except otherwise indicated.+ The Registrant has redacted exhibit provisions or terms that are both not material and would likely cause competitive harm to the Registrant if publicly disclosed.++ The Registrant has been granted confidential treatment for certain portions of this exhibit pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.108* Filed herewith. ** Furnished herewith. † Indicates management contract or compensatory plan or arrangement. ∞ Indicates that the 2018 form was used in 2019, and 2020, except otherwise indicated. + The Registrant has redacted exhibit provisions or terms that are both not material and would likely cause competitive harm to the Registrant if publicly disclosed. ++ The Registrant has been granted confidential treatment for certain portions of this exhibit pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.