Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | Apr. 27, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | AxoGen, Inc. | |
Entity Central Index Key | 805,928 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 34,681,970 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 30,559,882 | $ 36,506,624 |
Accounts receivable, net of allowance for doubtful accounts of $513,000 and $461,000, respectively | 11,766,829 | 11,064,720 |
Inventory | 8,052,930 | 7,315,942 |
Prepaid expenses and other | 1,355,262 | 853,381 |
Total current assets | 51,734,903 | 55,740,667 |
Property and equipment, net | 2,377,323 | 2,197,039 |
Intangible assets | 1,058,346 | 936,992 |
Total assets | 55,170,572 | 58,874,698 |
Current liabilities: | ||
Borrowings under revolving loan agreement | 3,983,189 | 4,000,000 |
Accounts payable and accrued expenses | 8,710,683 | 8,952,061 |
Current maturities of long term obligations | 2,841,378 | 735,017 |
Contract liabilities, current | 32,136 | 31,668 |
Total current liabilities | 15,567,386 | 13,718,746 |
Long Term Obligations, net of current maturities and deferred financing fees | 17,760,907 | 19,809,772 |
Other long-term liabilities | 89,010 | 95,514 |
Contract liabilities | 61,985 | 68,631 |
Total liabilities | 33,479,288 | 33,692,663 |
Shareholders' equity: | ||
Common stock, $0.01 par value per share; 50,000,000 shares authorized; 34,669,276 and 34,350,329 shares issued and outstanding | 346,693 | 343,503 |
Additional paid-in capital | 155,312,433 | 153,167,817 |
Accumulated deficit | (133,967,842) | (128,329,285) |
Total shareholders' equity | 21,691,284 | 25,182,035 |
Total liabilities and shareholders' equity | $ 55,170,572 | $ 58,874,698 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Consolidated Balance Sheets | ||
Accounts receivable, allowance for doubtful accounts | $ 513,000 | $ 461,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 34,669,276 | 34,350,329 |
Common stock, shares outstanding | 34,669,276 | 34,350,329 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Consolidated Statements of Operations | ||
Revenues | $ 17,259,859 | $ 12,241,073 |
Cost of goods sold | 2,712,380 | 1,915,648 |
Gross profit | 14,547,479 | 10,325,425 |
Costs and expenses: | ||
Sales and marketing | 12,469,351 | 8,610,482 |
Research and development | 2,058,442 | 1,411,136 |
General and administrative | 5,011,727 | 3,504,039 |
Total costs and expenses | 19,539,520 | 13,525,657 |
Loss from operations | (4,992,041) | (3,200,232) |
Other income (expense): | ||
Interest expense | (585,618) | (507,549) |
Interest expense - deferred financing costs | (60,663) | (44,491) |
Other expense | (235) | (9,753) |
Total other expense | (646,516) | (561,793) |
Net Loss | $ (5,638,557) | $ (3,762,025) |
Weighted Average Common Shares outstanding - basic and diluted | 34,521,122 | 33,026,433 |
Loss Per Common share - basic and diluted (in dollars per share) | $ (0.16) | $ (0.11) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (5,638,557) | $ (3,762,025) |
Adjustments to reconcile net loss to net cash used for operating activities: | ||
Depreciation | 179,938 | 108,359 |
Amortization of intangible assets | 19,600 | 23,189 |
Amortization of deferred financing costs | 60,663 | 44,491 |
Provision for bad debt | 56,844 | 34,747 |
Stock-based compensation | 1,729,115 | 848,589 |
Change in assets and liabilities: | ||
Accounts receivable | (758,953) | (366,469) |
Inventory | (736,988) | (391,890) |
Prepaid expenses and other | (501,881) | (237,633) |
Accounts payable and accrued expenses | (241,378) | (341,899) |
Contract and other liabilities | (12,682) | 86,459 |
Net cash used for operating activities | (5,844,279) | (3,954,082) |
Cash flows from investing activities: | ||
Purchase of property and equipment | (360,222) | (98,391) |
Acquisition of intangible assets | (140,954) | (84,898) |
Net cash used for investing activities | (501,176) | (183,289) |
Cash flows from financing activities: | ||
Borrowing on revolving loan | 16,146,151 | 11,247,114 |
Payments on revolving loan | (16,162,963) | (11,295,817) |
Repayments of long-term debt | (3,167) | (5,158) |
Debt issuance costs | (26,429) | |
Proceeds from exercise of stock options and warrants | 418,692 | 117,021 |
Net cash provided by financing activities | 398,713 | 36,731 |
Net decrease in cash and cash equivalents | (5,946,742) | (4,100,640) |
Cash and cash equivalents, beginning of year | 36,506,624 | 30,014,405 |
Cash and cash equivalents, end of period | 30,559,882 | 25,913,765 |
Supplemental disclosures of cash flow activity: | ||
Cash paid for interest | $ 576,856 | $ 505,020 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2018 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company as of March 31, 2018 and December 31, 2017 and for the three-month periods ended March 31, 2018 and 2017. The Company’s condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and therefore, do not include all information and footnotes necessary for a fair presentation of consolidated financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“USGAAP”) and should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2017, which are included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2017. The interim condensed consolidated financial statements are unaudited and in the opinion of management, reflect all adjustments necessary for a fair presentation of results for the periods presented. Results for interim periods are not necessarily indicative of results for the full year. All intercompany accounts and transactions have been eliminated in consolidation. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Revenue Recognition On January 1, 2018, the Company adopted Accounting Standards Codification (ASC) No. 606, Revenue from Contracts with Customers, utilizing the modified retrospective method applied to contracts that were not completed, and we did not utilize any of the practical expedients in the standard. The adoption of the standard did not have a material impact on the timing and amounts of our revenue, processes or internal controls. Upon adoption, we did not have any material remaining performance obligations, significant judgements, or material costs to obtain or fulfill contracts with our customers. The Company enters into contracts to sell and distribute products and services to hospitals and surgical facilities for use in caring for patients with peripheral nerve damage or discontinuity. Revenue is recognized when the Company has met its performance obligations pursuant to its contracts with its customers in an amount that we expect to be entitled to in exchange for the transfer of control of the products and services to our customers. In the case of products or services sold to a customer under a distribution or purchase agreement, the Company has no further performance obligations and revenue is recognized at the point control transfers which occurs either when: i) the product is shipped via common carrier; or ii) the product is delivered to the customer or distributor, in accordance with the terms of the agreement. A portion of the Company's product revenue is generated from consigned inventory maintained at hospitals and distributors, and also from inventory physically held by field sales representatives. For these types of products sales, the Company retains control until the product has been used or implanted, at which time revenue is recognized. The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in the cost of goods sold. The Company operates in a single reportable segment of peripheral nerve repair, offers similar products to its customers, and enters into consistently structured arrangements with similar type of customers. As such, the Company does not disaggregate revenue from contracts with customers as the nature, amount, timing and uncertainty of revenue and cash flows does not materially differ within and among the contracts with customers. The contract with the customer states the final terms of the sale, including the description, quantity, and price of each implant distributed. The payment terms and conditions in our contracts vary; however, as a common business practice, payment terms are typically due in full within 30 to 60 days of delivery. Since the customer agrees to a stated price in the contract that does not vary over the contract term, the contracts do not contain any material types of variable consideration, and contractual rights of return are not material. The Company has several contracts with distributors which include consideration paid to the customer in exchange for distinct marketing and other services. We can reasonably estimate the fair value of such services and record such consideration paid to the customer as an operating expense. In connection with our AcroVal ® Neurosensory and Motor Testing System, we sell extended warranty and service packages to some of our customers who purchase this evaluation and measurement tool, and the prepayment of these extended warranties represent contract liabilities until the performance obligations are satisfied ratably over the term of the contract. The sale of the aforementioned extended warranty represents the only performance obligation the Company satisfies over time, and creates the contract liability disclosed below. The opening and closing balances of our contract receivables and liabilities are as follows: Contract Balances Net Receivables Contract Liabilities, Current Contract Liabilities, Long-Term Opening, January 1, 2018 $ 11,064,720 $ 31,668 $ 68,631 Closing, March 31, 2018 11,766,829 32,136 61,985 Increase/(decrease) 702,109 468 (6,646) Concentrations of credit risk with respect to accounts receivable are limited because a large number of geographically diverse customers make up the Company’s customer base, thus spreading the trade credit risk. The Company further controls credit risk through credit approvals and monitoring procedures. Income Taxes The Company has not recorded current income tax expense due to the generation of net operating losses. Deferred income taxes are accounted for using the balance sheet approach which requires recognition of deferred tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. A valuation allowance is provided when it is more-likely-than-not that a deferred tax asset will not be realized. A full valuation allowance has been established on the deferred tax asset as it is more-likely-than-not that a future tax benefit will not be realized. In addition, future utilization of the available net operating loss carryforward may be limited under Internal Revenue Code Section 382 as a result of changes in ownership. The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company’s remaining open tax years subject to examination by the Internal Revenue Service include the years ended December 31, 2014 through 2016; however, there currently are no examinations in process. Use of Estimates The preparation of consolidated financial statements in conformity with USGAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Loss Per Share of Common Stock There were no dilutive instruments included in the calculation of loss per common share for the three months ended March 31, 2018 and 2017, respectively, due to the Company reporting a net loss. The basic and diluted weighted average shares outstanding were 34,521,122 and 33,026,433 shares for the three months ended March 31, 2018 and 2017, respectively. Basic and diluted net loss per share of common stock for all periods presented is computed by dividing the net loss attributable to common shareholders by the weighted-average number of shares of common stock outstanding and common stock equivalents outstanding, when dilutive. Potentially dilutive common stock equivalents include shares of common stock which would potentially be issued pursuant to stock warrants and stock options. Common stock equivalents are not included in determining the fully diluted loss per share if their effect is antidilutive. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB, issued a new standard on revenue recognition which outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard was designed to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures. The standard could be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the adoption date. We adopted the standard on January 1, 2018 utilizing the modified retrospective method. The adoption of this standard did not have a material impact on our consolidated financial statements, other than the enhanced disclosure included in Note 2. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. This update will increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This update is effective for annual and interim reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact this standard will have on our consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230). The ASU was issued intending to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the Consolidated Statement of Cash Flows by providing guidance on eight specific cash flow issues. We prospectively adopted the standard on January 1, 2018. The adoption of this standard did not have a material impact on our consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), guidance that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. We prospectively adopted the standard on January 1, 2018. The adoption of this standard did not have a material impact on our consolidated Statement of Cash Flows. In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.” ASU 2017-09 provides clarity on which changes to the terms or conditions of share-based payment awards require entities to apply the modification accounting provisions required in Topic 718. We prospectively adopted the standard on January 1, 2018. The adoption of this standard did not have a material impact on our consolidated financial statements. The Company’s management has reviewed and considered all other recent accounting pronouncements and believe there are none that could potentially have a material impact on the Company’s consolidated financial condition, results of operations, or disclosures. |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2018 | |
Inventories | |
Inventories | 3. Inventories Inventories are comprised of unprocessed tissue, work-in-process, Avance ® Nerve Graft, AxoGuard ® Nerve Connector, AxoGuard ® Nerve Protector, Avive ® Soft Tissue Membrane, AcroVal ® Neurosensory and Motor Testing System, AxoTouch ® Two-Point Discriminator and supplies and are valued at the lower of cost (first-in, first-out) or net realizable value and consist of the following: March 31, December 31, 2018 2017 Finished goods $ 6,151,713 $ 5,489,360 Work in process 464,392 470,187 Raw materials 1,436,825 1,356,395 Inventories $ 8,052,930 $ 7,315,942 Inventories are net of write down of approximately $843,000 and $812,000 at March 31, 2018 and December 31, 2017, respectively. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2018 | |
Property and Equipment | |
Property and Equipment | 4. Property and Equipment Property and equipment consist of the following: March 31, December 31, 2018 2017 Furniture and equipment $ 1,708,519 $ 1,934,669 Leasehold improvements 1,127,430 711,319 Processing equipment 2,010,061 1,839,800 Less: accumulated depreciation and amortization (2,468,687) (2,288,749) Property and equipment, net $ 2,377,323 $ 2,197,039 Depreciation expense for the three months ended March 31, 2018 and 2017 was $180,000 and $108,000, respectively. |
Intangible Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2018 | |
Intangible Assets | |
Intangible Assets | 5. Intangible Assets The Company’s intangible assets consist of the following: March 31, December 31, 2018 2017 License agreements $ 1,007,566 $ 1,007,566 Less: accumulated amortization (547,202) (485,585) License agreements, net $ 460,364 $ 521,981 Patents 645,749 459,903 Less: accumulated amortization (47,767) (44,892) Patents, net $ 597,982 $ 415,011 Intangible assets, net $ 1,058,346 $ 936,992 License agreements are being amortized over periods ranging from 17-20 years. Certain patent costs of $22,000 were being amortized over three years. As of March 31, 2018, those patents were fully amortized, and the remaining patents of $624,000 are a combination of pending patent costs, $102,000 of which is being amortized over periods up to 20 years. Amortization expense was approximately $20,000 and $23,000 for the three months ended March 31, 2018 and 2017, respectively. As of March 31, 2018, future amortization of license agreements and patents (i) for the remainder of fiscal year 2018 is $63,000, (ii) for the fiscal years 2019 through 2024 is expected to be $84,000 per year, and (iii) after 2024 an aggregate $76,000. License Agreements The Company has entered into multiple license agreements (together, the “License Agreements”) with the University of Florida Research Foundation and the University of Texas at Austin. Under the terms of the License Agreements, the Company acquired exclusive worldwide licenses for underlying technology used in repairing and regenerating nerves. The licensed technologies include the rights to issued patents and patents pending in the United States and international markets. The effective term of the License Agreements extends through the term of the related patents and the agreements may be terminated by the Company with 60 days prior written notice. Additionally, in the event of default, licensors may terminate an agreement if the Company fails to cure a breach after written notice. The License Agreements contain the key terms listed below: · AxoGen pays royalty fees ranging from 1% to 3% under the License Agreements based on net sales of licensed products. One of the agreements also contains a minimum royalty of $12,500 per quarter, which may include a credit in future quarters in the same calendar year for the amount the minimum royalty exceeds the royalty fees. Also, when AxoGen pays royalties to more than one licensor for sales of the same product, a royalty stack cap applies, capping total royalties at 3.75%; · If AxoGen sublicenses technologies covered by the License Agreements to third parties, AxoGen would pay a percentage of sublicense fees received from the third party to the licensor. Currently, AxoGen does not sublicense any technologies covered by License Agreements. The Company is not considered a sub-licensee under the License Agreements and does not owe any sub-licensee fees for its own use of the technologies; · AxoGen reimburses the licensors for certain legal expenses incurred for patent prosecution and defense of the technologies covered by the License Agreements; and · Currently, under the University of Texas at Austin’s agreement, AxoGen would owe a $15,000 milestone fee upon receiving a Phase II Small Business Innovation Research or Phase II Small Business Technology Transfer grant involving the licensed technology. The Company has not received either grant and does not owe such a milestone fee. A milestone fee to the University of Florida Research Foundation of $2,000 is due if AxoGen receives FDA approval of its Avance ® Nerve Graft, a milestone fee of $25,000 is due upon the first commercial use of certain licensed technology to provide services to manufacture products for third parties and a milestone fee of $10,000 is due upon the first use to manufacture products that utilize certain technology that is not currently incorporated into AxoGen products. Royalty fees were approximately $355,000 and $238,000 during the three months ended March 31, 2018 and 2017, respectively, and are included in sales and marketing expense on the accompanying condensed consolidated statements of operations. |
Accounts Payable and Accrued Ex
Accounts Payable and Accrued Expenses | 3 Months Ended |
Mar. 31, 2018 | |
Accounts Payable and Accrued Expenses | |
Accounts Payable and Accrued Expenses | 6. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consist of the following: March 31, December 31, 2018 2017 Accounts payable $ 3,297,419 $ 3,237,962 Accrued expenses 2,124,507 1,770,956 Accrued compensation 3,288,757 3,943,143 Accounts Payable and Accrued Expenses $ 8,710,683 $ 8,952,061 |
Term Loan Agreements and Long T
Term Loan Agreements and Long Term Debt | 3 Months Ended |
Mar. 31, 2018 | |
Term Loan Agreements and Long Term Debt | |
Term Loan Agreements and Long Term Debt | 7. Term Loan Agreements and Long-Term Debt Term Loan Agreement and Long-Term Debt consist of the following: March 31, December 31, 2018 2017 Term Loan Agreement with MidCap Financial Trust (“MidCap”) for a total of $21,000,000, net of $493,437 of unamortized deferred financing fees at March 31, 2018, and $554,100 at December 31, 2017. Interest is payable monthly at 8.0% per annum plus the greater of LIBOR or 0.5% which as of March 31, 2018 resulted in a 9.66% rate. $ 20,506,563 $ 20,445,900 Revolving Loan Agreement with MidCap for up to $10,000,000 with borrowings based upon eligible accounts receivable and inventory. Interest is payable monthly at 4.5% per annum plus the greater of LIBOR or 0.5% which as of March 31, 2018 resulted in a 6.16% rate. 3,983,189 4,000,000 Equipment Lease Agreement with Cisco Capital for a total lease amount of $58,875 which has a 36 month term and requires no lease payments for the first three months of the lease and 33 equal payments of principal and interest until the end of the term. Interest on the lease is payable monthly at 3.5% per annum. 35,147 36,930 Equipment Lease Agreement with Raymond Leasing Corporation for a total lease amount of $29,998 which has a 48 month term with equal payments for principal and interest until the end of the term. Interest on the lease is payable monthly at 6.7% per annum. 29,476 29,998 Equipment Lease Agreement with B&B Office Systems for a total lease amount of $31,961 which has a 60 month term with equal payments for principal and interest until the end of the term. Interest on the lease is payable monthly at 8.5% per annum. 31,099 31,961 Total 24,585,474 24,544,789 Less current revolving loan (3,983,189) (4,000,000) Less current maturities of long term debt (2,841,378) (735,017) Long-term portion $ 17,760,907 $ 19,809,772 Credit Facilities MidCap Term Loan Agreement On October 25, 2016 (the “Closing Date”), AxoGen and AC, each as borrowers, entered into a Credit and Security Agreement (Term Loan) (the ''MC Term Loan Agreement") with the lenders party thereto and MidCap Financial Trust (“MidCap”), as administrative agent and a lender. Under the MC Term Loan Agreement, MidCap provided the Company a term loan in the aggregate principal amount of $21 million (the "Term Loan") which has a maturity date of May 1, 2021 and requires interest only payments through December 1, 2018, and thereafter, 30 monthly payments of principal and interest resulting in the Term Loan being fully paid by the maturity date. Interest is payable monthly at 8.0% per annum plus the greater of LIBOR or 0.5%, which, as of March 31, 2018, resulted in an 9.66% rate. In addition to the interest charged on the Term Loan, the Company is also obligated to pay certain fees, including an annual agency fee of 0.25% of the aggregate principal amount of the Term Loan. The Company has the option at any time to prepay the Term Loan in whole or in part, subject to certain conditions, a prepayment fee, and a 5.0% exit fee as specified in the MC Term Loan Agreement. The prepayment fee is determined by multiplying the amount being prepaid by the following applicable percentage amount: (a) 3.0% during the first year following the Closing Date; (b) 2.0% during the second year following the Closing Date, and (c) 1.0% thereafter. However, no prepayment fee is due in the event the prepayment is a result of refinancing the Term Loan and Revolving Loan with MidCap or an affiliate of MidCap. As of March 31, 2018, the Term Loan had an outstanding balance of $21.0 million. MidCap Revolving Loan Agreement In addition, on October 25, 2016, AxoGen and AC, each as borrowers, also entered into a Credit and Security Agreement (Revolving Loan) (the ''Revolving Loan Agreement") with the lenders party thereto and MidCap, as administrative agent and a lender. Under the Revolving Loan Agreement, MidCap agreed to lend to the Company up to $10 million under a revolving credit facility (the "Revolving Loan") which amount may be drawn down by the Company based upon an available borrowing base which includes certain accounts receivable and inventory. The Revolving Loan may be increased to up to $15 million at the Company’s request and with the approval of MidCap. As of March 31, 2018, the Company’s borrowing base under the Revolving Loan provided availability of approximately $7.9 million. As of March 31, 2018, the Company had borrowed $4.0 million of the Revolving Loan. The maturity date of the Revolving Loan is May 1, 2021. Interest is payable monthly at 4.5% per annum plus the greater of LIBOR or 0.5% on outstanding advances. In addition to the interest charged on the Revolving Loan, the Company is also obligated to pay certain fees, including a collateral management fee of 0.5% per annum of the principal amount outstanding on the Revolving Loan from time to time and an unused line fee of 0.5% per annum on the difference between the average amount outstanding on the Revolving Loan minus the total amount of the Revolving Loan commitment. The Revolving Loan is subject to a minimum balance, such that the Company pays the greater of: (i) interest accrued on the actual amount drawn under the Revolving Loan Facility; and (ii) interest accrued on 30% of the average borrowing base. If the Revolving Loan is terminated or permanently reduced prior to the maturity date, MidCap is owed a deferred revolving loan origination fee as specified in the Revolving Loan Agreement. No deferred revolving loan origination fee is due in the event the Revolving Loan is paid in full or the termination of the revolving credit facility is a result of refinancing the Term Loan and Revolving Loan with MidCap or an affiliate of MidCap. The MC Term Loan Agreement and the Revolving Loan Agreement each contain covenants that place restrictions on AxoGen’s operations, including, without limitation, covenants related to debt restrictions, investment restrictions, dividend restrictions, restrictions on transactions with affiliates and certain revenue covenants. As of March 31, 2018, the Company was in compliance with the agreements’ covenants. MidCap, on behalf of the lenders under the agreements, has a first perfected security interest in the assets of the Company to guarantee the payment in full of the agreements. Upon the payment in full to MidCap and the lenders of the Term Loan Agreement and Revolving Loan Agreement, the Company would have no further obligations to MidCap or the lenders under the Term Loan Agreement or the Revolving Loan Agreement. Interest expense for the three months ended March 31, 2018 was approximately $586,000 compared to $508,000 for the three months ended March 31, 2017. Annual maturities of the Company’s long-term obligations are as follows: Year Ending December 31, Amount 2018 (nine months remaining) $ 731,850 2019 8,427,916 2020 8,413,817 2021 3,514,892 2022 7,247 21,095,722 Less unamortized debt issuance costs (493,437) TOTAL $ 20,602,285 |
Stock Incentive Plan
Stock Incentive Plan | 3 Months Ended |
Mar. 31, 2018 | |
Stock Incentive Plan | |
Stock Incentive Plan | 8. Stock Incentive Plan The Company maintains the AxoGen 2010 Stock Incentive Plan, as amended and restated (the “AxoGen Plan”), which allows for issuance of incentive stock options, non-qualified stock options, PSUs and restricted stock units (“RSUs”) to employees, directors and consultants at exercise prices not less than the fair market value at the date of grant. At the 2017 Annual Meeting of Shareholders held on May 24, 2017, the AxoGen Plan was amended to increase the number of shares of common stock authorized for issuance under the AxoGen Plan to 7,700,000 shares. At the 2017 Annual Meeting of Shareholders, the shareholders approved the adoption of the AxoGen 2017 Employee Stock Purchase Plan (the “2017 ESPP”), which allows for eligible employees to acquire shares of our common stock through payroll deductions at a discount from market value. The 2017 ESPP authorized a total of 600,000 shares of our common stock to be provided under the 2017 ESPP, with the first offering period having begun January 1, 2018. The options granted to employees prior to July 1, 2017 typically vest 25% one year after the grant date and 12.5% every six months thereafter for the remaining three-year period until fully vested after four years. The options granted to employees after July 1, 2017 typically vest 50% two years after the grant date and 12.5% every six months thereafter for the remaining two-year period until fully vested after four years. The options granted to directors and certain options granted from time to time to certain executive officers have vested 25% per quarter over one year or had no vesting period. Options issued to consultants have vesting provisions based on the engagement ranging from no vesting to vesting over the service period ranging from three to four years. Options typically have terms ranging from seven to ten years. The Company recognized stock-based compensation expense of approximately $1.7 million and $849,000 for the three months ended March 31, 2018 and 2017, respectively, which consisted of compensation expense related to employee stock options, PSUs, RSUs and the 2017 ESPP based on the value of share-based payment awards that are ultimately expected to vest during the period. The Company estimates the fair value of each option award issued under such plans on the date of grant using a Multiple Point Black-Scholes option-pricing model which uses a weighted average of historical volatility and peer company volatility. The Company determines the expected life of each award giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. The Company uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. The Company used the following weighted-average assumptions for options granted during the periods indicated: Three months ended March 31, 2018 2017 Expected term (in years) 6.22 6.16 Expected volatility 49.65 % 50.72 % Risk free rate 2.39 % 2.14 % Expected dividends — % — % The Company granted stock based awards for 53,200 shares of its common stock pursuant to the AxoGen Plan, for the three months ended March 31, 2018. The weighted average fair value of the awards granted at market during the three months ended March 31, 2018 and 2017 was $14.09 and $5.28 per award, respectively At March 31, 2018, the total future stock compensation expense related to non-vested awards is expected to be approximately $17.4 million. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies | |
Commitments and Contingencies | 9. Commitments and Contingencies Operating Leases The Company finances its use of certain facilities and equipment under committed lease arrangements provided by various institutions. Since the terms of these arrangements meet the accounting definition of operating lease agreements, the aggregate sum of future minimum lease payments is not reflected on the condensed consolidated balance sheet. Estimated future minimum rental payments on the leases are as follows: Year Ending December 31, Amount 2018 (nine months remaining) 343,447 2019 364,362 2020 165,116 2021 86,638 TOTAL $ 959,563 Total rent expense for the Company’s leased office and lab space for the three months ended March 31, 2018 and 2017 was approximately $115,000 and $110,000, respectively. Service Agreements On August 6, 2015, AC entered into a License and Services Agreement (the “CTS Agreement”) with Community Blood Center (d/b/a Community Tissue Services) (“CTS”), Dayton, Ohio, an FDA registered tissue establishment. Processing of the Avance ® Nerve Graft pursuant to the CTS Agreement began in February 2016. The CTS Agreement is for a five-year term, subject to earlier termination by either party for cause (subject to the non-terminating party’s right to cure, in certain circumstances), or without cause, upon 18 months’ prior notice. Under the CTS Agreement, AC pays CTS a facility fee for clean room/manufacturing, storage and office space. CTS also provides services in support of AC’s manufacturing such as routine sterilization of daily supplies, providing disposable supplies, microbial services and office support. During the three months ended March 31, 2018 and 2017, AxoGen paid license fees to CTS of approximately $419,000 and $317,000, respectively, and are included in cost of goods sold on the accompanying condensed consolidated statements of operations. In August 2008, the Company entered into an agreement to distribute the AxoGuard ® products worldwide in the field of peripheral nerve repair, and the parties subsequently amended the agreement on February 26, 2018. Pursuant to the February 2018 amendment, the agreement expires on June 30, 2027. The Cook Biotech agreement also requires certain minimum purchases, although through mutual agreement the parties have not established such minimums and to date have not enforced such provision, and establishes a formula for the transfer cost of the AxoGuard ® products. Under the agreement, AxoGen provides purchase orders to Cook Biotech, and Cook Biotech fulfills the purchase orders. In December 2011, the Company also entered into a Master Services Agreement for Clinical Research and Related Services. The Company was required to pay $151,318 upon execution of this agreement and the remainder monthly based on activities associated with the execution of AxoGen’s phase 3 pivotal clinical trial to support a biologics license application (BLA) for Avance ® Nerve Graft. Certain executive officers of the Company are parties to employment contracts. Such contracts have severance payments for certain conditions including change of control. Concentrations Vendor Substantially all of AxoGen’s revenue is currently derived from four products, Avance ® Nerve Graft, AxoGuard ® Nerve Protector, AxoGuard ® Nerve Connector and Avive ® Soft Tissue Membrane. AxoGen has an exclusive distribution agreement with Cook Biotech for the purchase of AxoGuard ® which expires June 30, 2027. The Cook Biotech agreement also requires certain minimum purchases, although through mutual agreement the parties have not established such minimums and to date have not enforced such provision, and establishes a formula for the transfer cost of the AxoGuard ® products. The agreement allows for termination provisions for both parties. Although there are products that AxoGen believes it could develop or obtain that would replace the AxoGuard ® products, the loss of the ability to sell the AxoGuard ® products could have a material adverse effect on AxoGen’s business until other replacement products would be available. Processor AxoGen is highly dependent on the continued availability of its processing facilities at CTS and could be harmed if the physical infrastructure of this facility is unavailable for any prolonged period of time. In addition, disruptions could lead to significant costs and reductions in revenues, as well as a potential harm to the AxoGen’s business reputation and financial results. The CTS agreement is for a five-year term, subject to earlier termination by either party at any time for cause (subject to the non-terminating party’s right to cure, in certain circumstances), or without cause, upon 18 months’ prior notice. Although AxoGen believes it can find and make operational a new facility in less than six months, the regulatory process for approval of facilities is time-consuming and unpredictable. AxoGen’s ability to rebuild or find acceptable lease facilities would take a considerable amount of time and expense and could cause a significant disruption in service to its customers. Although AxoGen has business interruption insurance which would, in instances other than lease termination, cover certain costs, it may not cover all costs nor help to regain AxoGen’s standing in the market. |
Retirement Plan
Retirement Plan | 3 Months Ended |
Mar. 31, 2018 | |
Retirement Plan | |
Retirement Plan | 10. Retirement Plan AxoGen 401(k) Plan The Company adopted the AxoGen 401(k) plan (the “401(k) Plan”) in December 2015 with contributions starting in January 2016. All full-time employees who have attained the age of 18 are eligible to participate in the 401(k) Plan. Eligibility is immediate upon employment and enrollment is available any time during employment. Participating employees may make annual pretax contributions to their accounts up to a maximum amount as limited by law. The 401(k) Plan requires the Company to make matching contributions of 3% on the first 3% of the employee’s annual salary and 1% of the next 2% of the employee’s annual salary as long as the employee participates in the 401(k) Plan. Both employee contributions and Company contributions vest immediately. Employer contributions to the 401(k) Plan for the three months ending March 31, 2018 and 2017 were approximately $139,000 and $109,000, respectively. |
Summary of Significant Accoun16
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Significant Accounting Policies | |
Revenue Recognition | Revenue Recognition On January 1, 2018, the Company adopted Accounting Standards Codification (ASC) No. 606, Revenue from Contracts with Customers, utilizing the modified retrospective method applied to contracts that were not completed, and we did not utilize any of the practical expedients in the standard. The adoption of the standard did not have a material impact on the timing and amounts of our revenue, processes or internal controls. Upon adoption, we did not have any material remaining performance obligations, significant judgements, or material costs to obtain or fulfill contracts with our customers. The Company enters into contracts to sell and distribute products and services to hospitals and surgical facilities for use in caring for patients with peripheral nerve damage or discontinuity. Revenue is recognized when the Company has met its performance obligations pursuant to its contracts with its customers in an amount that we expect to be entitled to in exchange for the transfer of control of the products and services to our customers. In the case of products or services sold to a customer under a distribution or purchase agreement, the Company has no further performance obligations and revenue is recognized at the point control transfers which occurs either when: i) the product is shipped via common carrier; or ii) the product is delivered to the customer or distributor, in accordance with the terms of the agreement. A portion of the Company's product revenue is generated from consigned inventory maintained at hospitals and distributors, and also from inventory physically held by field sales representatives. For these types of products sales, the Company retains control until the product has been used or implanted, at which time revenue is recognized. The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in the cost of goods sold. The Company operates in a single reportable segment of peripheral nerve repair, offers similar products to its customers, and enters into consistently structured arrangements with similar type of customers. As such, the Company does not disaggregate revenue from contracts with customers as the nature, amount, timing and uncertainty of revenue and cash flows does not materially differ within and among the contracts with customers. The contract with the customer states the final terms of the sale, including the description, quantity, and price of each implant distributed. The payment terms and conditions in our contracts vary; however, as a common business practice, payment terms are typically due in full within 30 to 60 days of delivery. Since the customer agrees to a stated price in the contract that does not vary over the contract term, the contracts do not contain any material types of variable consideration, and contractual rights of return are not material. The Company has several contracts with distributors which include consideration paid to the customer in exchange for distinct marketing and other services. We can reasonably estimate the fair value of such services and record such consideration paid to the customer as an operating expense. In connection with our AcroVal ® Neurosensory and Motor Testing System, we sell extended warranty and service packages to some of our customers who purchase this evaluation and measurement tool, and the prepayment of these extended warranties represent contract liabilities until the performance obligations are satisfied ratably over the term of the contract. The sale of the aforementioned extended warranty represents the only performance obligation the Company satisfies over time, and creates the contract liability disclosed below. |
Concentrations of Credit Risk | Concentrations of credit risk with respect to accounts receivable are limited because a large number of geographically diverse customers make up the Company’s customer base, thus spreading the trade credit risk. The Company further controls credit risk through credit approvals and monitoring procedures. |
Income Taxes | Income Taxes The Company has not recorded current income tax expense due to the generation of net operating losses. Deferred income taxes are accounted for using the balance sheet approach which requires recognition of deferred tax assets and liabilities for the expected future consequences of temporary differences between the financial reporting basis and the tax basis of assets and liabilities. A valuation allowance is provided when it is more-likely-than-not that a deferred tax asset will not be realized. A full valuation allowance has been established on the deferred tax asset as it is more-likely-than-not that a future tax benefit will not be realized. In addition, future utilization of the available net operating loss carryforward may be limited under Internal Revenue Code Section 382 as a result of changes in ownership. The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company’s remaining open tax years subject to examination by the Internal Revenue Service include the years ended December 31, 2014 through 2016; however, there currently are no examinations in process. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with USGAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. |
Loss Per Share of Common Stock | Loss Per Share of Common Stock There were no dilutive instruments included in the calculation of loss per common share for the three months ended March 31, 2018 and 2017, respectively, due to the Company reporting a net loss. The basic and diluted weighted average shares outstanding were 34,521,122 and 33,026,433 shares for the three months ended March 31, 2018 and 2017, respectively. Basic and diluted net loss per share of common stock for all periods presented is computed by dividing the net loss attributable to common shareholders by the weighted-average number of shares of common stock outstanding and common stock equivalents outstanding, when dilutive. Potentially dilutive common stock equivalents include shares of common stock which would potentially be issued pursuant to stock warrants and stock options. Common stock equivalents are not included in determining the fully diluted loss per share if their effect is antidilutive. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board, or FASB, issued a new standard on revenue recognition which outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard was designed to create greater comparability for financial statement users across industries and jurisdictions and also requires enhanced disclosures. The standard could be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the adoption date. We adopted the standard on January 1, 2018 utilizing the modified retrospective method. The adoption of this standard did not have a material impact on our consolidated financial statements, other than the enhanced disclosure included in Note 2. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. This update will increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This update is effective for annual and interim reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact this standard will have on our consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230). The ASU was issued intending to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the Consolidated Statement of Cash Flows by providing guidance on eight specific cash flow issues. We prospectively adopted the standard on January 1, 2018. The adoption of this standard did not have a material impact on our consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230), guidance that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. We prospectively adopted the standard on January 1, 2018. The adoption of this standard did not have a material impact on our consolidated Statement of Cash Flows. In May 2017, the FASB issued ASU 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.” ASU 2017-09 provides clarity on which changes to the terms or conditions of share-based payment awards require entities to apply the modification accounting provisions required in Topic 718. We prospectively adopted the standard on January 1, 2018. The adoption of this standard did not have a material impact on our consolidated financial statements. The Company’s management has reviewed and considered all other recent accounting pronouncements and believe there are none that could potentially have a material impact on the Company’s consolidated financial condition, results of operations, or disclosures |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Summary of Significant Accounting Policies | |
Balances of contract receivables and liabilities | Contract Balances Net Receivables Contract Liabilities, Current Contract Liabilities, Long-Term Opening, January 1, 2018 $ 11,064,720 $ 31,668 $ 68,631 Closing, March 31, 2018 11,766,829 32,136 61,985 Increase/(decrease) 702,109 468 (6,646) |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Inventories | |
Schedule of inventories | March 31, December 31, 2018 2017 Finished goods $ 6,151,713 $ 5,489,360 Work in process 464,392 470,187 Raw materials 1,436,825 1,356,395 Inventories $ 8,052,930 $ 7,315,942 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Property and Equipment | |
Schedule of property and equipment | March 31, December 31, 2018 2017 Furniture and equipment $ 1,708,519 $ 1,934,669 Leasehold improvements 1,127,430 711,319 Processing equipment 2,010,061 1,839,800 Less: accumulated depreciation and amortization (2,468,687) (2,288,749) Property and equipment, net $ 2,377,323 $ 2,197,039 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Intangible Assets | |
Schedule of intangible assets | March 31, December 31, 2018 2017 License agreements $ 1,007,566 $ 1,007,566 Less: accumulated amortization (547,202) (485,585) License agreements, net $ 460,364 $ 521,981 Patents 645,749 459,903 Less: accumulated amortization (47,767) (44,892) Patents, net $ 597,982 $ 415,011 Intangible assets, net $ 1,058,346 $ 936,992 |
Accounts Payable and Accrued 21
Accounts Payable and Accrued Expenses (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Accounts Payable and Accrued Expenses | |
Schedule of accounts payable and accrued expenses | March 31, December 31, 2018 2017 Accounts payable $ 3,297,419 $ 3,237,962 Accrued expenses 2,124,507 1,770,956 Accrued compensation 3,288,757 3,943,143 Accounts Payable and Accrued Expenses $ 8,710,683 $ 8,952,061 |
Term Loan Agreements and Long22
Term Loan Agreements and Long Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Term Loan Agreements and Long Term Debt | |
Schedule of Term Loan Agreements and Long Term Debt | March 31, December 31, 2018 2017 Term Loan Agreement with MidCap Financial Trust (“MidCap”) for a total of $21,000,000, net of $493,437 of unamortized deferred financing fees at March 31, 2018, and $554,100 at December 31, 2017. Interest is payable monthly at 8.0% per annum plus the greater of LIBOR or 0.5% which as of March 31, 2018 resulted in a 9.66% rate. $ 20,506,563 $ 20,445,900 Revolving Loan Agreement with MidCap for up to $10,000,000 with borrowings based upon eligible accounts receivable and inventory. Interest is payable monthly at 4.5% per annum plus the greater of LIBOR or 0.5% which as of March 31, 2018 resulted in a 6.16% rate. 3,983,189 4,000,000 Equipment Lease Agreement with Cisco Capital for a total lease amount of $58,875 which has a 36 month term and requires no lease payments for the first three months of the lease and 33 equal payments of principal and interest until the end of the term. Interest on the lease is payable monthly at 3.5% per annum. 35,147 36,930 Equipment Lease Agreement with Raymond Leasing Corporation for a total lease amount of $29,998 which has a 48 month term with equal payments for principal and interest until the end of the term. Interest on the lease is payable monthly at 6.7% per annum. 29,476 29,998 Equipment Lease Agreement with B&B Office Systems for a total lease amount of $31,961 which has a 60 month term with equal payments for principal and interest until the end of the term. Interest on the lease is payable monthly at 8.5% per annum. 31,099 31,961 Total 24,585,474 24,544,789 Less current revolving loan (3,983,189) (4,000,000) Less current maturities of long term debt (2,841,378) (735,017) Long-term portion $ 17,760,907 $ 19,809,772 |
Schedule of Maturities of Long Term Debt | Year Ending December 31, Amount 2018 (nine months remaining) $ 731,850 2019 8,427,916 2020 8,413,817 2021 3,514,892 2022 7,247 21,095,722 Less unamortized debt issuance costs (493,437) TOTAL $ 20,602,285 |
Stock Incentive Plan (Tables)
Stock Incentive Plan (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Stock Incentive Plan | |
Schedule of weighted-average assumptions for options granted | Three months ended March 31, 2018 2017 Expected term (in years) 6.22 6.16 Expected volatility 49.65 % 50.72 % Risk free rate 2.39 % 2.14 % Expected dividends — % — % |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies | |
Schedule of estimated future minimum rental payments | Year Ending December 31, Amount 2018 (nine months remaining) 343,447 2019 364,362 2020 165,116 2021 86,638 TOTAL $ 959,563 |
Summary of Significant Accoun25
Summary of Significant Accounting Policies (Details) - shares | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Dilutive instruments outstanding | 0 | 0 |
Weighted Average Common Shares outstanding - basic and diluted | 34,521,122 | 33,026,433 |
Minimum | ||
Age of doubtful accounts | 30 days | |
Maximum | ||
Age of doubtful accounts | 60 days |
Summary of Significant Accoun26
Summary of Significant Accounting Policies - Contract Balances (Details) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Summary of Significant Accounting Policies | |
Net receivables, opening balance | $ 11,064,720 |
Net receivables, closing balance | 11,766,829 |
Increase/(decrease) | 702,109 |
Contract Liabilities, Current, opening balance | 31,668 |
Contract Liabilities, Current, closing balance | 32,136 |
Increase/(decrease) | 468 |
Contract Liabilities, Long-Term, opening balance | 68,631 |
Contract Liabilities, Long-Term, closing balance | 61,985 |
Increase/(decrease) | $ (6,646) |
Inventories (Details)
Inventories (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Inventories | ||
Finished goods | $ 6,151,713 | $ 5,489,360 |
Work in process | 464,392 | 470,187 |
Raw materials | 1,436,825 | 1,356,395 |
Inventories | 8,052,930 | 7,315,942 |
Inventory valuation reserves | $ 843,000 | $ 812,000 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Property and equipment | ||
Less: accumulated depreciation and amortization | $ (2,468,687) | $ (2,288,749) |
Property and equipment, net | 2,377,323 | 2,197,039 |
Furniture and Equipment | ||
Property and equipment | ||
Property and equipment, gross | 1,708,519 | 1,934,669 |
Leasehold Improvements | ||
Property and equipment | ||
Property and equipment, gross | 1,127,430 | 711,319 |
Processing Equipment | ||
Property and equipment | ||
Property and equipment, gross | $ 2,010,061 | $ 1,839,800 |
Intangible Assets - Components
Intangible Assets - Components of Intangible Assets (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Intangible assets consist of: | |||
Intangible assets, net | $ 1,058,346 | $ 936,992 | |
Patent costs | 22,000 | ||
Amortization of Intangible Assets | 19,600 | $ 23,189 | |
Future amortization of license and patent agreements | |||
Remainder of this year | 63,000 | ||
2,019 | 84,000 | ||
2,020 | 84,000 | ||
2,021 | 84,000 | ||
2,022 | 84,000 | ||
2,023 | 84,000 | ||
2,024 | 84,000 | ||
After 2,024 | 76,000 | ||
License Agreements | |||
Intangible assets consist of: | |||
Finite-lived intangible assets, gross | 1,007,566 | 1,007,566 | |
Less: accumulated amortization | (547,202) | (485,585) | |
Intangible assets, net | $ 460,364 | 521,981 | |
License Agreements | Minimum | |||
Intangible assets consist of: | |||
Amortization period of intangible assets | 17 years | ||
License Agreements | Maximum | |||
Intangible assets consist of: | |||
Amortization period of intangible assets | 20 years | ||
Patents | |||
Intangible assets consist of: | |||
Finite-lived intangible assets, gross | $ 645,749 | 459,903 | |
Less: accumulated amortization | (47,767) | (44,892) | |
Intangible assets, net | $ 597,982 | $ 415,011 | |
Amortization period of intangible assets | 3 years | ||
Pending and issued license costs | $ 624,000 | ||
Pending and issued license costs amortized over period of 20 years | $ 102,000 | ||
Patents | Maximum | |||
Intangible assets consist of: | |||
Amortization period of intangible assets | 20 years |
Intangible Assets - License Agr
Intangible Assets - License Agreements (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Sales and Marketing Expense | ||
Intangible assets | ||
Royalty fees included in sales and marketing expense | $ 355,000 | $ 238,000 |
License Agreements | ||
Intangible assets | ||
License agreements extended period | 60 days | |
Minimum royalty of agreements | $ 12,500 | |
Milestone fee upon receiving a Phase II Small Business Innovation Research | 15,000 | |
Milestone fee upon FDA approval | 2,000 | |
Milestone fee upon first commercial use of certain licensed technology | 25,000 | |
Milestone fee upon first use to manufacture products that utilize certain technology not currently incorporated into AxoGen products | $ 10,000 | |
License Agreements | Minimum | ||
Intangible assets | ||
Royalty fees range under the license agreements | 1.00% | |
License Agreements | Maximum | ||
Intangible assets | ||
Royalty fees range under the license agreements | 3.00% | |
Royalty stack cap for royalties paid to more than one licensor for sales of the same product | 3.75% |
Accounts Payable and Accrued 31
Accounts Payable and Accrued Expenses (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Accounts Payable and Accrued Liabilities | ||
Accounts payable | $ 3,297,419 | $ 3,237,962 |
Accrued expenses | 2,124,507 | 1,770,956 |
Accrued compensation | 3,288,757 | 3,943,143 |
Accounts Payable and Accrued Expenses | $ 8,710,683 | $ 8,952,061 |
Term Loan Agreements and Long32
Term Loan Agreements and Long Term Debt - Schedule of Debt (Details) - USD ($) | Mar. 31, 2018 | Dec. 31, 2017 |
Note Payable | ||
Long term debt | $ 24,585,474 | $ 24,544,789 |
Less current revolving loan | (3,983,189) | (4,000,000) |
Less current maturities of long term debt | (2,841,378) | (735,017) |
Long-term portion | 17,760,907 | 19,809,772 |
MidCap Term Loan Agreement | ||
Note Payable | ||
Long term debt | 20,506,563 | 20,445,900 |
MidCap Revolving Loan Agreement | ||
Note Payable | ||
Long term debt | 3,983,189 | 4,000,000 |
Equipment Lease Agreement | Cisco Capital | ||
Note Payable | ||
Long term debt | 35,147 | 36,930 |
Equipment Lease Agreement | Raymond Leasing Corporation | ||
Note Payable | ||
Long term debt | 29,476 | 29,998 |
Equipment Lease Agreement | B&B Office Systems | ||
Note Payable | ||
Long term debt | $ 31,099 | $ 31,961 |
Term Loan Agreements and Long33
Term Loan Agreements and Long Term Debt - Schedule of Debt - Terms (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Dec. 31, 2017 | |
MidCap Term Loan Agreement | ||
Note Payable | ||
Face amount | $ 21,000,000 | $ 21,000,000 |
Unamortized deferred financing fees | $ 493,437 | $ 554,100 |
Interest payable, percent | 8.00% | 8.00% |
Interest rate spread | 0.50% | 0.50% |
Effective interest rate (as a percent) | 9.66% | 9.66% |
MidCap Revolving Loan Agreement | ||
Note Payable | ||
Interest payable, percent | 4.50% | 4.50% |
Interest rate spread | 0.50% | 0.50% |
Effective interest rate (as a percent) | 6.16% | 6.16% |
Maximum line of credit amount | $ 10,000,000 | $ 10,000,000 |
Equipment Lease Agreement | ||
Note Payable | ||
Face amount | $ 58,875 | $ 58,875 |
Interest payable, percent | 3.50% | 3.50% |
Term of debt | 36 months | 36 months |
No payments required, term | 3 months | 3 months |
Interest and principal payments, term | 33 months | 33 months |
Equipment Lease Agreement | Raymond Leasing Corporation | ||
Note Payable | ||
Interest payable, percent | 6.70% | 6.70% |
Term of debt | 48 months | 48 months |
Equipment Lease Agreement | B&B Office Systems | ||
Note Payable | ||
Interest payable, percent | 8.50% | 8.50% |
Term of debt | 60 months | 60 months |
Term Loan Agreements and Long34
Term Loan Agreements and Long Term Debt - MidCap Term Loan and Revolving Loan Agreement - Narrative (Details) $ in Millions | Oct. 25, 2016USD ($)item | Mar. 31, 2018USD ($) |
MidCap Term Loan Agreement | ||
Debt Instrument [Line Items] | ||
Number of months requiring principal and interest payments | item | 30 | |
Annual agency fee, percent of aggregate principal amount | 0.25% | |
Prepayment fee percent, year one | 3.00% | |
Prepayment fee percent, year two | 2.00% | |
Prepayment fee percent, thereafter | 1.00% | |
Exit fee percent | 5.00% | |
Amount outstanding | $ 21 | |
MidCap Revolving Loan Agreement | ||
Debt Instrument [Line Items] | ||
Percent of Borrowing Base which accrues interest | 30.00% | |
Possible increase to loan agreement at Company's request | $ 15 | |
Borrowing amount available | $ 7.9 | |
Collateral management fee, percent | 0.50% | |
Unused line fee, percent | 0.50% |
Term Loan Agreements and Long35
Term Loan Agreements and Long Term Debt - Schedule of Annual Maturities (Details) | Mar. 31, 2018USD ($) |
Minimum annual payment amounts | |
2,018 | $ 731,850 |
2,019 | 8,427,916 |
2,020 | 8,413,817 |
2,021 | 3,514,892 |
2,022 | 7,247 |
Total, before debt issuance costs | 21,095,722 |
Less unamortized debt issuance costs | (493,437) |
Total | $ 20,602,285 |
Stock Incentive Plan - Narrativ
Stock Incentive Plan - Narrative (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | May 24, 2017 | |
Stock Option disclosures | |||
Weighted average grant-date fair value of options granted (in dollars per share) | $ 14.09 | $ 5.28 | |
Granted (in shares) | 53,200 | ||
Stock Options | |||
Stock Option disclosures | |||
Total future stock compensation expense related to nonvested awards | $ 17,400,000 | ||
Directors and Officers Stock Options [Member] | Per quarter, over one year | |||
Stock Option disclosures | |||
Vesting percentage | 25.00% | ||
Vesting period | 1 year | ||
AxoGen 2010 Stock Incentive Plan [Member] | |||
Stock Option disclosures | |||
Shares authorized for issuance | 7,700,000 | ||
AxoGen 2010 Stock Incentive Plan [Member] | Minimum | |||
Stock Option disclosures | |||
Vesting period | 7 years | ||
AxoGen 2010 Stock Incentive Plan [Member] | Maximum | |||
Stock Option disclosures | |||
Vesting period | 10 years | ||
AxoGen 2010 Stock Incentive Plan [Member] | Stock Options | |||
Stock Option disclosures | |||
Vesting period | 4 years | ||
Share-based compensation expense | $ 1,700,000 | $ 849,000 | |
AxoGen 2010 Stock Incentive Plan [Member] | Stock Options | One Year After Grant Date | |||
Stock Option disclosures | |||
Vesting percentage | 25.00% | ||
Vesting period | 1 year | ||
AxoGen 2010 Stock Incentive Plan [Member] | Stock Options | Every Six Months | |||
Stock Option disclosures | |||
Vesting percentage | 12.50% | ||
Vesting period | 3 years | ||
AxoGen 2010 Stock Incentive Plan [Member] | Consultant Stock Options [Member] | Minimum | |||
Stock Option disclosures | |||
Vesting period | 3 years | ||
AxoGen 2010 Stock Incentive Plan [Member] | Consultant Stock Options [Member] | Maximum | |||
Stock Option disclosures | |||
Vesting period | 4 years | ||
AxoGen 2017 Employee Stock Purchase Plan [Member] | |||
Stock Option disclosures | |||
Shares authorized for issuance | 600,000 | ||
AxoGen 2017 Employee Stock Purchase Plan [Member] | Stock Options | |||
Stock Option disclosures | |||
Vesting period | 4 years | ||
AxoGen 2017 Employee Stock Purchase Plan [Member] | Stock Options | Every Six Months | |||
Stock Option disclosures | |||
Vesting percentage | 12.50% | ||
Vesting period | 2 years | ||
AxoGen 2017 Employee Stock Purchase Plan [Member] | Stock Options | Two Years After Grant Date | |||
Stock Option disclosures | |||
Vesting percentage | 50.00% | ||
Vesting period | 2 years |
Stock Incentive Plan - Summary
Stock Incentive Plan - Summary of Weighted-Average Assumptions Used (Details) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Weighted-average assumptions | ||
Expected term | 6 years 2 months 19 days | 6 years 1 month 28 days |
Expected volatility (as a percent) | 49.65% | 50.72% |
Risk free rate (as a percent) | 2.39% | 2.14% |
Public Offering of Common Stock
Public Offering of Common Stock (Details) - shares | Mar. 31, 2018 | Dec. 31, 2017 |
Public Offering of Common Stock | ||
Shares of common stock sold | 34,669,276 | 34,350,329 |
Commitments and Contingencies -
Commitments and Contingencies - Estimated Future Minimum Rental Payments (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Estimated future minimum rental payments on the leases | ||
2018 (three months ended) | $ 343,447 | |
2,019 | 364,362 | |
2,020 | 165,116 | |
2,021 | 86,638 | |
TOTAL | 959,563 | |
Total rent expense | $ 115,000 | $ 110,000 |
Commitments and Contingencies40
Commitments and Contingencies - Service Agreements (Details) - USD ($) | Aug. 06, 2015 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2011 |
Commitments and Contingencies | ||||
Term of agreement | 5 years | |||
Commitment extension period | 18 months | |||
Amount required to pay for execution of the agreement | $ 151,318 | |||
License fees paid | $ 419,000 | $ 317,000 |
Commitments and Contingencies41
Commitments and Contingencies - Concentrations (Details) | 3 Months Ended |
Mar. 31, 2018product | |
Vendor | |
Concentrations | |
Number of products from which revenue is derived | 4 |
Processor | |
Concentrations | |
Initial term of contract | 5 years |
Notice period for termination | 18 months |
Period within which new facility can be found and made operational | 6 months |
Retirement Plan (Details)
Retirement Plan (Details) | 3 Months Ended | |
Mar. 31, 2018USD ($)item | Mar. 31, 2017USD ($) | |
Defined Benefit Plan | ||
Age limit for eligibility to participate in the plan | item | 18 | |
AxoGen 401K Plan | ||
Defined Benefit Plan | ||
Employer contributions | $ | $ 139,000 | $ 109,000 |
Axogen 401K Plan, employer's contribution on first 3% of employee contribution | ||
Defined Benefit Plan | ||
Matching contributions | 3.00% | |
Employee contribution matched, percent | 3.00% | |
Axogen 401K Plan, employer's contribution on next 2% of employee contribution | ||
Defined Benefit Plan | ||
Matching contributions | 1.00% | |
Employee contribution matched, percent | 2.00% |