Organization and Basis of Presentation

ConforMIS, Inc. and subsidiaries (the “Company”) is a medical technology company that uses its proprietary iFit Image-to-Implant technology platform to develop, manufacture and sell joint replacement implants that are individually sized and shaped, which the Company refers to as customized, to fit each patient’s unique anatomy. The Company’s proprietary iFit® technology platform is potentially applicable to all major joints. The Company offers a broad line of customized knee implants designed to restore the natural shape of a patient’s knee.

The Company was incorporated in Delaware and commenced operations in 2004. The Company introduced its iUni and iDuo in 2007, its iTotal CR in 2011 and its iTotal PS on a limited basis in 2015. The Company has its corporate offices in Bedford, Massachusetts.

Liquidity and operations

Since the Company’s inception in June 2004, it has financed its operations through private placements of preferred stock, its initial public offering in July 2015, bank debt and convertible debt financings, equipment purchase loans, and, beginning in 2007, product revenue. The Company’s product revenue has continued to grow from year-to-year; however, it has not yet attained profitability and continues to incur operating losses. At December 31, 2015, the Company had an accumulated deficit of $325.3 million.

In November 2014, the Company entered into a senior secured $25 million loan and security agreement with Silicon Valley Bank and Oxford Finance, LLC (the “2014 Secured Loan Agreement”), consisting of a revolving line of credit, issued by Silicon Valley Bank (the “Revolving Line”) of up to $5 million and commitments for two term loans issued jointly by Silicon Valley Bank and Oxford Finance, LLC (the “SVB/Oxford Term Loans”) of $10 million each. In November 2014, in connection with the Company’s entry into the 2014 Secured Loan Agreement, the Company drew down the first $10 million term loan (the “SVB/Oxford Term Loan A”). Under the 2014 Secured Loan Agreement, the Company could draw down a second $10 million term loan on or prior to November 7, 2015 upon meeting certain conditions. In September 2015, the Company voluntarily prepaid the SVB/Oxford Term Loan A in full and terminated the Company’s right to draw down the SVB/Oxford Term Loans and any security interest in favor of Oxford Finance, LLC. In December 2015, the Company also terminated the Revolving Line. For further information regarding this facility, see “Note K—Debt and Notes Payable—2014 Secured Loan Agreement” below. The Company expects to incur substantial expenditures in the foreseeable future in connection with the continued expansion of its business.

The Company’s principal sources of funds are revenue generated from the sale of its products and the net proceeds from the initial public offering, detailed below.

At December 31, 2015, the Company had cash and cash equivalents and investments of $117.2 million and $0.6 million in restricted cash allocated to lease deposits. At December 31, 2014, the Company had cash and cash equivalents and investments of $37.9 million and $4.4 million in restricted cash allocated to lease deposits and funding for its Asia strategy. See “Note L—Related Party Transactions” for a description of the Asia strategy.

On July 7, 2015, the Company closed its initial public offering (the “IPO”), of its common stock and issued and sold 10,350,000 shares of its common stock, including 1,350,000 shares of common stock issued upon the exercise in full by the underwriters of their over-allotment option, at a public offering price of $15.00 per share, for aggregate offering proceeds of approximately $155 million. The Company received aggregate net proceeds from the offering of approximately $140 million after deducting underwriting discounts and commissions and offering expenses payable by the Company. The Company’s common stock began trading on the NASDAQ Global Select Market on July 1, 2015.

On July 7, 2015, the Company filed a restated certificate of incorporation in connection with its IPO, pursuant to which the Company is authorized to issue 200,000,000 shares of common stock and 5,000,000 shares of preferred stock. In addition, each of the following occurred in connection with the closing of the IPO on July 7, 2015:


•	the issuance of the 10,350,000 shares of the Company’s common stock;


•	the automatic conversion of all outstanding shares of the Company’s preferred stock into 25,527,505 shares of common stock;


•	the issuance of 380,902 shares of the Company’s common stock upon the exercise or exchange of warrants to purchase the Company’s common stock, which consisted of warrants to purchase:


•	4,166 shares of the Company’s common stock;


•	252,429 shares of the Company’s Series D preferred stock;


•	300,059 shares of the Company’s Series E-1 preferred stock; and


•	200,996 shares of the Company’s Series E-2 preferred stock;


•	the issuance of a warrant to purchase 142,857 shares of the Company’s common stock at an exercise price of $7.00 per share in replacement of a warrant to purchase 285,714 shares of the Company’s Series C preferred stock at an exercise price of $3.50 per share;


•	the conversion of a warrant to purchase 160,000 shares of the Company’s Series D preferred stock at an exercise price of $6.00 per share into a warrant to purchase 80,000 shares of common stock at an exercise price of $12.00 per share; and


•	the expiration of warrants to purchase 482,964 shares of the Company common stock, which consisted of warrants to purchase:


•	64,217 shares of the Company’s Series D preferred stock;


•	215,807 shares of the Company’s Series E-1 preferred stock; and


•	202,940 shares of the Company’s Series E-2 preferred stock.

In July 2015, upon the closing of the Company’s IPO, pursuant to the conditions of the letter agreement in connection with the Company’s Asia strategy, $3.5 million of the proceeds received in connection with the sale of the Company’s Series E-1 and E-2 preferred stock was reclassified from restricted cash to cash and cash equivalents. See “Note L—Related Party Transactions”.

At December 31, 2015, based on its current operating plan, the Company expects that its existing cash and cash equivalents as of December 31, 2015 and anticipated revenue from operations, including from projected sales of its products, will enable it to fund operating expenses and capital expenditure requirements and pay its debt service as it becomes due for at least the next 12 months.

In the event the Company’s existing cash and available financing is not sufficient to fund its operations, the Company may need to engage in equity or debt financings to secure additional funds. The Company may not be able to obtain additional financing on terms favorable to the Company, or at all.

Basis of presentation and use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States 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 revenue and expenses during the reporting periods. The most significant estimates used in these consolidated financial statements include the valuation of accounts receivable, inventory reserves, intangible valuation, equity instruments, impairment assessments, income tax reserves and related allowances, and the lives of property and equipment. Actual results may differ from those estimates.