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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from             to             

 

Commission File Number 000-21326

 

Anika Therapeutics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware04-3145961
(State or Other Jurisdiction of(I.R.S. Employer Identification No.)
Incorporation or Organization) 
  
32 Wiggins Avenue, Bedford, Massachusetts01730
(Address of Principal Executive Offices)(Zip Code)

 

(781) 457-9000

(Registrant’s Telephone Number, Including Area Code)

 

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share

ANIK

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐Accelerated filerNon-accelerated filer ☐Smaller reporting
company
Emerging growth
company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

As of October 26, 2020, there were 14,214,516 outstanding shares of Common Stock, par value $0.01 per share.

 

 

 

 

ANIKA THERAPEUTICS, INC.

TABLE OF CONTENTS

 

 

Page

Part I

Financial Information

 

Item 1.

Financial Statements (unaudited):

3

 

Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

3

 

Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2020 and 2019

4

 

Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2020 and 2019

5

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019

6

 

Notes to Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

Part II

Other Information

 

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 6.

Exhibits

39

Signatures

 

40

 

 

 

References in this Quarterly Report on Form 10-Q to “we,” “us,” “our” and “our company,” and other similar references refer to Anika Therapeutics, Inc. and its subsidiaries unless the context otherwise indicates.

 

ANIKA, ARTHROSURFACE, ANIKA THERAPEUTICS, CINGAL, HYAFF, MONOVISC, ORTHOVISC, PARCUS MEDICAL, TACTOSET, and WRISTMOTION are our registered trademarks. This Quarterly Report on Form 10-Q also contains additional registered marks, trademarks, and trade names, including ones that are the property of other companies and licensed to us.

 

 

 

 

 

 

 

PART I: FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS
 

Anika Therapeutics, Inc. and Subsidiaries

 

Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

 

  

September 30,

  

December 31,

 

ASSETS

 

2020

  

2019

 

Current assets:

        

Cash and cash equivalents

 $104,216  $157,463 

Investments

  20,542   27,480 

Accounts receivable, net of reserves of $1,055 and $962 at September 30, 2020 and December 31, 2019, respectively

  23,009   23,079 

Inventories, net

  47,882   21,995 

Prepaid expenses and other current assets

  6,226   4,289 

Total current assets

  201,875   234,306 

Property and equipment, net

  51,629   50,783 

Right-of-use assets

  22,898   22,864 

Other long-term assets

  13,226   7,478 

Intangible assets, net

  94,291   7,585 

Goodwill

  32,419   7,694 

Total assets

 $416,338  $330,710 
         

LIABILITIES AND STOCKHOLDERS’ EQUITY

        

Current liabilities:

        

Accounts payable

 $6,800  $3,832 

Accrued expenses and other current liabilities

  24,339   12,445 

Total current liabilities

  31,139   16,277 

Other long-term liabilities

  987   357 

Contingent consideration

  41,045   - 

Long-term debt

  25,000   - 

Deferred tax liability

  12,584   4,331 

Lease liabilities

  21,132   21,367 

Commitments and contingencies (Note 10)

          

Stockholders’ equity:

        

Common stock, $0.01 par value; 90,000 shares authorized, 14,208 and 14,308 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

  142   143 

Additional paid-in-capital

  52,505   48,707 

Accumulated other comprehensive loss

  (5,296)  (5,898)

Retained earnings

  237,100   245,426 

Total stockholders’ equity

  284,451   288,378 

Total liabilities and stockholders’ equity

 $416,338  $330,710 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

3

 

 

Anika Therapeutics, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share data)

(unaudited)

 

  

For the Three Months Ended September 30,

  

For the Nine Months Ended September 30,

 
  

2020

  

2019

  

2020

  

2019

 

Product revenue

 $31,694  $29,615  $97,769  $84,745 

Licensing, milestone and contract revenue

  -   82   -   93 

Total revenue

  31,694   29,697   97,769   84,838 
                 

Operating expenses:

                

Cost of product revenue

  14,351   5,951   45,487   20,098 

Research & development

  5,217   4,158   15,799   12,581 

Selling, general & administrative

  15,903   7,539   44,884   22,713 

Goodwill impairment

  -   -   18,144   - 

Change in fair value of contingent consideration

  4,150   -   (16,176)  - 

Total operating expenses

  39,621   17,648   108,138   55,392 

Income (loss) from operations

  (7,927)  12,049   (10,369)  29,446 

Interest and other income (expense), net

  (228)  482   (118)  1,513 

Income (loss) before income taxes

  (8,155)  12,531   (10,487)  30,959 

Provision for (benefit from) income taxes

  (1,744)  3,331   (2,161)  7,817 

Net income (loss)

 $(6,411) $9,200  $(8,326) $23,142 
                 

Basic net income (loss) per share:

                

Net income (loss)

 $(0.45) $0.65  $(0.59) $1.65 

Basic weighted average common shares outstanding

  14,205   14,070   14,202   14,065 

Diluted net income (loss) per share:

                

Net income (loss)

 $(0.45) $0.64  $(0.59) $1.62 

Diluted weighted average common shares outstanding

  14,205   14,387   14,202   14,266 
                 

Net income (loss)

 $(6,411) $9,200  $(8,326) $23,142 

Foreign currency translation adjustment

  522   (622)  602   (792)

Comprehensive income (loss)

 $(5,889) $8,578  $(7,724) $22,350 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

4

 

 

Anika Therapeutics, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Equity

(in thousands)

(unaudited)

 

  

For the Nine Months Ended September 30, 2020

 
                  

Accumulated

     
  

Common Stock

      

Other

  

Total

 
  

Number of

  

$.01 Par

  

Additional Paid

  

Retained

  

Comprehensive

  

Stockholders'

 
  

Shares

  

Value

  

in Capital

  

Earnings

  

Loss

  

Equity

 

Balance, January 1, 2020

  14,308  $143  $48,707  $245,426  $(5,898) $288,378 

Vesting of restricted stock units

  42   -   -   -   -   - 

Forfeiture of restricted stock awards

  (9)  -   -   -   -   - 

Stock-based compensation expense

  -   -   (207)  -   -   (207)

Retirement of common stock for minimum tax withholdings

  (4)  -   (141)  -   -   (141)

Repurchase of common stock

  (139)  (1)  1   -   -   - 

Net income

  -   -   -   5,793   -   5,793 

Other comprehensive loss

  -   -   -   -   (129)  (129)

Balance, March 31, 2020

  14,198  $142  $48,360  $251,219  $(6,027) $293,694 

Issuance of common stock for equity awards

  2   -   68   -   -   68 

Vesting of restricted stock units

  7   -   -   -   -   - 

Stock-based compensation expense

  -   -   2,240   -   -   2,240 

Retirement of common stock for minimum tax withholdings

  (3)  -   (59)  -   -   (59)

Net loss

  -   -   -   (7,708)  -   (7,708)

Other comprehensive income

  -   -   -   -   209   209 

Balance, June 30, 2020

  14,204  $142  $50,609  $243,511  $(5,818) $288,444 

Vesting of restricted stock units

  4   -   -   -   -   - 

Stock-based compensation expense

  -   -   1,920   -   -   1,920 

Retirement of common stock for minimum tax withholdings

  -   -   (24)  -   -   (24)

Net loss

  -   -   -   (6,411)  -   (6,411)

Other comprehensive income

  -   -   -   -   522   522 

Balance, September 30, 2020

  14,208  $142  $52,505  $237,100  $(5,296) $284,451 

 

 

   

For the Nine Months Ended September 30, 2019

 
                                   

Accumulated

         
   

Common Stock

           

Other

   

Total

 
   

Number of

   

$.01 Par

   

Additional Paid

   

Retained

   

Comprehensive

   

Stockholders'

 
   

Shares

   

Value

   

in Capital

   

Earnings

   

Loss

   

Equity

 

Balance, January 1, 2019

    14,210     $ 142     $ 50,763     $ 218,233     $ (5,526 )   $ 263,612  

Issuance of common stock for equity awards

    7       -       5       -       -       5  

Retirement of common stock for minimum tax withholdings

    (3 )     -       (124 )     -       -       (124 )

Stock-based compensation expense

    -       -       1,386       -       -       1,386  

Net income

    -       -       -       4,507       -       4,507  

Other comprehensive loss

    -       -       -       -       (315 )     (315 )

Balance, March 31, 2019

    14,214     $ 142     $ 52,030     $ 222,740     $ (5,841 )   $ 269,071  

Issuance of common stock for equity awards

    30       1       851       -       -       852  

Forfeiture of restricted stock

    (7 )     -       -       -       -       -  

Stock-based compensation expense

    -       -       1,443       -       -       1,443  

Repurchase of common stock

    (452 )     (5 )     (29,995 )     -       -       (30,000 )

Net income

    -       -       -       9,435       -       9,435  

Other comprehensive income

    -       -       -       -       145       145  

Balance, June 30, 2019

    13,785     $ 138     $ 24,329     $ 232,175     $ (5,696 )   $ 250,946  

Issuance of common stock for equity awards

    488       5       20,962       -       -       20,967  

Forfeiture of restricted stock

    (2 )     -       -       -       -       -  

Stock-based compensation expense

    -       -       1,311       -       -       1,311  

Retirement of common stock for minimum tax withholding

    (2 )     -       (120 )     -       -       (120 )

Net income

    -       -       -       9,200       -       9,200  

Other comprehensive loss

    -       -       -       -       (622 )     (622 )

Balance, September 30, 2019

    14,269     $ 143     $ 46,482     $ 241,375     $ (6,318 )   $ 281,682  

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

5

 

 

Anika Therapeutics, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

  

Nine Months Ended September 30,

 
  

2020

  

2019

 

Cash flows from operating activities:

        

Net income (loss)

 $(8,326) $23,142 

Adjustments to reconcile net income to net cash provided by operating activities:

        

Depreciation and amortization

  9,963   4,459 

Payment of interest expense on finance leases

  (22)  - 

Non-cash operating lease cost

  1,136   880 

Goodwill impairment

  18,144   - 

Change in fair value of contingent consideration

  (16,176)  - 

Loss on disposal of fixed assets

  287   927 

Loss on impairment of intangible asset

  1,025   303 

Stock-based compensation expense

  3,953   4,140 

Deferred income taxes

  (3,302)  941 

Provision (recovery) for doubtful accounts

  (482)  (450)

Provision for inventory

  4,205   1,062 

Amortization of acquisition-related inventory step-up

  7,396   - 

Accretion of amortized cost of investments

  3   (1,075)

Changes in operating assets and liabilities:

        

Accounts receivable

  7,811   (2,751)

Inventories

  (8,840)  (6,600)

Prepaid expenses, other current and long-term assets

  (989)  440 

Accounts payable

  (1,904)  (335)

Operating lease liabilities

  (1,286)  (796)

Accrued expenses, other current and long-term liabilities

  (2,340)  (681)

Income taxes

  222   377 

Net cash provided by operating activities

  10,478   23,983 
         

Cash flows from investing activities:

        

Acquisition of Parcus Medical and Arthrosurface, net of cash acquired

  (93,859)  - 

Proceeds from maturities of investments

  27,000   87,594 

Purchases of investments

  (20,035)  (86,368)

Purchases of property and equipment

  (1,179)  (2,559)

Net cash used in investing activities

  (88,073)  (1,333)
         

Cash flows from financing activities:

        

Payments made on finance leases

  (155)  - 

Repurchases of common stock

  -   (30,000)

Repayments of long term debt

  (25,351)  - 

Proceeds from long term debt

  50,000   - 

Cash paid for tax withheld on vested restricted stock awards

  (224)  (245)

Proceeds from exercises of equity awards

  68   21,825 

Net cash provided by (used in) financing activities

  24,338   (8,420)
         

Exchange rate impact on cash

  10   109 
         

(Decrease)/Increase in cash and cash equivalents

  (53,247)  14,339 

Cash and cash equivalents at beginning of period

  157,463   89,042 

Cash and cash equivalents at end of period

 $104,216  $103,381 

Supplemental disclosure of cash flow information:

        

Right-of-use assets obtained in exchange for operating lease liabilities as of January 1, 2019

 $-  $24,110 

Non-cash Investing Activities:

        

Purchases of property and equipment included in accounts payable and accrued expenses

 $44  $132 

Consideration for acquisitions included in accounts payable and accrued expenses

 $1,209  $- 

Acquisition-related contingent consideration

 $69,076  $- 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

6

 

ANIKA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share amounts or as otherwise noted)

(unaudited)

 

 

1.

Nature of Business

 

Anika Therapeutics, Inc. (“the Company”), is a global joint preservation company that creates and delivers meaningful advancements in early intervention orthopedic care, including in the areas of osteoarthritis pain management, regenerative solutions, soft tissue repair and bone preserving joint technologies.

 

In early 2020, the Company expanded its overall technology platform through its strategic acquisitions of Parcus Medical, LLC (“Parcus Medical”), a sports medicine implant and instrumentation solutions provider focused on surgical repair and reconstruction of ligaments and tendons, and Arthrosurface, Incorporated (“Arthrosurface”), a joint preservation technology company specializing in less invasive joint replacement solutions. These acquisitions broadened Anika's product portfolio into joint preservation and restoration, added high-growth revenue streams, increased its commercial capabilities, diversified its revenue base, and expanded its product pipeline and research and development expertise.

 

There continue to be uncertainties regarding the pandemic of the novel coronavirus (“COVID-19”), and the Company is closely monitoring the impact of COVID-19 on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, and business partners. The Company is unable to predict the impact that COVID-19 may have on its financial position and operations moving forward due to the numerous uncertainties. Any estimates made herein may change as new events occur and additional information is obtained, and actual results could differ materially from any estimates made herein under different assumptions or conditions. The Company will continue to assess the evolving impact of COVID-19.

 

The Company is subject to risks common to companies in the biotechnology and medical device industries including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, commercialization of existing and new products, and compliance with U.S. Food and Drug Administration (“FDA”) and foreign regulations and approval requirements, as well as the ability to grow the Company’s business through appropriate commercial strategies.

 

 

2.

Basis of Presentation

 

The accompanying unaudited consolidated financial statements and related notes have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in accordance with accounting principles generally accepted in the United States (“US GAAP”). The financial statements include the accounts of Anika Therapeutics, Inc. and its subsidiaries. Inter-company transactions and balances have been eliminated. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with US GAAP have been omitted pursuant to SEC rules and regulations relating to interim financial statements. The December 31, 2019 balances reported herein are derived from the audited consolidated financial statements. In the opinion of management, these unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the consolidated financial statements.

 

The accompanying unaudited consolidated financial statements and related notes should be read in conjunction with the Company’s annual financial statements filed with its Annual Report on Form 10-K for the year ended December 31, 2019. The results of operations for the three- and nine-month periods ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.

 

 

7

 

Segment Information

 

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is its President and Chief Executive Officer. Based on the criteria established by Accounting Standards Codification (“ASC”) 280, Segment Reporting, the Company has one operating and reportable segment.

 

Recent Accounting Adoptions

 

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2018-15, Intangibles Goodwill and Other Internal-Use Software (Subtopic 350-40), which amends ASU No. 2015-05, Customers Accounting for Fees in a Cloud Computing Agreement, to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The most significant change aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. Accordingly, the amendments in ASU 2018-15 require an entity in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as assets related to the service contract and which costs to expense. ASU 2018-15 is effective for fiscal years and interim periods beginning after December 15, 2019. The Company adopted ASU 2018-15 using the prospective method as of January 1, 2020. The adoption of this standard did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses. The standard, including subsequently issued amendments, requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU 2016-13 is effective for fiscal years and interim periods beginning after December 15, 2019 and requires the modified retrospective approach. The Company adopted ASU 2016-13 as of January 1, 2020. The adoption primarily impacted its trade receivables. The Company assesses its customer's ability to pay by conducting a credit review which includes an assessment of the customer's creditworthiness. The Company monitors the credit exposure through active review of customer balances. The Company's expected loss methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' account balances. Concentrations of credit risks are limited due to the large number of customers and their dispersion across a number of geographic areas. The historical credit losses have not been significant due to this dispersion and the financial stability of its customers. The Company considers credit losses immaterial to its business and, therefore, has not provided all the disclosures otherwise required by the standard.

 

 

3.

Business Combinations

 

Parcus Medical, LLC

 

On January 24, 2020, Anika Therapeutics, Inc. completed the acquisition of Parcus Medical pursuant to the terms of the Agreement and Plan of Merger, dated as of January 4, 2020 (the “Parcus Medical Merger Agreement”), by and among the Company, Parcus Medical, the Unitholder Representative, and Sunshine Merger Sub LLC, a Wisconsin limited liability company and a wholly-owned subsidiary of the Company. At the closing date, Parcus Medical became a wholly-owned subsidiary of the Company. Parcus Medical is a sports medicine implant and instrumentation solutions provider focused on surgical repair and reconstruction of soft tissue.

 

The acquisition of Parcus Medical has been accounted for as a business combination under ASC 805. Under ASC 805, assets acquired and liabilities assumed in a business combination must be recorded at their fair value as of the acquisition date. Recorded fair valuation of assets acquired and liabilities assumed related to the acquisition of Parcus Medical is preliminary and will be completed as soon as practicable, but no later than one year after the consummation of the transaction. Anika’s consolidated financial statements include results of operations for Parcus Medical from the January 24, 2020 acquisition date.

 

 

8

 

Consideration Transferred

 

Pursuant to the Parcus Medical Merger Agreement, the Company acquired all outstanding equity of Parcus Medical for estimated total purchase consideration of $75.1 million, which consists of:

 

Cash consideration

  $ 32,794  

Deferred consideration

    1,642  

Estimated fair value of contingent consideration

    40,700  

Estimated total purchase consideration

  $ 75,136  

 

Contingent consideration represents additional payments that the Company may be required to make in the future, which totals up to $60.0 million depending on the level of net sales generated in 2020 through 2022. The fair value of contingent consideration related to net sales was determined based on a Monte Carlo simulation model in an option pricing framework at the acquisition date, whereby a range of possible scenarios were simulated. Deferred consideration is related to certain purchase price holdbacks which will be resolved within one year of the acquisition date and were recorded in accounts payable as of September 30, 2020. The liability for contingent and deferred consideration is included in current and long-term liabilities on the consolidated balance sheets and will be remeasured at each reporting period until the contingency is resolved.

 

Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which the costs are incurred. The Company incurred approximately $1.9 million in transaction costs related to the Parcus Medical acquisition during the three-month period ending March 31, 2020. The transaction costs subsequent to March 31, 2020 were immaterial. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of operations.

 

Fair Value of Net Assets Acquired

 

The preliminary estimate of fair value required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable, however, actual results may differ from these estimates. The assessment of fair value is preliminary and is based on information that was available to management at the time the consolidated financial statements were prepared. Those estimates and assumptions are subject to change as the Company obtains additional information related to those estimates during the applicable measurement periods (up to one year from the acquisition date).

 

 

9

 

The preliminary allocation of purchase price to the identifiable assets acquired and liabilities assumed was based on preliminary estimates of fair value as of January 24, 2020, and is as follows:

 

Recognized identifiable assets acquired and liabilities assumed:

       

Cash and cash equivalents

  $ 196  

Accounts receivable

    2,029  

Inventories

    10,968  

Prepaid expenses and other current assets

    364  

Property and equipment, net

    1,099  

Right-of-use assets

    944  

Intangible assets

    44,000  

Accounts payable, accrued expenses and other current liabilities

    (2,763 )

Other long-term liabilities

    (594 )

Lease liabilities

    (735 )

Net assets acquired

    55,508  

Goodwill

    19,628  

Estimated total purchase consideration

  $ 75,136  

 

During the three-month period ended September 30, 2020, the Company completed the identification and confirmation of Parcus Medical inventory in the possession of its direct and distributor sales force, which resulted in an increase to the fair value of inventory of $1.9 million as of the January 24, 2020 acquisition date. As a result, the Company recorded this addition to inventory with a corresponding reduction to goodwill as a measurement period adjustment. The impact to the consolidated statement of operations for the three and nine months ended September 30, 2020 related to this adjustment is not material.

 

The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill and assigned to the newly established reporting unit for Parcus Medical and Arthrosurface. The goodwill is attributable to the workforce of the business and the value of future technologies expected to arise after the acquisition. Goodwill will not be amortized and is expected to be deductible for income tax purposes as the acquisition of the limited liability company is an asset purchase for tax purposes. The acquired intangible assets based on preliminary estimates of fair value as of January 24, 2020 are as follows:

 

Intangible assets acquired consist of:

       

Developed technology

  $ 41,100  

Trade name

    1,800  

Customer relationships

    1,100  

Total intangible assets

  $ 44,000  

 

The preliminary fair value of the developed technology intangible assets has been estimated using the multi-period excess earnings method, which is based on the principle that the value of an intangible asset is equal to the present value of the incremental after-tax cash flow attributable to the asset, after charges for other assets employed by the business. The preliminary fair value of the customer relationships has been estimated using the avoided costs/lost profits method, which is based on the principle that the value of an intangible asset is based on consideration of the total costs that would be avoided by having this asset in place. The preliminary fair value of the trade name has been estimated using the relief from royalty method of the income approach, which is based on the principle that the value of an intangible asset is equal to the present value of the after-tax royalty savings attributable to owning the intangible asset. Key estimates and assumptions used in these models are projected revenues and expenses related to the asset, estimated contributory asset charges, estimated costs to recreate the asset, and a risk-adjusted discount rate used to calculate the present value of the future expected cash inflows or cash outflows avoided from the asset.

 

The final fair value determination of the identified intangible assets may differ from this preliminary determination, and such differences could be material. Based on the preliminary valuation, approximately $44.0 million represents the fair value of identifiable intangible assets. Approximately $41.1 million represents the fair value of developed technology that will be amortized over a useful life of 15 years, $1.1 million represents the fair value of customer relationships that will be amortized over a useful life of 10 years, and $1.8 million represents the fair value of the trade name that will be amortized over a useful life of 5 years.

 

 

10

 

Revenue and Net Loss

 

The Company recorded revenue from Parcus Medical of $3.3 million and a net loss of $1.6 million in the three-month period ended September 30, 2020. The Company recorded revenue from Parcus Medical of $7.9 million and a net loss of $4.5 million in the period from January 24 through September 30, 2020.

 

Arthrosurface, Inc.

 

On February 3, 2020, Anika Therapeutics, Inc. completed the acquisition of Arthrosurface pursuant to the terms of the Agreement and Plan of Merger, dated as of January 4, 2020 (the “Arthrosurface Merger Agreement”), by and among the Company, Arthrosurface, the Stockholder Representative, and Button Merger Sub, a Delaware corporation and a wholly-owned subsidiary of the Company. At the closing date, Arthrosurface became a wholly-owned subsidiary of the Company. Arthrosurface is a joint preservation technology company specializing in less invasive, bone-preserving partial and total joint replacement solutions.

 

The acquisition of Arthrosurface has been accounted for as a business combination under ASC 805. Under ASC 805, assets acquired and liabilities assumed in a business combination must be recorded at their fair values as of the acquisition date. The final valuation of assets acquired and liabilities assumed related to the acquisition of Arthrosurface is expected to be completed as soon as practicable, but no later than one year after the consummation of the transaction. Anika’s consolidated financial statements include results of operations for Arthrosurface from the February 3, 2020 acquisition date.

 

Consideration Transferred

 

Pursuant to the Arthrosurface Merger Agreement, the Company acquired all outstanding equity of Arthrosurface for estimated total purchase consideration of $90.3 million, which consists of:

 

 

Cash consideration

  $ 61,909  

Estimated fair value of contingent consideration

    28,376  

Estimated total purchase consideration

  $ 90,285  

 

 

11

 

The Company may be required to make future payments of up to $40.0 million depending on the achievement of regulatory milestones and the level of net sales generated in 2020 through 2021. The fair value of contingent consideration related to regulatory milestones was determined through a scenario-based discounted cash flow analysis using scenario probabilities and regulatory milestone dates. The fair value of contingent consideration related to certain net sales levels from 2020 through 2021 was determined based upon a Monte Carlo simulation approach in an option pricing framework at acquisition date, whereby a range of possible scenarios were simulated. The liability for contingent consideration is included in current and long-term liabilities on the consolidated balance sheets and will be remeasured at each reporting period until the contingency is resolved.

 

Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which the costs are incurred. The Company incurred approximately $2.2 million in transaction costs related to the Arthrosurface acquisition during the three-month period ending March 31, 2020. The transaction costs subsequent to March 31, 2020 were immaterial. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of operations.

 

Fair Value of Net Assets Acquired

 

The preliminary estimate of fair value required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates. The assessment of fair value is preliminary and is based on information that was available to management at the time the consolidated financial statements were prepared. Those estimates and assumptions are subject to change as the Company obtains additional information related to those estimates during the applicable measurement periods (up to one year from the acquisition date).

 

The preliminary allocation of purchase price to the identifiable assets acquired and liabilities assumed was based on preliminary estimates of fair value as of February 3, 2020, as follows:

 

Recognized identifiable assets acquired and liabilities assumed:

       

Cash and cash equivalents

  $ 1,072  

Accounts receivable

    5,368  

Inventories

    15,652  

Prepaid expenses and other current assets

    535  

Property, plant and equipment

    3,394  

Other long-term assets

    7,548  

Intangible assets

    48,900  

Accounts payable, accrued expenses and other liabilities

    (3,929 )

Deferred tax liabilities

    (11,147 )

Net assets acquired

    67,393  

Goodwill

    22,892  

Estimated total purchase consideration

  $ 90,285  

 

The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill and assigned to the newly established reporting unit for Parcus Medical and Arthrosurface. The goodwill is attributable to the workforce of the business and the value of future technologies expected to arise after the acquisition. Goodwill will not be amortized and is not expected to be deductible for income tax purposes as the acquisition of the corporation is a stock purchase for tax purposes.

 

Intangible assets acquired consist of:        

Developed technology

  $ 37,000  

Trade name

    3,400  

Customer relationships

    7,900  

IPR&D

    600  

Total intangible assets

  $ 48,900  

 

The preliminary fair value of the developed technology intangible assets has been estimated using the multi-period excess earnings method, which is based on the principle that the value of an intangible asset is equal to the present value of the incremental after-tax cash flow attributable to the asset, after charges for other assets employed by the business. The preliminary fair value of the customer relationships has been estimated using the avoided costs/lost profits method, which is based on the principle that the value of an intangible asset is based on consideration of the total costs that would be avoided by having this asset in place. The preliminary fair value of the trade name has been estimated using the relief from royalty method of the income approach, which is based on the principle that the value of an intangible asset is equal to the present value of the after-tax royalty savings attributable to owning the intangible asset. Key estimates and assumptions used in these models are projected revenues and expenses related to the asset, estimated contributory asset charges, estimated costs to recreate the asset, and a risk-adjusted discount rate used to calculate the present value of the future expected cash inflows or cash outflows avoided from the asset.

 

The final fair value determination of the identified intangible assets may differ from this preliminary determination, and such differences could be material. Based on the preliminary valuation, approximately $48.9 million represents the fair value of identifiable intangible assets. Approximately $37.0 million represents the fair value of developed technology that will be amortized over an estimated useful life of 15 years, $7.9 million represents the fair value of customer relationships that will be amortized over an estimated useful life of 10 years, and $3.4 million represents the fair value of trade names that will be amortized over an estimated useful life of 5 years. A total of $0.6 million represents the fair value of in-process research and development (“IPR&D”) with an indefinite useful life that will be evaluated for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

 

 

12

 

Revenue and Net Loss

 

The Company recorded revenue from Arthrosurface of $7.2 million and a net loss of $1.6 million in the three-month period ended September 30, 2020. The Company recorded revenue from Arthrosurface of $15.6 million and a net loss of $8.4 million in the period from February 3 through September 30, 2020.

 

Pro forma Information

 

The Parcus Medical and Arthrosurface acquisitions were both completed in the first quarter of 2020. Both acquired companies have similar businesses with all of their products in the Orthopedic Joint Preservation and Restoration product family as discussed in Note 11, serving orthopedic surgeons, ambulatory surgical centers and hospitals. The Company has combined legacy Anika, Parcus Medical and Arthrosurface pro forma supplemental information as follows.

 

The unaudited pro forma information for the three- and nine-month periods ended September 30, 2020 and 2019 was calculated after applying the Company’s accounting policies and the impact of acquisition date fair value adjustments. The pro forma financial information presents the combined results of operations of Anika Therapeutics, Inc., Parcus Medical and Arthrosurface as if the acquisitions had occurred on January 1, 2019 after giving effect to certain pro forma adjustments. The pro forma adjustments reflected herein include only those adjustments that are factually supportable and directly attributable to the acquisitions.

 

These pro forma adjustments include: (i) a net increase in amortization expense to record amortization expense for the aforementioned acquired identifiable intangible assets, (ii) an adjustment to cost of product revenue based on the preliminary fair value inventory adjustment and the anticipated inventory turnover, (iii) a net decrease in interest expense as a result of eliminating interest expense and interest income related to borrowings that were settled in accordance with the respective Parcus Merger Agreement and Arthrosurface Merger Agreement, (iv) an adjustment to record the acquisition-related transaction costs in the period required, and (v) the tax effect of the pro forma adjustments using the anticipated effective tax rate. The effective tax rate of the combined company could be materially different from the rate presented in this unaudited pro forma combined financial information. As a result of the transaction, the combined company may be subject to annual limitations on its ability to utilize pre-acquisition net operating loss carryforwards to offset future taxable income. The amount of the annual limitation is determined based on the value of Anika immediately prior to the acquisition. As further information becomes available, any such adjustment described above could be material to the amounts presented in the unaudited pro forma combined financial statements. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combination occurred at the beginning of each period presented, or of future results of the consolidated entities.

 

The following table presents unaudited supplemental pro forma information:

 

  

For the Three Months Ended September 30,

  

For the Nine Months Ended September 30,

 
  

2020

  

2019

  

2020

  

2019

 

Total revenue

 $31,694  $39,912  $101,722  $115,045 

Net income (loss)

  (6,411)  4,909   (7,328)  7,296 

 

 

4.

Fair Value Measurements

 

The Company held U.S. treasury bills of $15.0 million and certificates of deposit of $5.5 million at September 30, 2020. The Company held U.S. treasury bills of $27.5 million at December 31, 2019. Unrealized losses and the associated tax impact on the Company’s available-for-sale securities were insignificant as of September 30, 2020 and December 31, 2019, respectively.

 

The Company’s investments are all classified within Levels 1 and 2 of the fair value hierarchy. The Company’s investments classified within Level 1 of the fair value hierarchy are valued based on quoted prices in active markets. Level 2 investments are based on matrix pricing compiled by third party pricing vendors, using observable market inputs such as interest rates, yield curves, and credit risk. For cash, current receivables, accounts payable, long-term debt and interest accrual, the carrying amounts approximate fair value, because of the short maturity of these instruments, and therefore fair value information is not included in the table below. Contingent consideration related to the previously described business combinations are classified within Level 3 of the fair value hierarchy as the determination of fair value uses considerable judgement and represents the Company’s best estimate of an amount that could be realized in a market exchange for the asset or liability.

 

13

 

The fair value hierarchy of the Company's cash equivalents, investments and liabilities at fair value was as follows:

 

      

Fair Value Measurements at Reporting Date Using

     
      

Quoted Prices in

             
      

Active Markets

  

Significant Other

  

Significant

     
      

for Identical Assets

  

Observable Inputs

  

Unobservable Inputs

     
  

September 30, 2020

  

(Level 1)

  

(Level 2)

  

(Level 3)

  

Amortized Cost

 

Cash equivalents:

                    

Money Market Funds

 $56,431  $56,431  $-  $-  $56,431 
                     

Investments:

                    

Bank Certificates of Deposit

 $5,503  $-  $5,503  $-  $5,516 

U.S. Treasury Bills

  15,039   15,039   -   -   15,130 

Total Investments

 $20,542  $15,039  $5,503  $-  $20,646 
                     

Other current and long-term liabilities:

                    

Contingent Consideration - Short Term

 $11,855  $-  $-  $11,855  $- 

Contingent Consideration - Long Term

  41,045   -   -   41,045   - 

Total Other current and long-term liabilities

 $52,900  $-  $-  $52,900  $- 

 

      

Fair Value Measurements at Reporting Date Using

     
      

Quoted Prices in

             
      

Active Markets

  

Significant Other

  

Significant

     
      

for Identical Assets

  

Observable Inputs

  

Unobservable Inputs

     
  

December 31, 2019

  

(Level 1)

  

(Level 2)

  

(Level 3)

  

Amortized Cost

 

Cash equivalents:

                    

Money Market Funds

 $48,971  $48,971  $-  $-  $48,971 
                     

Investments:

                    

U.S. Treasury Bills

 $27,480  $27,480  $-  $-  $27,479 

 

There were no transfers between fair value levels during the nine-month period ended September 30, 2020 or in 2019.

 

14

 

Contingent Consideration

 

The following table provides a rollforward of the contingent consideration related to business acquisitions discussed in Note 3.

 

  

Nine Months Ended

 
  

September 30, 2020

 

Balance, beginning January 1, 2020

 $- 

Additions

  69,076 

Payments

  - 

Change in fair value

  (16,176)

Balance, ending September 30, 2020

 $52,900 

 

Under the Parcus Medical Merger Agreement and Arthrosurface Merger Agreement, there are earn-out milestones totaling $100 million payable from 2020 to 2022. Parcus Medical has net sales earn-out milestones annually from 2020 to 2022, while Arthrosurface has both regulatory and net sales earn-out milestones in 2020 and 2021. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model or a Monte Carlo simulation approach. The unobservable inputs used in the fair value measurement of the Company’s contingent consideration are the probabilities of successful achievement, the weighted average cost of capital used for the Monte Carlo simulation, discount rate and the periods in which the milestones are expected to be achieved. The discount rates used for the net sales and regulatory earn-out milestones ranged from 2.0% - 2.5%. The probability of successful achievement of the regulatory earn-out milestones range from 60%-90% for Arthrosurface, which remained unchanged from the acquisition date to September 30, 2020. The key variables that led to a decrease in contingent consideration versus the acquisition date are the decrease in near term revenues due to the COVID-19 pandemic and an increase in the weighted average cost of capital from 11.5% to 13.0% for Arthrosurface and 14.5% to 15.0% for Parcus Medical. Increases or decreases in any of the probabilities of success in which milestones are expected to be achieved would result in a higher or lower fair value measurement, respectively. Increases or decreases in the discount rate would result in a lower or higher fair value measurement, respectively.

 

The fair value of contingent consideration is assessed on a quarterly basis. The fair value of contingent consideration increased by $4.2 million for the three- month period ended September 30, 2020 due primarily to the passage of time, higher than forecasted revenues during the third quarter, and a reduction in market-based borrowing rates. The fair value of the contingent consideration increased by $16.2 million for the nine-month period ended September 30, 2020 due to a decrease in the revenue due to the COVID-19 pandemic. On October 15, 2020, the Company received regulatory clearance for its WRISTMOTION Total Arthroplasty System, triggering a $5 million regulatory-based milestone payment pursuant to the terms of the Arthrosurface Merger Agreement.

 

 

5.

Inventories

 

Inventories consist of the following:

 

  

September 30,

  

December 31,

 
  

2020

  

2019

 

Raw materials

 $12,973  $12,058 

Work-in-process

  12,372   8,330 

Finished goods

  35,259   8,777 

Total

 $60,604  $29,165 
         

Inventories

 $47,882  $21,995 

Other long-term assets

  12,722   7,170 

 

 

15

 

The increase in inventories for the nine months ended September 30, 2020 is due to the acquisitions of Parcus Medical and Arthrosurface in January and February 2020, as discussed in Note 3.

 

The Company recorded an inventory reserve of $1.9 million during the three-month period ended June 30, 2020 as the Company determined it would not pursue CE mark renewals for certain legacy products, primarily for certain advanced wound care products, as a result of the Company's product rationalization efforts. The additional inventory reserve represents excess inventory which will not be sold prior to expiration of the applicable CE mark based on current projections.

 

 

6.

Intangible Assets

 

Intangible assets as of September 30, 2020 and December 31, 2019 consisted of the following:

 

      

Nine Months Ended September 30, 2020

 
  

Gross Value

  

Less: Accumulated

Currency Translation

Adjustment

  

Less: Current Period

Impairment Charge

  

Less: Accumulated

Amortization

  

Net Book Value

  

Weighted

Average Useful

Life

 

Developed technology

 $93,953  $(2,766) $(1,025) $(12,919) $77,243  15 

In-process research & development

  5,006   (1,120)  -   -   3,886  

Indefinite

 

Customer relationships

  9,000   -   -   (568)  8,432  10 

Distributor relationships

  4,700   (415)  -   (4,285)  -  5 

Patents

  1,000   (167)  -   (602)  231  16 

Tradenames

  5,200   -   -   (701)  4,499  5 

Total

 $118,859  $(4,468) $(1,025) $(19,075) $94,291  13 

 

      

Year Ended December 31, 2019

 
  

Gross Value

  

Less: Accumulated

Currency Translation

Adjustment

  

Less: Current Period

Impairment Charge

  

Less: Accumulated

Amortization

  

Net Book Value

  

Weighted

Average Useful

Life

 

Developed technology

 $17,100  $(2,934) $(389) $(9,657) $4,120  15 

In-process research & development

  4,406   (1,234)  -   -   3,172  

Indefinite

 

Distributor relationships

  4,700   (415)  -   (4,285)  -  5 

Patents

  1,000   (176)  -   (531)  293  16 

Elevess Tradename

  1,000   -   -   (1,000)  -  9 

Total

 $28,206  $(4,759) $(389) $(15,473) $7,585  11 

 

The aggregate amortization expense related to intangible assets was $1.9 million and $0.3 million for the three-month periods ended September 30, 2020 and 2019, respectively, and $5.4 million and $0.8 million for the nine-month periods ended September 30, 2020 and 2019, respectively.

 

In the first quarter of 2020, the Company acquired Parcus Medical and Arthrosurface as discussed in Note 3, which resulted in an increase of $92.9 million of gross value in intangible assets. During the six-month period ended June 30, 2020, the Company determined that it would not pursue CE Mark renewals for certain of its legacy products, which resulted in an impairment of $1.0 million. The impairments are included in the selling, general and administrative expenses on the Company's consolidated statements of operations.

 

For the quarter ended September 30, 2020, the Company did not identify any impairment triggers. 

 

 

7.

Goodwill

 

The Company assesses goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment on each reporting unit. In connection with the evaluation of goodwill for impairment, the Company may first consider qualitative factors to assess whether there are any indicators to suggest it is more likely than not that the fair value of a reporting unit may not exceed its carrying amount. If after assessing such factors or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then a quantitative assessment is not required. If the Company chooses to bypass the qualitative assessment, or if it chooses to perform a qualitative assessment but is unable to qualitatively conclude that no impairment has occurred, then the Company will perform a quantitative assessment. If the estimated fair value of a reporting unit is less than its carrying value, an impairment charge is recognized for the excess of the reporting unit’s carrying value over its fair value.

 

16

 

As of December 31, 2019, the Company concluded that it operated as a single reporting unit and performed the 2019 goodwill impairment test using a single reporting unit.

 

  

Nine Months Ended

September 30, 2020

  

Year Ended

December 31, 2019

 

Balance, beginning

 $7,694  $7,851 

Effect of foreign currency adjustments

  349   (157)

Acquisitions

  42,520   - 

Impairment

  (18,144)  - 

Balance, ending

 $32,419  $7,694 

 

The increase in goodwill for the nine months ended September 30, 2020 is related to the acquisitions of Parcus Medical and Arthrosurface in January and February 2020 as further discussed in Note 3. As a result of the acquisitions, the Company now has two reporting units. The newly formed reporting unit includes Parcus Medical and Arthrosurface, which share similar economic and qualitative characteristics. This reporting unit produces soft tissue repair surgical tools, instruments and joint implants. The legacy Anika business remains in one reporting unit, which specializes in therapies based on its hyaluronic acid, or HA, technology platform.

 

The widespread economic volatility resulting from the COVID-19 pandemic triggered impairment testing in the first quarter of 2020, and accordingly, the Company performed interim impairment testing on the goodwill balances of its reporting units. For the legacy Anika reporting unit, the Company performed a qualitative assessment including consideration of (i) general macroeconomic factors, (ii) industry and market conditions, and (iii) the extent of the excess of the fair value over the carrying value indicated in prior impairment testing. The Company determined it was not more likely than not that the fair value of the legacy Anika reporting unit is less than its carrying amount and thus goodwill was not impaired as of March 31, 2020. Through September 30, 2020, there have been no events or changes in circumstances that indicate that the carrying value of goodwill may not be recoverable.

 

U.S. government policy responses to the COVID-19 pandemic and the resulting changes in healthcare guidelines caused a temporary suspension of domestic elective surgical procedures. As a result of these events during the first quarter of 2020, the Company performed a quantitative assessment of goodwill impairment related to the Parcus Medical and Arthrosurface reporting unit as of March 31, 2020. The Company then estimated the fair value of the Parcus Medical and Arthrosurface reporting unit using a discounted cash flow method, which is based on the present value of projected cash flows and a terminal value, which represents the expected normalized cash flows of the reporting units beyond the cash flows from the discrete projection period. The Company determined that a discounted cash flow model provided the best approximation of fair value of the reporting unit for the purpose of performing the interim impairment test.

 

This approach incorporates significant estimates and assumptions related to the forecasted results including revenues, expenses, the achievement of certain cost synergies, terminal growth rates and discount rates to estimate future cash flows. While assumptions utilized are subject to a high degree of judgment and complexity, the Company made its best estimate of future cash flows under a high degree of economic uncertainty that existed as of March 31, 2020. In developing its assumptions, the Company also considered observed trends of its industry participants.

 

 

17

 

The results of the interim impairment test indicated that the estimated fair value of the Parcus and Arthrosurface reporting unit was less than its carrying value. This was primarily due to decreases in near term revenue and related cash flows as a result of the temporary suspension of domestic elective procedures which directly impact the Parcus and Arthrosurface reporting unit. Consequently, a non-cash goodwill impairment charge was recorded as reflected in the table above as of March 31, 2020. For the quarter ended September 30, 2020, there have been no events or changes in circumstances that indicate that the carrying value of goodwill as determined on March 31, 2020 may not be recoverable. If the pandemic's economic impact is more severe, or if the economic recovery takes longer to materialize or does not materialize as strongly as anticipated, this could result in further goodwill impairment charges.

 

 

8.

Leases

 

The components of lease expense and other information are as follows:

 

  

For the Three Months Ended

  

For the Nine Months Ended

 
  

September 30, 2020

  

September 30, 2019

  

September 30, 2020

  

September 30, 2019

 

Amortization of right-of-use assets

 $50  $-  $136  $- 

Interest on finance lease liabilities

  7   -   22   - 

Finance lease expense

 $57  $-  $158  $- 

Operating lease expense

  590   525   1,759   1,568 

Short-term lease expense

  -   -   -   6 

Variable lease expense

  67   43   204   155 

Total lease expense

 $714  $568  $2,121  $1,729 

 

  

For the Three Months Ended

  

For the Nine Months Ended

 
  

September 30, 2020

  

September 30, 2019

  

September 30, 2020

  

September 30, 2019

 

Weighted Average Remaining Lease Term (in years)

                

Operating leases

  15.9   17.1   15.9   17.1 

Financing leases

  3.3   -   3.3   - 

Weighted Average Discount Rate

                

Operating leases

  4.1%  4.1%  4.1%  4.1%

Financing leases

  5.0%  -   5.0%  - 

Other information