UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
| | 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
Anika Therapeutics, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| | |
| (State or Other Jurisdiction of | (I.R.S. Employer Identification No.) |
| Incorporation or Organization) |
(Address of Principal Executive Offices) (Zip Code)
(
(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 |
| | | |
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.
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).
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 ☐ | | Non-accelerated filer ☐ | Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of October 31, 2022, there were
ANIKA THERAPEUTICS, INC.
TABLE OF CONTENTS
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, Anika Therapeutics, Anikavisc, Arthrosurface, Cingal, Hyaff, Monovisc, Orthovisc, Parcus Medical, Tactoset and Hyvisc are our registered trademarks that appear in this Quarterly Report on Form 10-Q. For convenience, these trademarks appear in this Quarterly Report on Form 10-Q without ® and ™ symbols, but that practice does not mean that we will not assert, to the fullest extent under applicable law, our rights to the trademarks. This Quarterly Report on Form 10-Q also contains trademarks and trade names that are the property of other companies and licensed to us.
| FINANCIAL INFORMATION |
| FINANCIAL STATEMENTS |
Anika Therapeutics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
| September 30, | December 31, | |||||||
| ASSETS | 2022 | 2021 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, less allowance for credit losses of $ and $ at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Other long-term assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Contingent consideration | ||||||||
| Total current liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Deferred tax liability | ||||||||
| Lease liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value; shares authorized, shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Common stock, $ par value; shares authorized, and shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Retained earnings | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Anika Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share data)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research & development | ||||||||||||||||
| Selling, general & administrative | ||||||||||||||||
| Change in fair value of contingent consideration | ( | ) | ( | ) | ||||||||||||
| Total operating expenses | ||||||||||||||||
| (Loss) income from operations | ( | ) | ( | ) | ||||||||||||
| Interest and other income (expense), net | ( | ) | ( | ) | ||||||||||||
| (Loss) income before income taxes | ( | ) | ( | ) | ||||||||||||
| (Benefit from) provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Net (loss) income per share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| Consolidated Statements of Stockholders' Equity | ||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||
| Common Stock | Other | Total | ||||||||||||||||||||||
| Number of | $.01 Par | Additional Paid | Retained | Comprehensive | Stockholders' | |||||||||||||||||||
| Shares | Value | in Capital | Earnings | Loss | Equity | |||||||||||||||||||
| Balance, January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Issuance of common stock for equity awards | - | - | ||||||||||||||||||||||
| Vesting of restricted stock units | ( | ) | - | - | - | |||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | ||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings | ( | ) | ( | ) | - | - | ( | ) | ||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||
| Other comprehensive income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Vesting of restricted stock units | ( | ) | - | - | ||||||||||||||||||||
| Issuance of ESPP shares | - | - | ||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | ||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings | ( | ) | ( | ) | - | - | ( | ) | ||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||
| Other comprehensive income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Vesting of restricted stock units | - | - | ||||||||||||||||||||||
| Issuance of ESPP shares | - | - | - | |||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | ||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings | ( | ) | ( | ) | - | - | ( | ) | ||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||
| Other comprehensive income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||
| Common Stock | Other | Total | ||||||||||||||||||||||
| Number of | $.01 Par | Additional Paid | Retained | Comprehensive | Stockholders' | |||||||||||||||||||
| Shares | Value | in Capital | Earnings | Loss | Equity | |||||||||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Issuance of common stock for equity awards | - | |||||||||||||||||||||||
| Vesting of restricted stock units | ( | ) | ||||||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Other comprehensive income | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Issuance of common stock for equity awards | ||||||||||||||||||||||||
| Vesting of restricted stock units | ||||||||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Issuance of common stock for equity awards | ||||||||||||||||||||||||
| Vesting of restricted stock units | ||||||||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Other comprehensive income | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Anika Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Nine Months Ended September 30 |
||||||||
| 2022 |
2021 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net (loss) income |
$ | ( |
) |
$ | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation |
||||||||
| Amortization of acquisition related intangible assets |
||||||||
| Amortization of acquisition related inventory step-up |
||||||||
| Non-cash operating lease cost |
||||||||
| Change in fair value of contingent consideration |
( |
) | ||||||
| Loss on disposal of fixed assets |
||||||||
| Stock-based compensation expense |
||||||||
| Deferred income taxes |
( |
) |
||||||
| Provision (recovery) for doubtful accounts |
( |
) | ||||||
| Provision for inventory |
||||||||
| Other |
( |
) | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
( |
) |
( |
) | ||||
| Inventories |
( |
) |
( |
) | ||||
| Prepaid expenses, other current and long-term assets |
( |
) |
||||||
| Accounts payable |
( |
) |
||||||
| Operating lease liabilities |
( |
) |
( |
) |
||||
| Accrued expenses, other current and long-term liabilities |
||||||||
| Contingent consideration |
( |
) | ||||||
| Income taxes |
( |
) |
||||||
| Net cash provided by operating activities |
||||||||
| Cash flows from investing activities: |
||||||||
| Acquisition of Parcus Medical and Arthrosurface, net of cash acquired |
( |
) |
||||||
| Proceeds from maturities of investments |
||||||||
| Purchases of property and equipment |
( |
) |
( |
) |
||||
| Net cash used in investing activities |
( |
) |
( |
) |
||||
| Cash flows from financing activities: |
||||||||
| Payments made on finance leases |
( |
) |
( |
) |
||||
| Cash paid for tax withheld on vested restricted stock awards |
( |
) |
( |
) |
||||
| Proceeds from exercises of equity awards |
||||||||
| Contingent consideration payout |
( |
) | ( |
) | ||||
| Net cash used in financing activities |
( |
) |
( |
) | ||||
| Exchange rate impact on cash |
( |
) |
( |
) |
||||
| Decrease in cash and cash equivalents |
( |
) |
( |
) | ||||
| Cash and cash equivalents at beginning of period |
||||||||
| Cash and cash equivalents at end of period |
$ | $ | ||||||
| Supplemental disclosure of cash flow information: |
||||||||
| Non-cash investing activities: |
||||||||
| Right-of-use assets obtained in exchange for operating lease liabilities |
$ | $ | ||||||
| Purchases of property and equipment included in accounts payable and accrued expenses |
$ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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 (“OA”) 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 sports medicine and soft tissue repair, and Arthrosurface, Inc. (“Arthrosurface”), a company specializing in less invasive, bone preserving partial and total joint replacement solutions. These acquisitions broadened the Company’s product portfolio, developed over its 30 years of expertise in hyaluronic acid technology, into the broader joint preservation and restoration market with greater market potential, added high-growth revenue streams, increased the Company’s commercial capabilities, diversified its revenue base, and expanded its product pipeline and research and development expertise.
The Company is subject to risks common to companies in the life sciences industry 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 and foreign regulations and approval requirements, as well as the ability to grow the Company’s business through appropriate commercial strategies.
There continue to be uncertainties regarding the pandemic of the ongoing 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, business partners and a broader impact on elective surgeries. The Company is unable to predict the specific 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.
| 2. | Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“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 or omitted pursuant to SEC rules and regulations relating to interim financial statements. The December 31, 2021 balances reported herein were derived from the audited consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the condensed consolidated financial statements.
The accompanying unaudited condensed 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, 2021. The results of operations for the three-month and nine-month periods ended September 30, 2022, are not indicative of the results to be expected for the year ending December 31, 2022
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 as of September 30, 2022. Based on the criteria established by Accounting Standards Codification 280, Segment Reporting, the Company has one operating and reportable segment.
| 3. | Business Combinations |
Parcus Medical, LLC
On January 24, 2020, the Company 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”). Parcus Medical is a sports medicine implant and instrumentation solutions provider focused on surgical repair and reconstruction of soft tissue.
Consideration Transferred
Pursuant to the Parcus Medical Merger Agreement, the Company acquired all outstanding equity of Parcus Medical for estimated total purchase consideration of $
| Cash consideration | $ | |||
| Deferred consideration | ||||
| Estimated fair value of contingent consideration | ||||
| Estimated total purchase consideration | $ |
Pursuant to the Parcus Medical Merger Agreement, contingent consideration represents additional payments that the Company may be required to make in the future which could total up to $
The fair value of contingent consideration related to net sales as of January 24, 2020, and at each reporting date, was determined based on a Monte Carlo simulation model in an option pricing framework, whereby a range of possible scenarios were simulated. The liability for contingent consideration was included in current liabilities on the condensed consolidated balance sheets and will be remeasured at each reporting period until the contingency is resolved. During the three months ended September 30, 2022, the Company paid the contingent consideration related to net sales in the amount of $
Acquisition-related costs were not included as a component of consideration transferred but were expensed in the periods in which the costs are incurred. The Company incurred approximately $
Fair Value of Net Assets Acquired
The estimate of fair value as of the acquisition date 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 allocation of purchase price to the identifiable assets acquired and liabilities assumed was based on estimates of fair value as of January 24, 2020, and was as follows:
| Recognized identifiable assets acquired and liabilities assumed: | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Inventories | ||||
| Prepaid expenses and other current assets | ||||
| Property and equipment, net | ||||
| Right-of-use assets | ||||
| Intangible assets | ||||
| Accounts payable, accrued expenses and other current liabilities | ( | ) | ||
| Other long-term liabilities | ( | ) | ||
| Lease liabilities | ( | ) | ||
| Net assets acquired | ||||
| Goodwill | ||||
| Estimated total purchase consideration | $ |
The acquired intangible assets based on estimates of fair value as of January 24, 2020 were as follows:
| Developed technology | $ | |||
| Trade name | ||||
| Customer relationships | ||||
| Total acquired intangible assets | $ |
The fair value of developed technology will be amortized over a useful life of
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 was impaired in 2020 and there was no remaining goodwill as of December 31, 2020.
Arthrosurface, Inc.
On February 3, 2020, the Company 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”). Arthrosurface is a joint preservation technology company specializing in less invasive, bone-preserving partial and total joint replacement solutions.
Consideration Transferred
Pursuant to the Arthrosurface Merger Agreement, the Company acquired all outstanding equity of Arthrosurface for estimated total purchase consideration of $
| Cash consideration | $ | |||
| Estimated fair value of contingent consideration | ||||
| Estimated total purchase consideration | $ |
Pursuant to the Arthrosurface Merger Agreement, the Company could be required to make future payments of up to $
Acquisition-related costs were not included as a component of consideration transferred but were expensed in the periods in which the costs are incurred. The Company incurred approximately $
Fair Value of Net Assets Acquired
The 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 allocation of purchase price to the identifiable assets acquired and liabilities assumed was based on estimates of fair value as of February 3, 2020, as follows:
| Recognized identifiable assets acquired and liabilities assumed: | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Inventories | ||||
| Prepaid expenses and other current assets | ||||
| Property, plant and equipment | ||||
| Other long-term assets | ||||
| Intangible assets | ||||
| Accounts payable, accrued expenses and other liabilities | ( | ) | ||
| Deferred tax liabilities | ( | ) | ||
| Net assets acquired | ||||
| Goodwill | ||||
| Estimated total purchase consideration | $ | |||
| Intangible assets acquired consist of: | ||||
| Developed technology | $ | |||
| Trade name | ||||
| Customer relationships | ||||
| IPR&D | ||||
| Total acquired intangible assets | $ |
The fair value of developed technology will be amortized over an estimated useful life of
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 was impaired in 2020 and there was no remaining goodwill as of December 31, 2020.
| 4. | Fair Value Measurements |
The Company has certain cash equivalents in money market funds that are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets. For cash, accounts receivables, accounts payable, and accrued interest, 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. There were no transfers between fair value levels during the nine-month periods ended September 30, 2022 or 2021. See Note 3, Business Combinations for additional discussion of contingent consideration as of September 30, 2022.
| Active Markets | Significant Other | Significant | ||||||||||||||||||
| for Identical Assets | Observable Inputs | Unobservable Inputs | ||||||||||||||||||
| September 30, 2022 | (Level 1) | (Level 2) | (Level 3) | Amortized Cost | ||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||
| Money Market Funds | $ | $ | $ | $ | $ | |||||||||||||||
| Other current liabilities: | ||||||||||||||||||||
| Contingent Consideration - Short Term | $ | $ | $ | $ | $ | |||||||||||||||
| Active Markets | Significant Other | Significant | ||||||||||||||||||
| for Identical Assets | Observable Inputs | Unobservable Inputs | ||||||||||||||||||
| December 31, 2021 | (Level 1) | (Level 2) | (Level 3) | Amortized Cost | ||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||
| Money Market Funds | $ | $ | $ | $ | $ | |||||||||||||||
| Other current liabilities: | ||||||||||||||||||||
| Contingent Consideration - Short Term | $ | $ | $ | $ | $ | |||||||||||||||
Contingent Consideration
The following table provides a rollforward of the contingent consideration related to business acquisitions discussed in Note 3, Business Combinations
| Nine Months Ended | Nine Months Ended | |||||||
| September 30, 2022 | September 30, 2021 | |||||||
| Balance, beginning | $ | $ | ||||||
| Payments | ( | ) | ( | ) | ||||
| Change in fair value | ( | ) | ||||||
| Balance, ending | $ | $ | ||||||
| 5. | Inventories |
Inventories consist of the following:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Raw materials | $ | $ | ||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
| Inventories | $ | $ | ||||||
| Other long-term assets | ||||||||
| Total | $ | $ | ||||||
Inventories are stated net of inventory reserves of $
| 6. | Intangible Assets |
| Nine Months Ended September 30, 2022 | December 31, 2021 | |||||||||||||||||||||||
| Gross | Less: Accumulated | Less: | Net Book | Net Book | Weighted | |||||||||||||||||||
| Developed technology | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||
| IPR&D | ( | ) | Indefinite | |||||||||||||||||||||
| Customer relationships | ( | ) | ||||||||||||||||||||||
| Distributor relationships | ( | ) | ( | ) | ||||||||||||||||||||
| Patents | ( | ) | ( | ) | ||||||||||||||||||||
| Tradenames | ( | ) | ||||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||
The aggregate amortization expense related to intangible assets was $
| 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.
Changes in the carrying value of goodwill for the nine months ended September 30, 2022 were as follows:
| Nine Months Ended September 30, 2022 | ||||
| Balance, beginning | $ | |||
| Effect of foreign currency adjustments | ( | ) | ||
| Balance, ending | $ | |||
| 8. | Leases |
The Company leases its buildings and manufacturing facilities under operating leases. As of September 30, 2022, the Company had real estate leases in Bedford, Massachusetts, Franklin, Massachusetts, Sarasota, Florida, Warsaw, Indiana and Padova, Italy.
In June 2022, the Company finalized renewal options to extend the current term of its leases for its building and manufacturing facility in Bedford as well as its two facilities in Sarasota. With the extension of these renewal options, the Bedford lease term extends to 2027 with several lease renewal options into 2038 and the two leases in Sarasota extend to 2027 but may be extended by mutual agreement. The Sarasota leases also include a right to terminate in 2025 at the Company’s option. The current term of the Franklin lease extends to 2023 and the current term of the Padova lease extends to 2032, with a right to terminate at the Company’s option without penalty.
The following table summarizes the Company’s significant commitments under lease agreements as of September 30, 2022:
| Operating Leases | ||||
| 2022 (Remainder of Year) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Present value adjustment | ( | ) | ||
| Present value of lease payments | ||||
| Less current portion included in accrued expenses and other current liabilities | ( | ) | ||
| Total lease liabilities | $ | |||
During the three and nine months ended September 30, 2022, the Company incurred lease expense of $
| 9. | Accrued Expenses and Other Liabilities |
Accrued expenses and other liabilities consist of the following:
| September 30, 2022 | December 31, 2021 | |||||||
| Compensation and related expenses | $ | $ | ||||||
| Professional fees | ||||||||
| Operating lease liability – current | ||||||||
| Clinical trial costs | ||||||||
| Financing lease liability – current | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
| 10. | Commitments and Contingencies |
In certain of its contracts, the Company warrants to its customers that the products it manufactures conform to the product specifications as in effect at the time of delivery of the specific product. The Company may also warrant that the products it manufactures do not infringe, violate, or breach any U.S. or international patent or intellectual property right, trade secret, or other proprietary information of any third party. On occasion, the Company contractually indemnifies its customers against any and all losses arising out of, or in any way connected with, any claim or claims of breach of its warranties or any actual or alleged defect in any product caused by the negligent acts or omissions of the Company. The Company maintains a products liability insurance policy that limits its exposure to these risks. Based on the Company’s historical activity, in combination with its liability insurance coverage, the Company believes the estimated fair value of these indemnification agreements is immaterial. The Company had
The Company is also involved from time-to-time in various legal proceedings arising in the normal course of business. Although the outcomes of these legal proceedings are inherently difficult to predict, the Company does not expect the resolution of these occasional legal proceedings to have a material adverse effect on its financial position, results of operations, or cash flow.
On October 21, 2021, the Company received notice that the former unitholders of Parcus Medical had filed a request for arbitration regarding the earnout provisions agreed to in the Parcus Medical Merger Agreement. The Company has engaged in the arbitration process and does not anticipate a resolution during 2022. The Company is unable to estimate the potential liability with respect to this matter at this time. There are numerous factors that make it difficult to estimate reasonably possible loss or range of loss at this stage of the matter, including the significant number of legal and factual issues still to be resolved in the arbitration process. The Company intends to vigorously defend against the claims and believes it has strong defenses to the claims asserted.
| 11. | Revenue and Geographic Information |
Revenue by product family was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| OA Pain Management | $ | $ | $ | $ | ||||||||||||
| Joint Preservation and Restoration | ||||||||||||||||
| Non-Orthopedics | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Revenue from the Company’s sole significant customer, DePuy Synthes Mitek Sports Medicine (“Mitek”), part of the Johnson & Johnson Medical Companies, as a percentage of the Company’s total revenue was
The Company receives payments from our customers based on billing schedules established in each contract. Up-front payments are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements. Amounts are recorded as accounts receivable when our right to consideration is unconditional. Deferred revenue was $
Total revenue by geographic location was as follows:
| Three Months Ended September 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Total | Percentage of | Total | Percentage of | |||||||||||||
| Revenue | Revenue | Revenue | Revenue | |||||||||||||
| Geographic Location: | ||||||||||||||||
| United States | $ | % | $ | % | ||||||||||||
| Europe | % | % | ||||||||||||||
| Other | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Total | Percentage of | Total | Percentage of | |||||||||||||
| Revenue | Revenue | Revenue | Revenue | |||||||||||||
| Geographic Location: | ||||||||||||||||
| United States | $ | % | $ | % | ||||||||||||
| Europe | % | % | ||||||||||||||
| Other | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| 12. | Equity Incentive Plan |
Equity Incentive Plan
The Anika Therapeutics, Inc. 2017 Omnibus Incentive Plan (the “2017 Plan”) was approved by the Company’s stockholders on June 13, 2017 and subsequently amended on June 18, 2019, June 16, 2020, June 16, 2021 and June 8, 2022. On June 8, 2022, the Company’s stockholders approved an amendment to the 2017 Plan increasing the number of shares by
The Anika Therapeutics, Inc. 2021 Inducement Plan (the “Inducement Plan”) was adopted by the Company’s board of directors on November 4, 2021. The Inducement Plan reserves
The Company may satisfy the awards upon exercise, or upon fulfillment of the vesting requirements for other equity-based awards, with either newly issued shares or shares reacquired by the Company. Stock-based awards are granted with an exercise price equal to or greater than the market price of the Company’s stock on the date of grant. Awards contain service conditions or service and performance conditions, and they generally become exercisable ratably over years with a maximum contractual term of years.
The Company presents the expenses related to stock-based compensation awards in the same expense line items as cash compensation paid to each of its employees as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Cost of revenue | $ | $ | $ | $ | ||||||||||||
| Research & development | ||||||||||||||||
| Selling, general & administrative | ||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
Stock Options
Stock options are granted to purchase common shares at prices that are equal to the fair market value of the shares on the date the options are granted or, in the case of premium options, are granted with an exercise price at
The following summarizes the activity under the Company’s stock option plans:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | |||||||||||||
| Outstanding as of December 31, 2021 | $ | |||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ( | ) | $ | $ | ||||||||||||
| Forfeited and canceled | ( | ) | $ | |||||||||||||
| Outstanding as of September 30, 2022 | $ | $ | ||||||||||||||
| Vested, September 30, 2022 | $ | $ | ||||||||||||||
| Vested or expected to vest, September 30, 2022 | $ | $ | ||||||||||||||
The aggregate intrinsic value of options exercised for the nine-month period ended September 30, 2022 was immaterial.
The Company granted
As of September 30, 2022, there was $
The Company uses the Black-Scholes pricing model to determine the fair value of options granted. The calculation of the fair value of stock options is affected by the stock price on the grant date, the expected volatility of the Company’s common stock over the expected term of the award, the expected life of the award, the risk-free interest rate and the dividend yield. The Company estimates the fair value of TSRs using Monte-Carlo simulation model where the expected volatility assumption is evaluated over
The assumptions used in the Black-Scholes pricing model for options granted during the nine months ended September 30, 2022 and 2021, along with the weighted-average grant-date fair values, were as follows:
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Risk free interest rate |
| - |
|
| - |
| ||
| Expected volatility | | - | | | - | | ||
| Expected life (years) | | | ||||||
| Expected dividend yield |
|
| ||||||
| Fair value per option | $ | $ | ||||||
Restricted Stock Units
RSUs generally vest in equal annual installments over a -year period. The grant-date fair value of RSUs is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company determines the fair value of RSUs based on the closing price of its common stock on the date of grant.
RSU activity for the nine-month period ended September 30, 2022 was as follows:
| Number of Shares | Weighted Average Fair Value | |||||||
| Outstanding as of December 31, 2021 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited and cancelled | ( | ) | $ | |||||
| Outstanding as of September 30, 2022 | $ | |||||||
The weighted-average grant-date fair value per share of RSUs granted was $
As of September 30, 2022, there was $
Performance Stock Units
PSU activity for the nine-month ended September 30, 2022 was as follows:
| Number of Shares | Weighted Average Fair Value | |||||||
| Outstanding as of December 31, 2021 | $ | |||||||
| Performance factor adjustment | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited and cancelled | ( | ) | $ | |||||
| Outstanding as of September 30, 2022 | $ | |||||||
The total fair value of PSUs vested was $
| 13. | Income Taxes |
The Company recorded an income tax benefit of $
The decrease in the effective tax rate for the three-month period ended September 30, 2022, as compared to the same period in 2021, was primarily due to non-deductible stock-option activity during the three-month period ended September 30, 2021. The increase in the effective tax rate for the nine-month period ended September 30, 2022, as compared to the same period in 2021, was primarily due to the year-to-date net tax benefit in 2021 on the change in the fair value of contingent consideration, in the amount of $
The Company files income tax returns in the United States on a federal basis, in certain U.S. states, and in certain foreign jurisdictions. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate, which varies by jurisdiction.
In connection with the preparation of the financial statements, the Company assessed whether it is more likely than not that it will be able to utilize, in future periods, the Company’s deferred income tax assets to offset future taxable income and tax liabilities. The Company concluded that it is more likely than not that its deferred tax assets will be realized, after evaluation and consideration of both the positive and negative evidence. On December 31, 2021, the Company released a valuation allowance that had been previously recorded related to its net deferred tax assets in Italy in the amount of $
| 14. | Earnings Per Share (“EPS”) |
Basic EPS is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period. Unvested restricted shares, although legally issued and outstanding, are not considered outstanding for purposes of calculating basic EPS. Diluted EPS is calculated by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding share-based awards using the treasury stock method
The following table provides share information used in the calculation of the Company's basic and diluted earnings per share (in thousands):
| Three Month Period Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Shares used in the calculation of basic earnings per share | ||||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||
| Share-based payment awards | ||||||||||||||||
| Diluted shares used in the calculation of earnings per share | ||||||||||||||||
The Company had a net loss during the three and nine-months ended September 30, 2022, and therefore all potential common shares would have been anti-dilutive and accordingly were excluded from the computation of diluted EPS. Stock options of
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
You should read the following discussion in conjunction with our financial statements and related notes appearing elsewhere in this report and our audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2021, or our 2021 Form 10-K. In addition to historical information, this report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 concerning our business, consolidated financial condition, and results of operations. The Securities and Exchange Commission, or the SEC, encourages companies to disclose forward-looking statements so that investors can better understand a company’s prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as "will," "likely," "may," "believe," "expect," "anticipate," "intend," "seek," "designed," "develop," "would," "future," "can," "could," “estimate,” “potential,” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans, and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements regarding the effect of COVID-19 and related impacts on our business, operations, and financial results, expected future operating results, expectations regarding the timing and receipt of regulatory results, anticipated levels of capital expenditures, and expectations of the effect on our financial condition of claims, litigation, and governmental and regulatory proceedings.
Please also refer to those factors described in “Part I, Item 1A. Risk Factors” of our 2021 Form 10-K for important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
Management Overview
We are a global joint preservation company that creates and delivers meaningful advancements in early intervention orthopedic care. Based on our collaborations with clinicians to understand what they need most to treat their patients, we develop minimally invasive products that restore active living for people around the world. We are committed to leading in high opportunity spaces within orthopedics, including osteoarthritis, or OA, pain management, regenerative solutions, sports medicine soft tissue repair and bone preserving joint technologies.
We have thirty years of global expertise developing, manufacturing and commercializing products based on and/or enhanced with our hyaluronic acid, or HA, technology platform. HA is a naturally occurring polymer found throughout the body that is vital for proper joint health and tissue function. Our proprietary technologies for modifying the HA molecule allow product properties to be tailored specifically to multiple uses, including enabling longer residence time to support OA pain management and creating a solid form of HA called Hyaff, which is a platform utilized in our regenerative solutions portfolio.
In early 2020, we expanded our overall technology platform, product portfolio, and significantly enhanced and accelerated our commercial infrastructure, especially in the United States, through our strategic acquisitions of Parcus Medical, a sports medicine and instrumentation solutions provider focused on soft tissue repair, and Arthrosurface, a company specializing in bone preserving partial and total joint replacement solutions. Through these acquisitions, we have transformed our company. We expanded our addressable market from the over $1 billion global OA pain management market to the over $8 billion global joint preservation market (which includes the faster growing sports medicine soft tissue repair and extremities segments), advanced our commercial capabilities, instituted systems and processes to support our transformation, and expanded our product pipeline and research and development expertise in our target markets.
As we look towards the future, our business is positioned to capture value within our target market of joint preservation. We believe our success will be driven by our:
| ● |
Decades of experience in HA-based regenerative solutions and early intervention orthopedics combined under new seasoned leadership with a strong financial foundation for future investment in meaningful solutions for our customers and their patients; |
| ● |
Robust network of stakeholders in our target markets to identify evolving unmet patient treatment needs; |
| ● |
Prioritized investment in differentiated pipeline of regenerative solutions, bone preserving implants and sports medicine soft tissue repair products; |
|
| ● |
Leveraging our global commercial expertise and building out our capabilities to drive growth across the portfolio, with an intentional and increased focus on the ambulatory surgery centers site of care in the United States; |
| ● |
Opportunity to pursue strategic inorganic growth opportunities, including potential partnerships and smaller acquisitions, technology licensing, and leveraging our strong financial foundation and operational capabilities; and |
| ● |
Energized and experienced team focused on strong values, talent, and culture. |
COVID-19 Pandemic and Resulting Supply Chain and Staffing Challenges
In March 2020, the World Health Organization declared the spread of the COVID-19 virus a pandemic. This pandemic has caused an economic downturn on a global scale, as well as significant volatility in the financial markets. There has been significant volatility in our results on a quarterly basis due to the worldwide cancellation or delay of elective procedures, staffing shortages and supply chain disruptions, as well as the impact on timelines associated with certain clinical studies. Resurgence of COVID-19 as a result of emerging variants or other factors could result in additional staffing shortages or supply chain disruptions that could impact our business and operations. We have had some disruption in our ability to supply products to our customers due to supply chain disruptions and staffing shortages which has caused back orders or delays in certain shipments to our customers. The companies that produce our products, product components or otherwise support our manufacturing processes, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers, including third parties that sterilize and store our products, are or could be disrupted, temporarily close or experience worker shortages for a sustained period of time. To date, we believe we have taken adequate precaution to mitigate the impact of the current disruption of key materials, components and parts to the extent possible and reasonable. We expect, however, the current supply chain disruption with certain key suppliers to continue, which could have a material adverse effect on our operations. For additional information on the impact of supply chain disruption related to the COVID-19 pandemic on our manufacturing operations, please refer to the section captioned “Part II, Item 1A. Risk Factors.
Our commercial day-to-day operations have been impacted due to the worldwide cancellations and/or delays of elective procedures and restrictions on travel for both our employees and our clinician customers, and timelines associated with certain clinical studies and research and development programs have been delayed. While the impact has been limited to these items to date, we caution that there continues to be a possibility for potential future implementation of certain additional restrictions or other challenges associated with infections, staffing shortages, volatility in elective surgical procedures or supply chain disruptions due to COVID-19 and its current or new variants in certain jurisdictions. In particular, supply constraints that have continued into 2022 that we have partially been able to mitigate to date have impacted and could be expected to impact our ability to produce and supply our products. The impact of these challenges is currently unknown but could be significant.
Products
OA Pain Management
Our OA Pain Management product family consists of:
| ● |
Monovisc and Orthovisc, our single- and multi-injection, HA-based viscosupplement product offerings indicated to provide pain relief from OA conditions solely for use in the knee. Our OA Pain Management products are generally administered to patients in an office setting. In the United States, Monovisc and Orthovisc are marketed exclusively by DePuy Synthes Mitek Sports Medicine, or “Mitek”, part of the Johnson & Johnson Medical Companies. In December 2011, we entered into a fifteen-year licensing agreement with Mitek to exclusively market Monovisc in the United States through December 2026. In December 2003, we entered into a ten-year licensing agreement with Mitek to exclusively market Orthovisc in the United States. Mitek extended this agreement for additional five-year terms in 2007, 2012, 2017 and most recently in August 2022. The current agreement expires on December 20, 2028 unless extended at the option of Mitek. The Monovisc and Orthovisc products have been the market leaders, based on combined overall revenue in the viscosupplement market, since 2018. Internationally, we market our OA Pain Management products directly through a worldwide network of commercial distributors. |
| ● |
Cingal, our novel, third-generation, single-injection OA Pain Management product consisting of our proprietary cross-linked HA material combined with a fast-acting steroid. Cingal is designed to provide both short- and long-term pain relief. Cingal is CE Mark approved and for several years has been sold outside the United States directly in over 35 countries through our network of distributors. In the United States, Cingal is a pipeline product currently in clinical development and is not available for commercial sale. |
| ● |
Hyvisc, our high molecular weight injectable HA veterinary product approved for the treatment of joint dysfunction in horses due to non-infectious synovitis associated with equine OA. |
Joint Preservation and Restoration
Our Joint Preservation and Restoration product family consists of:
| ● |
Bone Preserving Joint Technologies. Our portfolio of more than 150 bone preserving joint technologies, including partial joint replacement, joint resurfacing, and minimally invasive and bone sparing implants, is designed to treat upper and lower extremity orthopedic conditions as well as knee and hip conditions caused by arthritic disease, acute trauma and injury. These products span multiple joints including the shoulder, foot/ankle, wrist, knee and hip and are generally intended to restore a patient’s natural anatomy and movement. These products are often used to treat patients with OA progression beyond where our OA Pain Management products can allow the patients to retain an active lifestyle when early surgical intervention becomes preferable. |
| ● |
Soft Tissue Repair. Our line of soft tissue repair solutions is used by surgeons to repair and reconstruct damaged ligaments and tendons resulting from sports injuries, acute trauma and disease. These more traditional sports medicine solutions include screws, sutures, suture anchors, grafts and other surgical systems that facilitate surgical procedures on the shoulder, knee, hip, upper and lower extremities, and other soft tissues. |
| ● |
Regenerative Solutions. Our portfolio of orthopedic regenerative solutions leveraging our proprietary technologies based on HA and Hyaff, which is a solid form of HA. These products include Tactoset Injectable Bone Substitute, an HA-enhanced injectable bone repair therapy designed to treat insufficiency fractures and for augmenting hardware fixation, such as suture anchors and Hyalofast, a biodegradable support for human bone marrow mesenchymal stem cells used for cartilage regeneration and as an adjunct for microfracture surgery. Tactoset cleared and commercialized principally in the United States, whereas Hyalofast is CE Mark approved and currently available outside the United States in over 35 countries within Europe, South America, Asia, and certain other international markets. In the United States, Hyalofast is a product under clinical trial studies and is not available for commercial sale. |
We currently commercialize Bone Preserving Joint Technologies, Soft Tissue Repair products, and Tactoset (from our Regenerative Solutions portfolio) in the United States by selling to hospitals and ambulatory surgery centers, through an independent network of sales representatives and distributors, and utilize our distributor network for sales in certain international markets.
Non-Orthopedic
Our Non-Orthopedic product family consists of legacy HA-based products that are marketed principally for non-orthopedic applications. These products include Hyalobarrier, an anti-adhesion barrier indicated for use after abdomino-pelvic surgeries, Hyalomatrix, used for the treatment of complex wounds such as burns and ulcers, as well as products used in connection with the treatment of ears, nose and throat disorders, and ophthalmic products, including injectable, high molecular weight HA products such as Anikavisc and Nuvisc, used as viscoelastic agents in ophthalmic surgical procedures such as cataract extraction and intraocular lens implantation. These Non-Orthopedic products are sold through commercial sales and marketing partners around the world.
Results of Operations
Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
| 2022 |
2021 |
$ Inc/(Dec) |
% Inc/(Dec) |
2022 |
2021 |
$ Inc/(Dec) |
% Inc/(Dec) |
|||||||||||||||||||||||||
| (in thousands, except percentages) |
(in thousands, except percentages) |
|||||||||||||||||||||||||||||||
| Revenue |
$ | 40,264 | $ | 39,536 | $ | 728 | 2 | % | $ | 116,614 | $ | 111,973 | $ | 4,641 | 4 | % | ||||||||||||||||
| Cost of revenue |
17,485 | 16,513 | 972 | 6 | % | 47,169 | 47,164 | 5 | 0 | % | ||||||||||||||||||||||
| Gross Profit |
22,779 | 23,023 | (244 | ) | (1% | ) | 69,445 | 64,809 | 4,636 | 7 | % | |||||||||||||||||||||
| Gross Margin |
57 | % | 58 | % | 60 | % | 58 | % | ||||||||||||||||||||||||
| Operating expenses: |
||||||||||||||||||||||||||||||||
| Research & development |
7,301 | 7,673 | (372 | ) | (5% | ) | 20,433 | 21,327 | (894 | ) | (4% | ) | ||||||||||||||||||||
| Selling, general & administrative |
21,276 | 17,500 | 3,776 | 22 | % | 61,745 | 53,664 | 8,081 | 15 | % | ||||||||||||||||||||||
| Change in fair value of contingent consideration |
- | (3,450 | ) | 3,450 | (100% | ) | - | (21,920 | ) | 21,920 | (100% | ) | ||||||||||||||||||||
| Total operating expenses |
28,577 | 21,723 | 6,854 | 32 | % | 82,178 | 53,071 | 29,107 | 55 | % | ||||||||||||||||||||||
| (Loss) income from operations | (5,797 | ) | 1,300 | (7,097 | ) | (546% | ) | (12,733 | ) | 11,738 | (24,471 | ) | (208% | ) | ||||||||||||||||||
| Interest and other income (expense), net |
436 | (48 | ) | 484 | (1,008% | ) | 378 | (141 | ) | 519 | (368% | ) | ||||||||||||||||||||
| (Loss) income before income taxes | (5,361 | ) | 1,252 | (6,613 | ) | (528% | ) | (12,355 | ) | 11,597 | (23,952 | ) | (207% | ) | ||||||||||||||||||
| (Benefit from) provision for income taxes | (1,187 | ) | 694 | (1,881 | ) | (271% | ) | (2,404 | ) | 1,670 | (4,074 | ) | (244% | ) | ||||||||||||||||||
| Net (loss) income | $ | (4,175 | ) | $ | 558 | $ | (4,733 | ) | (848% | ) | $ | (9,951 | ) | $ | 9,927 | $ | (19,878 | ) | (200% | ) | ||||||||||||
Revenue
Revenue for the three-month period ended September 30, 2022 was $40.3 million, an increase of $0.8 million as compared to $39.5 million for the three-month period ended September 30, 2021. Revenue for the nine-month period ended September 30, 2022 was $116.6 million, an increase of $4.6 million as compared to $112.0 million for the nine-month period ended September 30, 2021.
The following tables present product revenue by product family:
| Three Months Ended September 30, |
||||||||||||||||
| 2022 |
2021 |
$ Inc/(Dec) |
% Inc/(Dec) |
|||||||||||||
| OA Pain Management |
$ | 25,665 | $ | 26,153 | $ | (488 | ) | (2 | %) |
|||||||
| Joint Preservation and Restoration |
11,821 | 11,193 | 628 | 6 | % |
|||||||||||
| Non-Orthopedic |
2,778 | 2,190 | 588 | 27 | % | |||||||||||
| $ | 40,264 | $ | 39,536 | $ | 728 | 2 | % |
|||||||||
| Nine Months Ended September 30, |
||||||||||||||||
| 2022 |
2021 |
$ Inc/(Dec) |
% Inc/(Dec) |
|||||||||||||
| OA Pain Management |
$ | 74,139 | $ | 69,790 | $ | 4,349 | 6 | % |
||||||||
| Joint Preservation and Restoration |
36,055 | 35,296 | 759 | 2 | % |
|||||||||||
| Non-Orthopedic |
6,420 | 6,887 | (467 | ) |
(7 | )% | ||||||||||
| $ | 116,614 | $ | 111,973 | $ | 4,641 | 4 | % |
|||||||||
For the three-month period ended September 30, 2022, the increase in revenue was mainly due to growth in Joint Preservation and Restoration revenues as hospitals and ASCs recover from the COVID 19 pandemic and higher Non-Orthopedic revenues from the sales of certain legacy products related to end-of-life purchases. This revenue increase was offset by lower US OA Pain Management revenue primarily related to ordering patterns from Mitek in the prior year.
For the nine-month period ended September 30, 2022, the increase in revenue was mainly due an increase in OA Pain Management revenues from international viscosupplement distributors and Hyvisc equine product sales due to recovery from the COVID 19 pandemic as well as favorable ordering patterns, offset by lower US OA Pain Management sales to Mitek as a result of ordering patterns in the prior year. The increase in total revenue was also due to an increase in Joint Preservation and Restoration revenues as hospitals and ASCs performing more procedures as they recover from COVID 19 pandemic, which however remained limited due in part to constraints on staffing, offset by lower Non-Orthopedic revenue in part related to the timing of orders on legacy products.
Gross Profit and Margin
Gross profit for the three -and nine -month periods ended September 30, 2022 decreased by $0.2 million and increased by $4.6 million, to $22.8 million and $69.4 million, respectively. The decrease in gross profit for the three-month period ended September 30 2022 was related to a reserve of $2.6 million primarily associated with inventory for certain legacy Non-Orthopedic products that the Company no longer expects to sell. The increase in gross profit for the nine-month period ended September 30, 2022, as compared to the same period in 2021 was primarily due to increased revenue as well as the impact of inventory step-up charges associated with the acquisitions of Arthrosurface and Parcus Medical in 2021.
Gross margin for the three- and nine-month periods ended September 30, 2022 was 57% and 60%, respectively. Gross margin for the three- and nine-month periods ended September 30, 2021 was 58% for each period. The decrease in gross margin for the three-month period ended September 30, 2022 was due primarily to product rationalization charges in the third quarter of 2022. The increase in gross margin for the nine-month period ended September 30, 2022 was due primarily to the unfavorable impact of inventory step-up charges associated with the Arthrosurface and Parcus Medical in 2021.
Research and Development
Research and development expenses for the three- and nine-month periods ended September 30, 2022 were $7.3 million and $20.4 million, a decrease of $0.4 million and $0.9 million, respectively as compared to the same period in 2021. The decreases for the three-month and nine-month periods ended September 30, 2022 were primarily due to lower clinical trial spending, associated with the conclusion of our Cingal Phase III trial in 2022.
Selling, General and Administrative
Selling, general and administrative, or SG&A expenses for the three- and nine-month periods ended September 30, 2022 were $21.3 million and $61.7 million representing an increase of $3.8 million and $8.0 million, respectively as compared to the same period in 2021. This increase in SG&A expense for the three-month and nine-month periods ended September 30, 2022, was primarily due to expansion of our commercial capabilities in the United States and expanded marketing activities and other operational capabilities to support the growing business needs. Certain marketing and medical education activities also were more limited in 2021 due to the COVID-19 pandemic. The increase in SG&A expense was also due to higher stock-based compensation expense in 2022 driven by a change in headcount associated with the Company’s strategic transformation that accelerated in 2020 and 2021.
Contingent Consideration Fair Value Change
The fair value of contingent consideration as of September 30, 2022 did not change compared to December 31, 2021. During the three-month and six-month periods ended September 30, 2021, the change in the fair value of contingent consideration liabilities was $3.5 million and $21.9 million, respectively, resulting in a non-cash benefit to net income in those periods.
Income Taxes
The benefit from income taxes was $1.2 million and $2.4 million for the three- and six-month periods ended September 30, 2022, resulting in effective tax rates of 22.1% and 19.5%, respectively. The provision for income taxes was $0.7 million and $1.7 million for the three- and nine-month periods ended September 30, 2021, based on effective tax rates of 55.4% and 14.4%, respectively.
The decrease in the effective tax rate for the three-month period ended September 30, 2022, as compared to the same period in 2021, was primarily due to non-deductible stock-option activity during the three-month period ended September 30, 2021. The increase in the effective tax rate for the nine-month period ended September 30, 2022, as compared to the same period in 2021, was primarily due to the net tax benefit in 2021 on the change in the fair value of contingent consideration and non-deductible stock compensation in 2022.
Net (Loss) Income
For the three and nine-month periods ended September, 2022, net loss was $4.2 million and $10.0 million, or $0.29 per diluted share and $0.68 per diluted share, respectively, compared to net income of $0.6 million and $9.9 million, or $0.04 per diluted share and $0.68 per diluted share, for the same periods in prior year. The decrease in net income and diluted earnings per share was primarily due to the change in fair value of contingent consideration of $21.9 million for the nine-months ended September 30, 2021, as well as increased spending to expand our commercial capability in the United States, partially offset by increased revenue.
Non-GAAP Financial Measures
We present certain information with respect to adjusted gross profit and adjusted gross margin, adjusted Earnings Before Interest, Tax, Depreciation and Amortization, or EBITDA, adjusted net income, adjusted diluted earnings per share or adjusted EPS, which are financial measures not based on any standardized methodology prescribed by accounting principles generally accepted in the United States, or GAAP, and is not necessarily comparable to similarly titled measures presented by other companies.
We have presented adjusted gross profit and adjusted gross margin, adjusted EBITDA, adjusted net income, adjusted EPS, because they are key measures used by our management and board of directors to understand and evaluate our operating performance and to develop operational goals for managing our business. We believe these financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. In particular, we believe that the exclusion of these items in calculating these measures can provide a useful tool for period-to-period comparisons of our core operating performance. Accordingly, we believe that these measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects and allowing for greater transparency with respect to key financial metrics used by our management in their financial and operational decision-making.
Adjusted Gross Profit and Adjusted Gross Margin
We define adjusted gross profit as our gross profit excluding amortization of certain acquired intangible assets, the impact of inventory fair-value step up associated with our recent acquisitions and certain product rationalization charges. The amortized assets contribute to revenue generation, and the amortization of such assets will likely continue in future periods until such assets are fully amortized. These assets include the fair value of certain identified assets acquired in acquisitions, including developed technology and acquired tradenames. We define adjusted gross margin as adjusted gross profit divided by total revenue.
The following is a reconciliation of adjusted gross profit to gross profit for the three- and nine-month periods ended September 30, 2022 and 2021, respectively:
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Gross Profit |
$ | 22,779 | $ | 23,023 | $ | 69,445 | $ | 64,809 | ||||||||
| Product rationalization related charges |
2,636 | - | 2,636 | 2,063 | ||||||||||||
| Acquisition related intangible asset amortization |
1,562 | 1,562 | 4,686 | 4,686 | ||||||||||||
| Acquisition related inventory step up |
- | 1,458 | - | 6,244 | ||||||||||||
| Adjusted Gross Profit |
$ | 26,977 | $ | 26,043 | $ | 76,767 | $ | 77,802 | ||||||||
| Adjusted Gross Margin |
67 | % |
66 | % |
66 | % |
69 | % |
||||||||
Adjusted gross profit for the three- and nine-month periods ended September 30, 2022 increased by $1.0 million and decreased $1.0 million to $27.0 million and $76.8 million, respectively, representing adjusted gross margin of 67% and 66%. Adjusted gross profit for the three- and nine-month periods ended September 30, 2021 was $26.0 million and $77.8 million, respectively, representing gross margin of 66% and 69%, respectively. The decrease in adjusted gross margin for the nine-month period ended September 30, 2022, was primarily due to higher manufacturing costs and production inefficiencies caused in part by supply chain and staffing challenges.
Adjusted EBITDA
We present information below with respect to adjusted EBITDA, which we define as our net income (loss) excluding interest and other income, net, income tax benefit (expense), depreciation and amortization, stock-based compensation, product rationalization, and acquisition related expenses. In light of the COVID-19 pandemic, we have also excluded the impacts of goodwill impairment charges and changes in the fair value of contingent consideration associated with our acquisition transactions in early 2020.
Adjusted EBITDA is not prepared in accordance with US GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with US GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net income (loss), which is the nearest US GAAP equivalent. Some of these limitations are:
| ● |
adjusted EBITDA excludes depreciation and amortization, and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA; |
| ● |
we exclude stock-based compensation expense from adjusted EBITDA although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our employee compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses likely would be higher, which would affect our cash position; |
| ● |
we exclude acquisition related expenses, including transaction costs and other related expenses, amortization and depreciation of acquired assets in recent acquisitions, and the impact of inventory fair-value step up on cost of revenue; |
| ● |
we exclude certain impairment charges, including certain product rationalization charges as a result of managing our financial position in light of our recent acquisitions, the impact of COVID-19 and changing regulatory requirements; |
| ● |
we exclude goodwill impairment charges and changes in the fair value of contingent consideration; |
| ● |
the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results; |
| ● |
adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs; |
| ● |
adjusted EBITDA does not reflect (benefit from) provision for income taxes or the cash requirements to pay taxes; and |
| ● |
adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments. |
The following is a reconciliation of net income (loss) to adjusted EBITDA for the three- and nine-month periods ended September 30, 2022 and 2021, respectively:
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Net (loss) income |
$ | (4,175 | ) |
$ | 558 | $ | (9,951 | ) |
$ | 9,927 | ||||||
| Interest and other expense, net |
(436 | ) |
48 | (378 | ) | 141 | ||||||||||
| (Benefit from) provision for income taxes |
(1,187 | ) |
694 | (2,404 | ) |
1,670 | ||||||||||
| Depreciation and amortization |
1,549 | 1,789 | 4,980 | 5,226 | ||||||||||||
| Share-based compensation |
3,876 | 2,863 | 10,502 | 7,919 | ||||||||||||
| Product rationalization |
2,636 | - | 2,636 | 2,063 | ||||||||||||
| Acquisition related intangible asset amortization |
1,787 | 1,787 | 5,361 | 5,361 | ||||||||||||
| Acquisition related inventory step up |
- | 1,458 | - | 6,244 | ||||||||||||
| Change in fair value of contingent consideration |
- | (3,450 | ) |
- | (21,920 | ) |
||||||||||
| Adjusted EBITDA |
$ | 4,050 | $ | 5,747 | $ | 10,746 | $ | 16,631 | ||||||||
Adjusted EBITDA for the three-month period ended September 30, 2022, decreased by $1.6 million as compared with the same period in 2021. The decrease in adjusted EBITDA for the period was primarily due to increased commercial spending to support future growth as certain marketing and medical education activities were more limited in 2021.
Adjusted EBITDA for the nine-month period ended September 30, 2022, decreased $5.9 million as compared with the same period in 2021. The decrease in adjusted EBITDA for the period was primarily due to lower adjusted gross profit, from higher manufacturing costs and production inefficiencies caused in part by supply chain and staffing challenges, as well as an increase in operating expenses primarily attributable to expansion of our commercial capability in the United States.
Adjusted Net Income (Loss) and Adjusted EPS
We present information below with respect to adjusted net income (loss) and adjusted EPS. We define adjusted net income (loss) as our net income (loss) excluding acquisition-related expenses, amortization and depreciation of acquired assets, the impact of inventory fair-value step up on cost of revenue and the impacts of goodwill impairment charges and changes in the fair value of contingent consideration, as well as certain impairment charges, including product rationalization charges, on a tax effected basis. Acquisition related expenses are those that we would not have incurred except as a direct result of acquisition transactions. Acquisition related expenses consist of investment banking, legal, accounting, and other professional and related expenses. The amortized assets contribute to revenue generation, and the amortization of such assets will recur in future periods until such assets are fully amortized. These assets include the estimated fair value of certain identified assets acquired in acquisitions, including in-process research and development, developed technology, customer relationships and acquired tradenames. We define adjusted EPS as US GAAP diluted earnings (loss) per share excluding the above adjustments to net income used in calculating adjusted net income, each on a per share and tax effected basis.
The following is a reconciliation of adjusted net income (loss) to net income (loss) for the three- and nine-month periods ended September 30, 2022 and 2021, respectively:
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Net (loss) income |
$ | (4,175 | ) |
$ | 558 | $ | (9,951 | ) |
$ | 9,927 | ||||||
| Product rationalization, tax effected |
2,056 | - | 1,947 | 1,590 | ||||||||||||
| Impairment on property and equipment; tax effected |
- | - | - | - | ||||||||||||
| Acquisition related intangible asset amortization; tax effected |
1,394 | 1,146 | 3,960 | 3,898 | ||||||||||||
| Acquisition related inventory step up, tax effected |
- | 935 | - | 4,626 | ||||||||||||
| Change in fair value of contingent consideration, tax effected |
- | (1,865 | ) | - | (17,152 | ) | ||||||||||
| Adjusted net (loss) income |
$ | (725 | ) |
$ | 774 | $ | (4,044 | ) |
$ | 2,889 | ||||||
The following is a reconciliation of adjusted EPS to diluted earnings (loss) per share for the three- and nine-month periods ended September 30, 2022 and 2021:
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Diluted (loss) earnings per share (EPS) |
$ | (0.29 | ) |
$ | 0.04 | $ | (0.68 | ) |
$ | 0.68 | ||||||
| Product rationalization, tax effected |
0.14 | - | 0.13 | 0.11 | ||||||||||||
| Impairment on Property and Equipment |
- | - | - | |||||||||||||
| Acquisition related intangible asset amortization; tax effected |
0.10 | 0.08 | 0.27 | 0.27 | ||||||||||||
| Acquisition related inventory step up, tax effected |
- | 0.06 | - | 0.32 | ||||||||||||
| Change in fair value of contingent consideration, tax effected |
- | (0.13 | ) |
- | (1.18 | ) |
||||||||||
| Adjusted diluted (loss) earnings per share (EPS) |
$ | (0.05 | ) |
$ | 0.05 | $ | (0.28 | ) |
$ | 0.20 | ||||||
Adjusted net (loss) income and adjusted diluted (loss) income per share in the three-month period ended September 30, 2022 decreased by $1.5 million or $0.10, respectively, as compared with the same period in 2021. The decrease for the period was primarily due to increased commercial spending to support future growth as certain marketing and medical education activities were more limited in 2021.
Adjusted net (loss) income in and adjusted diluted (loss) income per share the nine-month period ended September 30, 2022, decreased $6.9 million or $0.48, as compared with the same period in 2021. The decrease in adjusted net income for the period was primarily due to lower adjusted gross profit, from higher manufacturing costs and production inefficiencies caused in part by supply chain and staffing challenges due largely to the impact of the COVID-19 pandemic, as well as an increase in selling and marketing expenses primarily attributable to increased cost to support our commercial capability in the United States and an increase in stock-based compensation expense driven by incremental headcount associated with the Company’s strategic transformation that accelerated in 2020 and 2021.
Liquidity and Capital Resources
We require cash to fund our operating activities and to make capital expenditures and other investments in the business. We expect that our requirements for cash to fund these uses will increase as our operations expand. We continue to generate cash from operating activities and believe that our operating cash flows, cash currently on our condensed consolidated balance sheet and availability under our credit facility will be sufficient to allow us to continue to invest in our existing business, to manage our capital structure on a short and long-term basis, and to meet our anticipated operating cash needs. Cash, cash equivalents, and investments aggregated $87.8 million and $94.4 million, and working capital totaled $141.4 million and $138.7 million, at September 30, 2022 and December 31, 2021, respectively. We are closely monitoring our liquidity and capital resources for any potential impact that the COVID-19 pandemic may have on our operations.
On November 12, 2021, we entered into a Third Amendment to Credit Agreement with Bank of America N.A. as administrative agent, which amended our existing revolving line of credit agreement dated October 24, 2017 which provides up to $75.0 million in the form of a senior revolving line of credit. Subject to certain conditions, we may request up to an additional $75.0 million for a maximum aggregate commitment of $150.0 million. As of September 30, 2022, and December 31, 2021, there were no outstanding borrowings, and we are in compliance with the terms of the credit facility.
| Nine Months Ended September 30, |
||||||||
| 2022 |
2021 |
|||||||
| Cash provided by (used in) |
||||||||
| Operating activities |
$ | 3,928 | $ | 3,925 | ||||
| Investing activities |
(4,957 | ) |
(1,878 | ) |
||||
| Financing activities |
(5,519 | ) |
(6,839 | ) | ||||
| Effect of exchange rate changes on cash |
(61 | ) |
(49 | ) |
||||
| Net decrease in cash and cash equivalents |
$ | (6,609 | ) |
$ | (4,841 | ) | ||
The following changes contributed to the net change in cash and cash equivalents in the nine-month period ended September 30, 2022 as compared to the same period in 2021.
Operating Activities
Cash provided by operating activities was $3.9 million for nine-month period ended September 30, 2022 was consistent with the same period in 2021, as the higher net loss was in part a result of higher non-cash stock compensation expense, and was offset by an improvement in working capital attributable to timing of collections and inventory purchases.
For the foreseeable future, we expect to continue to invest in research and development for new products and clinical studies as well as continued investment in our commercial infrastructure to support our growth strategy. These costs will be funded with a combination of cash on hand and cash expected to be generated from future operations.
Investing Activities
Cash used in investing activities was $5.0 million for the nine-month period ended September 30, 2022, as compared to cash used in investing activities of $1.9 million for the same period in 2021. The change was primarily due to an increase in capital expenditures to support commercial growth of the business in the nine-month period ended September 30, 2022 and proceeds from maturities of investments that occurred in 2021.
Financing Activities
Cash used in financing activities was $5.5 million for the nine-month period ended September 30, 2022, as compared to cash used in financing activities of $6.8 million for the same period in 2021. The change was primarily attributable to lower contingent consideration payments in 2022 and lower stock option exercises in 2022.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with US GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We believe that our accounting policies for revenue recognition, accounts receivable and allowance for credit losses, goodwill, acquired in-process research and development, inventory and contingencies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. There have been no significant changes to the above critical accounting policies or in the underlying accounting assumptions and estimates used in such policies from those disclosed in our annual consolidated financial statements and accompanying notes included in our 2021 Form 10-K for the year ended December 31, 2021 We monitor our estimates on an ongoing basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates, if past experience or other assumptions do not turn out to be substantially accurate.
Recent Accounting Pronouncements
A discussion of Recent Accounting Pronouncements is included in our 2021 Form 10-K for the fiscal year ended December 31, 2021.
Contractual Obligations and Other Commercial Commitments
Our contractual obligations and other commercial commitments are summarized in the section captioned “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations and Other Commercial Commitments” in our 2021 Form 10-K for the year ended December 31, 2021. There were no material changes to our contractual obligations reported in our 2021 Form 10-K during the nine months ended September 30, 2022 other than changes in operating leases reported in Note 8. For additional discussion, see Note 10 to the condensed consolidated financial statements included in this report.
To the extent that funds generated from our operations, together with our existing capital resources, are insufficient to meet future requirements, we will be required to obtain additional funds through equity or debt financings, strategic alliances with corporate partners and others, or through other sources. No assurance can be given that any additional financing will be made available to us or will be available on acceptable terms should such a need arise.
Off-Balance Sheet Arrangements
We do not use special purpose entities or other off-balance sheet financing techniques that we believe have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, or capital resources.
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Our market risks and the ways we manage them are summarized in the section captioned “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes in the first nine months of 2022 to our market risks or to our management of such risks.
| CONTROLS AND PROCEDURES |
| (a) |
Evaluation of disclosure controls and procedures. |
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the chief executive officer and chief financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. On an on-going basis, we review and document our disclosure controls and procedures, and our internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.
| (b) |
Changes in internal controls over financial reporting. |
There were no material changes in our internal control over financial reporting during the quarter ended September 30, 2022, that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
| OTHER INFORMATION |
| LEGAL PROCEEDINGS |
We are involved from time-to-time in various legal proceedings arising in the normal course of business. Although the outcomes of these legal proceedings are inherently difficult to predict, we do not expect the resolution of these occasional legal proceedings to have a material adverse effect on our financial position, results of operations, or cash flow. There have been no material changes to the information provided in the section captioned “Part I, Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2021.
| RISK FACTORS |
Except as set forth below, there have been no material changes to the risk factors described in the section captioned “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as amended and supplemented by the information in “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022 and June 30, 2022. In addition to the other information set forth in this report, you should carefully consider the factors discussed in the section captioned “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and in “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, which could materially affect our business, financial condition, or future results. The risks described in our Annual Report on Form 10-K and such subsequently filed Quarterly Report on Form 10-Q, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may have a material adverse effect on our business, financial condition, and/or operating results.
Inflation could adversely affect our business, financial condition or results of operations.
Inflation has the potential to adversely affect our business, financial condition and results of operations by increasing our overall costs and increasing the risk that patients will curtail normal levels of elective orthopedic procedures due to pressure on the overall global economy. The existence of inflation in the economy has resulted in, and may continue to result in, higher shipping costs, supply shortages, increased costs of labor and other similar effects. As a result of inflation, we have experienced and may continue to experience, cost increases. Although we may take measures to mitigate the impact of inflation, if these measures are not effective our business, financial condition and results of operations could be adversely affected.
We rely on a small number of suppliers for certain key raw materials and a small number of suppliers for a number of other materials required for the manufacturing and delivery of our products, and disruption could materially adversely affect our business, financial condition, and results of operations.
Although we believe that alternative sources for many of these and other components and raw materials that we use in our manufacturing processes are available, we cannot be certain that the supply of key raw and other materials will continue to be available at current levels or will be sufficient to meet our future needs. The COVID-19 pandemic has impacted, and is expected to continue to impact, our supply chain as the companies that produce our products, product components or otherwise support our manufacturing processes, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers, including third parties that sterilize and store our products, are, or may be, disrupted, temporarily closed or experience worker shortages for a sustained period of time. For example, for the manufacture of bone preserving joint technologies, we engage a single third-party organization as a contract manufacturer. Any supply interruption could harm our ability to manufacture our products until a new source of supply is identified and qualified. We may not be able to find sufficient alternative suppliers in a reasonable time-period, or on commercially reasonable terms, if at all, and our ability to produce and supply our products and our ability to generate revenue could be impaired.
Our global supply chain has been and is expected to continue to be materially adversely impacted due to the COVID-19 pandemic and faces new and ongoing challenges related to supply constraints.
We rely upon the facilities of our global suppliers to support our business. As a result of COVID-19 and the measures designed to contain its spread, certain of our suppliers have not had the materials, capacity, or capability to supply our needed materials and other supplies that we require to manufacture our products according to our schedule and specifications. It is uncertain to what extent these supply chain challenges will continue as the COVID-19 pandemic continues to evolve. In the past several months, variants of COVID-19 surged across the globe, causing further delays in the supply chain. Despite our attempts to mitigate the impact on our business, constrained supply conditions are expected to adversely impact the amount of revenue we realize. During the first nine months of 2022, we experienced disruptions in our supply chain and manufacturing capability that impacted our revenue for the period. If we are not able to mitigate the impact of these supply shortages, our ability to generate revenue will be significantly impacted. Further, logistics issues, including our ability and our supply chain’s ability to quickly ramp up production, and transportation demands may continue to cause delays. If our suppliers’ operations are curtailed, or if our suppliers are not able to deliver materials and supplies to us as scheduled, we may need to seek alternate sources of supply, which may be more expensive or require approval from regulatory agencies which could cause further delays. Alternative sources may not be available or may result in delays in shipments to us from our supply chain and subsequently to our customers, each of which would affect our results of operations. Even if alternative sources are identified, we may not be able to quickly establish additional or replacement sources for certain components or materials due, in part, to the FDA’s manufacturing requirements. If the duration of the production and supply chain disruptions continue for an extended period of time, the impact on our supply chain could have a material adverse effect on our results of operations and cash flows.
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Issuer Purchases of Equity Securities
On May 2, 2019, we announced that our Board of Directors approved a $50.0 million share repurchase program with $30.0 million to be utilized for an accelerated share repurchase program, which was completed in January 2020, and $20.0 million reserved for open market repurchases which represents the maximum value of shares that may yet be purchased. No open market repurchases were made during the nine-month period ended September 30, 2022.
| EXHIBITS |
| Exhibit No. |
||
| 3.1 | Certificate of Incorporation of Anika Therapeutics, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 10-K (File No. 001-14027) filed by the Registrant on March 11, 2022) | |
| 3.2 | Bylaws of Anika Therapeutics, Inc., effective as of June 6, 2018 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 10-K (File No. 001-14027) filed by the Registrant on March 11, 2022) | |
| †10.1 | Anika Therapeutics, Inc. 2017 Omnibus Incentive Plan (as amended effective June 8, 2022) (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed (File No. 000-21326) by the Registrant on June 10, 2022) | |
| (31) |
Rule 13a-14(a)/15d-14(a) Certifications |
|
| (32) |
Section 1350 Certifications |
|
| (101) |
XBRL |
|
| *101 |
The following materials from Anika Therapeutics, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 as filed with the SEC on November 9, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language), as follows: |
|
| i. |
Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021 (unaudited) |
|
| ii. |
Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and September 30, 2021 (unaudited) |
|
| iii. |
Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2022 and September 30, 20201(unaudited) |
|
| iv. |
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and September 30, 2021 (unaudited) |
|
| v. |
Notes to Consolidated Financial Statements (unaudited) |
|
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
| * |
Filed herewith. |
|
| ** |
Furnished herewith. |
|
| † |
Management contract or compensatory plan or arrangement. |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ANIKA THERAPEUTICS, INC. |
|||
| Date: November 9, 2022 |
By: |
/s/ MICHAEL LEVITZ |
|
| Michael Levitz |
|||
| Executive Vice President, Chief Financial Officer and Treasurer |
|||
| (Authorized Officer and Principal Financial Officer) |
|||
Exhibit 31.1
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Cheryl Blanchard, certify that:
|
1. |
I have reviewed this report on Form 10-Q for the quarterly period ended September 30, 2022 of Anika Therapeutics, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 9, 2022
|
/s/ CHERYL BLANCHARD |
||
|
Cheryl R. Blanchard, Ph.D. |
||
|
President and Chief Executive Officer |
Exhibit 31.2
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael Levitz, certify that:
|
1. |
I have reviewed this report on Form 10-Q for the quarterly period ended September 30, 2022 of Anika Therapeutics, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 9, 2022
|
/s/ MICHAEL LEVITZ |
||
|
Michael Levitz |
||
|
Executive Vice President, Chief Financial Officer and Treasurer |
||
|
(Principal Financial Officer) |
Exhibit 32.1
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned officers of Anika Therapeutics, Inc. (the “Company”) hereby certify to their knowledge and in their respective capacities that the Company’s quarterly report on Form 10-Q to which this certification is attached (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 9, 2022
|
/s/ CHERYL BLANCHARD |
||
|
Cheryl R. Blanchard, Ph.D. |
||
|
President and Chief Executive Officer |
||
|
(Principal Executive Officer) |
||
|
/s/ MICHAEL LEVITZ |
||
|
Michael Levitz |
||
|
Executive Vice President, Chief Financial Officer and Treasurer |
||
|
(Principal Financial Officer) |
This certification shall not be deemed “filed” for any purpose, nor shall it be deemed to be incorporated by reference into any filing, under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) shares in Thousands, $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Accounts receivable, reserves | $ 1,566 | $ 1,442 |
| Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
| Preferred stock, shares authorized (in shares) | 1,250 | 1,250 |
| Preferred stock, shares issued (in shares) | 0 | 0 |
| Preferred stock, shares outstanding (in shares) | 0 | 0 |
| Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized (in shares) | 90,000 | 90,000 |
| Common stock, shares issued (in shares) | 14,607 | 14,441 |
| Common stock, shares outstanding (in shares) | 14,607 | 14,441 |
Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Revenue | $ 40,264 | $ 39,536 | $ 116,614 | $ 111,973 |
| Cost of revenue | 17,485 | 16,513 | 47,169 | 47,164 |
| Gross Profit | 22,779 | 23,023 | 69,445 | 64,809 |
| Operating expenses: | ||||
| Research & development | 7,301 | 7,673 | 20,433 | 21,327 |
| Selling, general & administrative | 21,276 | 17,500 | 61,745 | 53,664 |
| Change in fair value of contingent consideration | 0 | (3,450) | 0 | (21,920) |
| Total operating expenses | 28,577 | 21,723 | 82,178 | 53,071 |
| (Loss) income from operations | (5,798) | 1,300 | (12,733) | 11,738 |
| Interest and other income (expense), net | 436 | (48) | 378 | (141) |
| (Loss) income before income taxes | (5,362) | 1,252 | (12,355) | 11,597 |
| (Benefit from) provision for income taxes | (1,187) | 694 | (2,404) | 1,670 |
| Net (loss) income | $ (4,175) | $ 558 | $ (9,951) | $ 9,927 |
| Basic (in dollars per share) | $ (0.29) | $ 0.04 | $ (0.68) | $ 0.69 |
| Diluted (in dollars per share) | $ (0.29) | $ 0.04 | $ (0.68) | $ 0.68 |
| Basic (in shares) | 14,603 | 14,429 | 14,542 | 14,389 |
| Diluted (in shares) | 14,603 | 14,647 | 14,542 | 14,588 |
| Net (loss) income | $ (4,175) | $ 558 | $ (9,951) | $ 9,927 |
| Foreign currency translation adjustment | (851) | 199 | (1,779) | (777) |
| Comprehensive (loss) income | $ (5,026) | $ 757 | $ (11,730) | $ 9,150 |
Note 1 - Nature of Business |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Nature of Operations [Text Block] |
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 (“OA”) 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 sports medicine and soft tissue repair, and Arthrosurface, Inc. (“Arthrosurface”), a company specializing in less invasive, bone preserving partial and total joint replacement solutions. These acquisitions broadened the Company’s product portfolio, developed over its 30 years of expertise in hyaluronic acid technology, into the broader joint preservation and restoration market with greater market potential, added high-growth revenue streams, increased the Company’s commercial capabilities, diversified its revenue base, and expanded its product pipeline and research and development expertise.
The Company is subject to risks common to companies in the life sciences industry 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 and foreign regulations and approval requirements, as well as the ability to grow the Company’s business through appropriate commercial strategies.
There continue to be uncertainties regarding the pandemic of the ongoing 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, business partners and a broader impact on elective surgeries. The Company is unable to predict the specific 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. |
Note 2 - Basis of Presentation |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Business Description and Basis of Presentation [Text Block] |
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“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 or omitted pursuant to SEC rules and regulations relating to interim financial statements. The December 31, 2021 balances reported herein were derived from the audited consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the condensed consolidated financial statements.
The accompanying unaudited condensed 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, 2021. The results of operations for the three-month and nine-month periods ended September 30, 2022, are not indicative of the results to be expected for the year ending December 31, 2022
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 as of September 30, 2022. Based on the criteria established by Accounting Standards Codification 280, Segment Reporting, the Company has one operating and reportable segment.
|
Note 3 - Business Combinations |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination Disclosure [Text Block] |
Parcus Medical, LLC
On January 24, 2020, the Company 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”). Parcus Medical is a sports medicine implant and instrumentation solutions provider focused on surgical repair and reconstruction of soft tissue.
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, as of January 24, 2020, which consisted of:
Pursuant to the Parcus Medical Merger Agreement, contingent consideration represents additional payments that the Company may be required to make in the future which could total up to $60.0 million depending on the level of net sales of Parcus Medical products generated in 2020 through 2022.
The fair value of contingent consideration related to net sales as of January 24, 2020, and at each reporting date, was determined based on a Monte Carlo simulation model in an option pricing framework, whereby a range of possible scenarios were simulated. The liability for contingent consideration was included in current liabilities on the condensed consolidated balance sheets and will be remeasured at each reporting period until the contingency is resolved. During the three months ended September 30, 2022, the Company paid the contingent consideration related to net sales in the amount of $4.3 million which was included in current liabilities as of December 31, 2021. The Company does not expect any further milestones to be achieved.
Acquisition-related costs were not included as a component of consideration transferred but were 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.
Fair Value of Net Assets Acquired
The estimate of fair value as of the acquisition date 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 allocation of purchase price to the identifiable assets acquired and liabilities assumed was based on estimates of fair value as of January 24, 2020, and was as follows:
The acquired intangible assets based on estimates of fair value as of January 24, 2020 were as follows:
The fair value of developed technology will be amortized over a useful life of 15 years, the fair value of customer relationships over 10 years, and the fair value of the trade name over 5 years.
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 was impaired in 2020 and there was no remaining goodwill as of December 31, 2020.
Arthrosurface, Inc.
On February 3, 2020, the Company 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”). Arthrosurface is a joint preservation technology company specializing in less invasive, bone-preserving partial and total joint replacement solutions.
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, as of February 3, 2020 which consisted of:
Pursuant to the Arthrosurface Merger Agreement, the Company could 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 of Arthrosurface products from 2020 through 2021. The fair value of contingent consideration related to regulatory milestones as of February 3, 2020 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 net sales achievement as of February 3, 2020 was determined based upon a Monte Carlo simulation approach at acquisition date, whereby a range of possible scenarios were simulated. The Company paid $5.0 million in October 2020 and $10.0 million in July 2021 based upon the achievement of two distinct regulatory milestones. As of September 30, 2022, there were no milestones remaining.
Acquisition-related costs were not included as a component of consideration transferred but were 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.
Fair Value of Net Assets Acquired
The 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 allocation of purchase price to the identifiable assets acquired and liabilities assumed was based on estimates of fair value as of February 3, 2020, as follows:
The fair value of developed technology will be amortized over an estimated useful life of 15 years, the fair value of customer relationships over 10 years, and the fair value of trade names over 5 years. A total of $0.6 million represents the fair value of IPR&D with an indefinite useful life which was impaired during the quarter ended December 31, 2021.
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 was impaired in 2020 and there was no remaining goodwill as of December 31, 2020. |
Note 4 - Fair Value Measurements |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Text Block] |
The Company has certain cash equivalents in money market funds that are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets. For cash, accounts receivables, accounts payable, and accrued interest, 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. There were no transfers between fair value levels during the nine-month periods ended September 30, 2022 or 2021. See Note 3, Business Combinations for additional discussion of contingent consideration as of September 30, 2022.
Contingent Consideration
The following table provides a rollforward of the contingent consideration related to business acquisitions discussed in Note 3, Business Combinations
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 5 - Inventories |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Text Block] |
Inventories consist of the following:
Inventories are stated net of inventory reserves of $10.0 million and $9.1 million as of September 30, 2022 and December 31, 2021, respectively. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 6 - Intangible Assets |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Text Block] |
The aggregate amortization expense related to intangible assets was $1.9 million and $2.0 million for the three-month periods ended September 30, 2022 and 2021, respectively, and $5.8 million and $5.9 million for each of the nine-month periods ended September 30, 2022 and 2021. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 7 - Goodwill |
9 Months Ended | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||
| Goodwill Disclosure [Text Block] |
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.
Changes in the carrying value of goodwill for the nine months ended September 30, 2022 were as follows:
|
||||||||||||||||||||||
Note 8 - Leases |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lessee, Operating Leases and Finance Leases [Text Block] |
The Company leases its buildings and manufacturing facilities under operating leases. As of September 30, 2022, the Company had real estate leases in Bedford, Massachusetts, Franklin, Massachusetts, Sarasota, Florida, Warsaw, Indiana and Padova, Italy.
In June 2022, the Company finalized renewal options to extend the current term of its leases for its building and manufacturing facility in Bedford as well as its two facilities in Sarasota. With the extension of these renewal options, the Bedford lease term extends to 2027 with several lease renewal options into 2038 and the two leases in Sarasota extend to 2027 but may be extended by mutual agreement. The Sarasota leases also include a right to terminate in 2025 at the Company’s option. The current term of the Franklin lease extends to 2023 and the current term of the Padova lease extends to 2032, with a right to terminate at the Company’s option without penalty.
The following table summarizes the Company’s significant commitments under lease agreements as of September 30, 2022:
During the three and nine months ended September 30, 2022, the Company incurred lease expense of $0.8 million and $2.1 million, respectively. During the three and nine months ended September 30, 2021, the Company incurred lease expense of $0.6 million and $1.9 million, respectively. As of September 30, 2022, the weighted average remaining operating lease term was 15.0 years and the weighted average incremental borrowing rate used to determine the operating lease liability was 3.6%. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 9 - Accrued Expenses and Other Liabilities |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Liabilities Disclosure [Text Block] |
Accrued expenses and other liabilities consist of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 10 - Commitments and Contingencies |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Commitments and Contingencies Disclosure [Text Block] |
In certain of its contracts, the Company warrants to its customers that the products it manufactures conform to the product specifications as in effect at the time of delivery of the specific product. The Company may also warrant that the products it manufactures do not infringe, violate, or breach any U.S. or international patent or intellectual property right, trade secret, or other proprietary information of any third party. On occasion, the Company contractually indemnifies its customers against any and all losses arising out of, or in any way connected with, any claim or claims of breach of its warranties or any actual or alleged defect in any product caused by the negligent acts or omissions of the Company. The Company maintains a products liability insurance policy that limits its exposure to these risks. Based on the Company’s historical activity, in combination with its liability insurance coverage, the Company believes the estimated fair value of these indemnification agreements is immaterial. The Company had no accrued warranties as of September 30, 2022 or December 31, 2021 and has no history of claims paid.
The Company is also involved from time-to-time in various legal proceedings arising in the normal course of business. Although the outcomes of these legal proceedings are inherently difficult to predict, the Company does not expect the resolution of these occasional legal proceedings to have a material adverse effect on its financial position, results of operations, or cash flow.
On October 21, 2021, the Company received notice that the former unitholders of Parcus Medical had filed a request for arbitration regarding the earnout provisions agreed to in the Parcus Medical Merger Agreement. The Company has engaged in the arbitration process and does not anticipate a resolution during 2022. The Company is unable to estimate the potential liability with respect to this matter at this time. There are numerous factors that make it difficult to estimate reasonably possible loss or range of loss at this stage of the matter, including the significant number of legal and factual issues still to be resolved in the arbitration process. The Company intends to vigorously defend against the claims and believes it has strong defenses to the claims asserted. |
Note 11 - Revenue and Geographic Information |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contract with Customer [Text Block] |
Revenue by product family was as follows:
Revenue from the Company’s sole significant customer, DePuy Synthes Mitek Sports Medicine (“Mitek”), part of the Johnson & Johnson Medical Companies, as a percentage of the Company’s total revenue was 45% and 51% for the three months ended September 30, 2022 and 2021, respectively, and 43% and 46% for the nine months ended September 30, 2022 and 2021, respectively
The Company receives payments from our customers based on billing schedules established in each contract. Up-front payments are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements. Amounts are recorded as accounts receivable when our right to consideration is unconditional. Deferred revenue was $0.1 million and $1.0 million as of September 30, 2022 and December 31, 2021, respectively.
Total revenue by geographic location was as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 12 - Equity Incentive Plan |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement [Text Block] |
Equity Incentive Plan
The Anika Therapeutics, Inc. 2017 Omnibus Incentive Plan (the “2017 Plan”) was approved by the Company’s stockholders on June 13, 2017 and subsequently amended on June 18, 2019, June 16, 2020, June 16, 2021 and June 8, 2022. On June 8, 2022, the Company’s stockholders approved an amendment to the 2017 Plan increasing the number of shares by 250,000 shares from 4.6 million shares to 4.85 million shares. The 2017 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted stock awards, performance restricted stock units (“PSUs”), restricted stock units (“RSUs”), total shareholder return options (“TSRs”) and performance options that may be settled in cash, stock, or other property. In accordance with the 2017 Plan approved by the Company’s stockholders, including the amendments thereto, each share award other than stock options or SARs will reduce the number of total shares available for grant by two shares. Subject to adjustment for specified types of changes in the Company’s capitalization, no more than 4.85 million shares of common stock may be issued under the 2017 Plan. There were 1.2 million shares available for future grant at September 30, 2022 under the 2017 Plan.
The Anika Therapeutics, Inc. 2021 Inducement Plan (the “Inducement Plan”) was adopted by the Company’s board of directors on November 4, 2021. The Inducement Plan reserves 125,000 shares of common stock for issuance pursuant to equity-based awards granted under the Inducement Plan. Such awards may be granted only to an individual who was not previously the Company’s employee or director with the Company. The Inducement Plan provides for the grant of awards under terms substantially similar to the 2017 Plan (as amended). There were 4,883 shares available for future grant at September 30, 2022 under the Inducement Plan.
The Company may satisfy the awards upon exercise, or upon fulfillment of the vesting requirements for other equity-based awards, with either newly issued shares or shares reacquired by the Company. Stock-based awards are granted with an exercise price equal to or greater than the market price of the Company’s stock on the date of grant. Awards contain service conditions or service and performance conditions, and they generally become exercisable ratably over years with a maximum contractual term of years.
The Company presents the expenses related to stock-based compensation awards in the same expense line items as cash compensation paid to each of its employees as follows (in thousands):
Stock Options
Stock options are granted to purchase common shares at prices that are equal to the fair market value of the shares on the date the options are granted or, in the case of premium options, are granted with an exercise price at 110% of the market price of the Company’s common stock on the date of grant. Options generally vest in equal annual installments over a period of years and expire 10 years after the date of grant. The grant-date fair value of options is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.
The following summarizes the activity under the Company’s stock option plans:
The aggregate intrinsic value of options exercised for the nine-month period ended September 30, 2022 was immaterial.
The Company granted 486,901 stock options during the nine-month ended September 30, 2022, of which 398,314 shares were premium-priced options.
As of September 30, 2022, there was $8.7 million of unrecognized compensation cost related to unvested stock options. This expense is expected to be recognized over a weighted average period of 1.8 years.
The Company uses the Black-Scholes pricing model to determine the fair value of options granted. The calculation of the fair value of stock options is affected by the stock price on the grant date, the expected volatility of the Company’s common stock over the expected term of the award, the expected life of the award, the risk-free interest rate and the dividend yield. The Company estimates the fair value of TSRs using Monte-Carlo simulation model where the expected volatility assumption is evaluated over 6.3 years. The actual number of TSR options that may be earned ranges from 0% to 150% of the target number, depending on the total shareholder return of the Company relative to the peer group over the vesting period of 2.7 years. There were 104,638 TSRs as of September 30, 2022.
The assumptions used in the Black-Scholes pricing model for options granted during the nine months ended September 30, 2022 and 2021, along with the weighted-average grant-date fair values, were as follows:
Restricted Stock Units
RSUs generally vest in equal annual installments over a -year period. The grant-date fair value of RSUs is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company determines the fair value of RSUs based on the closing price of its common stock on the date of grant.
RSU activity for the nine-month period ended September 30, 2022 was as follows:
The weighted-average grant-date fair value per share of RSUs granted was $25.14 for the nine-month period ended September 30, 2022. The total fair value of RSUs vested was $5.8 million and $3.9 million for the nine-month periods ended September 30, 2022 and 2021, respectively.
As of September 30, 2022, there was $14.8 million of unrecognized compensation cost related to time-based RSUs, which was expected to be recognized over a weighted-average period of 2.0 years.
Performance Stock Units
PSU activity for the nine-month ended September 30, 2022 was as follows:
The total fair value of PSUs vested was $0.6 million and $0 for the nine-month period ended September 30, 2022 and 2021, respectively. As of September 30, 2022, none of the milestones related to the outstanding PSUs were expected to be achieved.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 13 - Income Taxes |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2022 | |||
| Notes to Financial Statements | |||
| Income Tax Disclosure [Text Block] |
The Company recorded an income tax benefit of $1.2 million and $2.4 million for the three- and nine-month periods ended September 30, 2022, resulting in effective tax rates of 22.1% and 19.5%, respectively. The Company recorded income tax expense of $0.7 million and $1.7 million for the three- and nine-month periods ended September 30, 2021, based on effective tax rates of 55.4% and 14.4%, respectively.
The decrease in the effective tax rate for the three-month period ended September 30, 2022, as compared to the same period in 2021, was primarily due to non-deductible stock-option activity during the three-month period ended September 30, 2021. The increase in the effective tax rate for the nine-month period ended September 30, 2022, as compared to the same period in 2021, was primarily due to the year-to-date net tax benefit in 2021 on the change in the fair value of contingent consideration, in the amount of $1.1 million, and a year-to-date discrete charge of $0.7 million in 2022 related to non-deductible stock compensation.
The Company files income tax returns in the United States on a federal basis, in certain U.S. states, and in certain foreign jurisdictions. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate, which varies by jurisdiction.
In connection with the preparation of the financial statements, the Company assessed whether it is more likely than not that it will be able to utilize, in future periods, the Company’s deferred income tax assets to offset future taxable income and tax liabilities. The Company concluded that it is more likely than not that its deferred tax assets will be realized, after evaluation and consideration of both the positive and negative evidence. On December 31, 2021, the Company released a valuation allowance that had been previously recorded related to its net deferred tax assets in Italy in the amount of $0.9 million. The Company did record a valuation allowance on its deferred tax balances as of September 30, 2022. |
Note 14 - Earnings Per Share ("EPS") |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Text Block] |
Basic EPS is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period. Unvested restricted shares, although legally issued and outstanding, are not considered outstanding for purposes of calculating basic EPS. Diluted EPS is calculated by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding share-based awards using the treasury stock method
The following table provides share information used in the calculation of the Company's basic and diluted earnings per share (in thousands):
The Company had a net loss during the three and nine-months ended September 30, 2022, and therefore all potential common shares would have been anti-dilutive and accordingly were excluded from the computation of diluted EPS. Stock options of 1.1 million shares were outstanding for the nine-month period ended September 30, 2021, respectively, and were not included in the computation of diluted EPS because the awards’ impact on EPS would have been anti-dilutive.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 3 - Business Combinations (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Business Acquisitions, by Acquisition [Table Text Block] |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block] |
|
Note 4 - Fair Value Measurements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value, Assets Measured on Recurring Basis [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 5 - Inventories (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventory, Current [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 6 - Intangible Assets (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Finite-Lived and Indefinite-Lived Intangible Assets by Major Class [Table Text Block] |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 7 - Goodwill (Tables) |
9 Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||
| Schedule of Goodwill [Table Text Block] |
|
||||||||||||||||||||
Note 8 - Leases (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lessee, Operating Lease and Finance Lease, Liability, Maturity [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 9 - Accrued Expenses and Other Liabilities (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accrued Liabilities [Table Text Block] |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 11 - Revenue and Geographic Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from External Customers by Products and Services [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Revenue and Operating Income by Geographical Areas [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 12 - Equity Incentive Plan (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement, Option, Activity [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Nonvested Performance-Based Units Activity [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 14 - Earnings Per Share ("EPS") (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes Tables | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 3 - Business Combinations - Consideration Transferred (Details) - USD ($) $ in Thousands |
Feb. 03, 2020 |
Jan. 24, 2020 |
|---|---|---|
| Parcus Medical [Member] | ||
| Cash consideration | $ 32,794 | |
| Deferred consideration | 1,642 | |
| Estimated fair value of contingent consideration | 40,700 | |
| Estimated total purchase consideration | $ 75,136 | |
| Arthrosurface [Member] | ||
| Cash consideration | $ 61,909 | |
| Estimated fair value of contingent consideration | 28,376 | |
| Estimated total purchase consideration | $ 90,285 |
Note 3 - Business Combinations - Intangible Assets Acquired (Details) - Parcus Medical [Member] $ in Millions |
Jan. 24, 2020
USD ($)
|
|---|---|
| Intangible assets | $ 44.0 |
| Developed Technology Rights [Member] | |
| Intangible assets | 41.1 |
| Trade Names [Member] | |
| Intangible assets | 1.8 |
| Customer Relationships [Member] | |
| Intangible assets | $ 1.1 |
Note 4 - Fair Value Measurements - Contingent Consideration (Details) - Contingent Consideration [Member] - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Balance | $ 4,315 | $ 35,410 |
| Payments | (4,315) | (10,000) |
| Change in fair value | 0 | (21,920) |
| Balance | $ 0 | $ 3,490 |
Note 5 - Inventories (Details Textual) - USD ($) $ in Millions |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Inventory Valuation Reserves | $ 10.0 | $ 9.1 |
Note 5 - Inventories - Summary of Inventories (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Raw materials | $ 19,015 | $ 16,881 |
| Work-in-process | 11,650 | 11,442 |
| Finished goods | 24,277 | 26,731 |
| Total | 54,941 | 55,054 |
| Inventories | 37,237 | 36,010 |
| Other long-term assets | $ 17,704 | $ 19,044 |
Note 6 - Intangible Assets (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Amortization of Intangible Assets | $ 1.9 | $ 2.0 | $ 5.8 | $ 5.9 |
Note 7 - Goodwill - Changes in the Carrying Value of Goodwill (Details) $ in Thousands |
9 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
| |
| Balance | $ 7,781 |
| Effect of foreign currency adjustments | (1,060) |
| Balance | $ 6,721 |
Note 8 - Leases (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Operating Lease, Expense | $ 0.8 | $ 2.1 | $ 0.6 | $ 1.9 |
| Operating Lease, Weighted Average Remaining Lease Term (Year) | 15 years | 15 years | ||
| Operating Lease, Weighted Average Discount Rate, Percent | 3.60% | 3.60% | ||
Note 8 - Leases - Future Minimum Rental Payments for Leases (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| 2022 (Remainder of Year), operating leases | $ 720 | |
| 2023, operating leases | 3,081 | |
| 2024, operating leases | 3,025 | |
| 2025, operating leases | 3,066 | |
| 2026, operating leases | 2,760 | |
| Thereafter, operating leases | 27,873 | |
| Present value adjustment, operating leases | (9,421) | |
| Total lease liabilities, operating leases | 29,183 | $ 19,240 |
| Liabilities [Member] | ||
| Present value of lease payments, operating leases | 31,105 | |
| Accrued Expenses and Other Current Liabilities [Member] | ||
| Less current portion included in Accrued expenses and other current liabilities, operating leases | $ (1,922) | $ (1,526) |
Note 9 - Accrued Expenses and Other Liabilities - Summary of Accrued Expenses (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Compensation and related expenses | $ 11,166 | $ 9,523 |
| Professional fees | 3,063 | 3,590 |
| Clinical trial costs | 1,352 | 1,961 |
| Other | 496 | 1,059 |
| Total | 17,999 | 17,847 |
| Accrued Expenses and Other Current Liabilities [Member] | ||
| Operating lease liability – current | 1,922 | 1,526 |
| Financing lease liability – current | $ 0 | $ 188 |
Note 10 - Commitments and Contingencies (Details Textual) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Standard and Extended Product Warranty Accrual, Ending Balance | $ 0 | $ 0 |
Note 11 - Revenue and Geographic Information (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Revenues From Agreements as Percent of Total Revenue | 45.00% | 51.00% | 43.00% | 46.00% | |
| Contract with Customer, Liability, Total | $ 0.1 | $ 0.1 | $ 1.0 | ||
Note 11 - Revenue and Geographic Information - Revenues (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Revenue | $ 40,264 | $ 39,536 | $ 39,536 | $ 116,614 | $ 111,973 |
| OA Pain Management [member] | |||||
| Revenue | 25,665 | 26,153 | 74,139 | 69,790 | |
| Joint Preservation and Restoration [Member] | |||||
| Revenue | 11,821 | 11,193 | 36,055 | 35,296 | |
| Non-Orthopedic [Member] | |||||
| Revenue | $ 2,778 | $ 2,190 | $ 6,420 | $ 6,887 | |
Note 11 - Revenue and Geographic Information - Total Revenue by Geographic Location (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Revenue | $ 40,264 | $ 39,536 | $ 39,536 | $ 116,614 | $ 111,973 |
| Percentage of Revenue | 100.00% | 100.00% | 100.00% | 100.00% | |
| UNITED STATES | |||||
| Revenue | $ 31,093 | $ 30,910 | $ 87,552 | $ 85,984 | |
| Percentage of Revenue | 77.00% | 78.00% | 75.00% | 77.00% | |
| Europe [Member] | |||||
| Revenue | $ 4,885 | $ 4,238 | $ 15,973 | $ 14,808 | |
| Percentage of Revenue | 12.00% | 11.00% | 14.00% | 13.00% | |
| Other Location [Member] | |||||
| Revenue | $ 4,286 | $ 4,388 | $ 13,089 | $ 11,181 | |
| Percentage of Revenue | 11.00% | 11.00% | 11.00% | 10.00% | |
Note 12 - Equity Incentive Plan - Total Stock-based Compensation Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Stock-based compensation expense | $ 3,876 | $ 2,863 | $ 10,502 | $ 7,919 |
| Stock-based compensation expense | 3,876 | 2,863 | 10,502 | 7,919 |
| Cost of Sales [Member] | ||||
| Stock-based compensation expense | 242 | 142 | 645 | 485 |
| Stock-based compensation expense | 242 | 142 | 645 | 485 |
| Research and Development Expense [Member] | ||||
| Stock-based compensation expense | 397 | 360 | 1,267 | 1,003 |
| Stock-based compensation expense | 397 | 360 | 1,267 | 1,003 |
| Selling, General and Administrative Expenses [Member] | ||||
| Stock-based compensation expense | 3,237 | 2,361 | 8,590 | 6,431 |
| Stock-based compensation expense | $ 3,237 | $ 2,361 | $ 8,590 | $ 6,431 |
Note 12 - Equity Incentive Plan - Assumptions Used to Estimate Fair Value of Stock Options and Stock Appreciation Rights (Details) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Expected life (years) (Year) | 4 years 6 months | 4 years |
| Expected dividend yield | 0.00% | 0.00% |
| Fair value per option | 0.1126 | 0.1455 |
| Minimum [Member] | ||
| Risk free interest rate | 1.30% | 0.30% |
| Expected volatility | 53.80% | 54.80% |
| Maximum [Member] | ||
| Risk free interest rate | 3.40% | 0.70% |
| Expected volatility | 55.50% | 56.10% |
Note 12 - Equity Incentive Plan - Restricted Stock Activity (Details) - Restricted Stock Units (RSUs) [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2022
$ / shares
shares
| |
| Outstanding, shares (in shares) | shares | 412,658 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 36.33 |
| Granted (in shares) | shares | 507,524 |
| Granted, weighted average grant date fair value (in dollars per share) | $ / shares | $ 25.14 |
| Vested, shares (in shares) | shares | (159,871) |
| Vested, weighted average grant date fair value (in dollars per share) | $ / shares | $ 36.48 |
| Forfeited and cancelled, shares (in shares) | shares | (67,389) |
| Forfeited and cancelled, weighted average grant date fair value (in dollars per share) | $ / shares | $ 32.45 |
| Outstanding, shares (in shares) | shares | 692,922 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 28.48 |
Note 12 - Equity Incentive Plan - Performance Stock Units (Details) - Performance Shares [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2022
$ / shares
shares
| |
| Outstanding, shares (in shares) | shares | 158,297 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 37.44 |
| Performance factor adjustment (in shares) | shares | 2,125 |
| Performance factor adjustment (in dollars per share) | $ / shares | $ 32.53 |
| Vested, shares (in shares) | shares | (19,125) |
| Vested, weighted average grant date fair value (in dollars per share) | $ / shares | $ 32.53 |
| Forfeited and cancelled, shares (in shares) | shares | (23,400) |
| Forfeited and cancelled, weighted average grant date fair value (in dollars per share) | $ / shares | $ 41.86 |
| Outstanding, shares (in shares) | shares | 117,897 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 34.98 |
Note 13 - Income Taxes (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Income Tax Expense (Benefit), Total | $ (1,187) | $ 694 | $ (2,404) | $ 1,670 | |
| Effective Income Tax Rate Reconciliation, Percent, Total | 22.10% | 55.40% | 19.50% | 14.40% | |
| Income Tax Expense (Benefit), Change in Fair Value of Contingent Consideration | $ 1,100 | ||||
| Effective Income Tax Rate Reconciliation, Nondeductible Expense, Share-Based Payment Arrangement, Amount | $ 700 | ||||
| Deferred Tax Assets, Valuation Allowance | $ 0 | $ 0 | |||
| Foreign Tax Authority [Member] | Ministry of Economic Affairs and Finance, Italy [Member] | |||||
| Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount | $ (900) | ||||
Note 14 - Earnings Per Share ("EPS") (Details Textual) shares in Millions |
9 Months Ended |
|---|---|
|
Sep. 30, 2021
shares
| |
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 1.1 |
Note 14 - Earnings Per Share ("EPS") - Basic and Diluted Earnings Per Share (Details) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Shares used in the calculation of basic earnings per share (in shares) | 14,603 | 14,429 | 14,542 | 14,389 |
| Share-based payment awards (in shares) | 0 | 218 | 0 | 199 |
| Diluted shares used in the calculation of earnings per share (in shares) | 14,603 | 14,647 | 14,542 | 14,588 |