|
|
|
|
|
Delaware
|
56-2463152
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
28 Crosby Drive
Bedford, MA
|
01730
|
(Address of principal executive offices)
|
(Zip Code)
|
|
|
|
Title of Class
|
|
Name of Exchange on Which Registered
|
Common Stock, $0.00001 par value
|
|
NASDAQ Global Select Market
|
Large accelerated filer
|
¨
|
Accelerated filer
|
þ
|
|
|
|
|
Non-accelerated filer
|
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
¨
|
|
|
Page
|
|
|
Item 8. Financial Statements
and Supplementary Data
|
|
•
|
our estimates regarding the potential market opportunity and timing of estimated commercialization for our current and future products, including our iUni, iDuo, iTotal CR, iTotal PS and, if we receive required marketing clearances or approvals, our iTotal Hip;
|
•
|
our expectations regarding our sales, expenses, gross margins and other results of operations;
|
•
|
our strategies for growth and sources of new sales;
|
•
|
maintaining and expanding our customer base and our relationships with our independent sales representatives and distributors;
|
•
|
our current and future products and plans to promote them;
|
•
|
anticipated trends and challenges in our business and in the markets in which we operate;
|
•
|
the implementation of our business model, strategic plans for our business, products, product candidates and technology;
|
•
|
the future availability of raw materials used to manufacture, and finished components for, our products from third-party suppliers, including single source suppliers;
|
•
|
product liability claims;
|
•
|
the impact of our voluntary recall initiated in August 2015 on our business operations, financial results and customer relations;
|
•
|
patent infringement claims;
|
•
|
our ability to retain and hire necessary employees and to staff our operations appropriately;
|
•
|
our ability to compete in our industry and with innovations by our competitors;
|
•
|
potential reductions in reimbursement levels by third-party payors and cost containment efforts of accountable care organizations;
|
•
|
our ability to protect proprietary technology and other intellectual property and potential claims against us for infringement of the intellectual property rights of third parties;
|
•
|
potential challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the U.S. Food and Drug Administration and foreign government regulators, such as more stringent requirements for regulatory clearance of our products;
|
•
|
the impact of federal legislation to reform the United States healthcare system and the reimposition of the 2.3 percent medical device excise tax if and when the current moratorium is lifted;
|
•
|
the anticipated adequacy of our capital resources to meet the needs of our business;
|
•
|
our expectations regarding the time during which we will be an emerging growth company under the JOBS Act; and
|
•
|
our plans related to the move of our offices from Bedford, Massachusetts to Billerica, Massachusetts and Wilmington, Massachusetts.
|
•
|
iFit Design
, our proprietary algorithms and computer software that we use to design customized implants and associated single-use, patient-specific instrumentation, which we refer to as iJigs, based on a computed tomography, or CT, scan of the patient and to prepare a surgical plan customized for the patient that we call iView.
|
▪
|
iFit Printing
, a three-dimensional, or 3D, printing technology that we use to manufacture iJigs and that we may extend to manufacture certain components of our customized knee replacement implants.
|
•
|
iFit Just-in-Time Delivery
, our just-in-time manufacturing and delivery capabilities.
|
•
|
For the patient.
We believe that our individualized approach offers better clinical outcomes when compared to off-the-shelf implants based on the following measures:
|
▪
|
Better fit
.
We design our customized knee implants to restore the patient's own native anatomy. As a result, we believe that our implants fit better.
|
▪
|
Faster recovery
.
We believe an individual fit requires less bone and soft tissue removal by the surgeon, thereby shortening recovery times.
|
•
|
Better function
.
We design our customized knee implants to follow the particular shape and contour of the patient's knee. As a result, we believe our implants offer an increased potential for a knee that moves more naturally and is more stable.
|
▪
|
Greater patient satisfaction
.
We believe our implants offer patients greater overall satisfaction with the results of their knee replacement.
|
•
|
For the surgeon.
We believe that the combination of the use of our iJigs with our customized knee replacement implants enables a more accurate, reproducible and simplified surgical procedure by reducing the number of required steps and increasing the precision of the placement of the implant. Our summary of a retrospective study of 200 knee replacement surgeries published in 2014 in the peer-reviewed
Journal of Arthroplasty
, or the 2014 JOA Study, indicates that our iTotal CR implant was 1.8 times more likely to be in
|
•
|
For the hospital.
We believe that our customized knee replacement implants and iFit technology platform provide a better economic outcome for hospitals by:
|
•
|
improving patient recovery times, reducing blood loss and reducing adverse event rates at discharge;
|
▪
|
reducing the costs associated with managing and sterilizing large numbers of reusable instruments; and
|
▪
|
improving turnaround times with the potential for more procedures to be completed within the same amount of time and for the hospital to generate additional revenue.
|
•
|
iFit Design
, our proprietary algorithms and computer software that we use to design customized implants and associated iJigs based on a CT scan of the patient and to prepare a surgical plan customized for the patient that we call iView.
|
•
|
iFit Printing
, a 3D printing technology that we use to manufacture iJigs and may extend to manufacture certain components of our customized knee replacement implants.
|
•
|
iFit Just-in-Time Delivery
, our just-in-time manufacturing and delivery capabilities. We manufacture the customized replacement joint and iJigs to order and do not maintain significant inventory of finished products. We deliver the customized knee replacement implant and iJigs to the hospital in advance of the scheduled arthroplasty procedure.
|
|
|
CT scan
The surgeon orders a standard diagnostic CT scan of the patient's knee, along with a few CT images of the hip and ankle. The CT scan is then sent to ConforMIS.
|
|
|
|
|
|
Recreating the knee using three-dimensional modeling
We use our proprietary algorithms and computer software to map the articular surfaces of the knee joint, define the areas of disease and convert the imaging data into a three-dimensional model of the knee. Our software is designed to correct for deformities caused by osteoarthritis and to digitally recreate the biomechanical axes of the patient's knee, which is important in determining proper rotation and alignment of the implant.
|
|
|
|
|
|
Personalizing the implant
Our engineers use computer-aided design, or CAD, software to design the customized implant and iJigs that will precisely match the three-dimensional model of the patient's knee. We are able to model the implant contact surfaces and maximize contact area for each patient with the goal of reducing polyethylene wear, a common reason for implant failure.
|
|
|
|
|
|
Development of patient-specific surgical plan
For each patient, we generate and provide the surgeon with iView, which allows the surgeon to visualize all preoperative planning information, including surgical steps, measurements and orientations. We make iView available to the surgeon electronically in advance of the procedure and include iView in a single package with our customized implant and iJigs.
|
|
|
|
|
|
Just-in-time delivery to hospital
We deliver the patient's customized knee implant, iJigs and iView to the hospital in advance of the surgery. We are able to deliver our products within six weeks in the United States and seven weeks internationally of the date of our receipt of an order, which includes a CT scan and an implant request form from the surgeon.
|
•
|
For the patient.
We believe that our individualized approach offers better clinical outcomes when compared to off-the-shelf implants based on the following measures:
|
▪
|
Better fit
.
Using our proprietary algorithms and computer software, we design our customized knee implants to restore the patient's own native anatomy, avoid femoral and tibial overhang and undersizing and provide proper tibial component rotation. As a result, we believe that our implants fit better, which is important to minimize pain and maintain the integrity of the implant.
|
▪
|
Faster recovery
.
We believe an individual fit requires less bone and soft tissue removal by the surgeon, resulting in less bleeding and swelling within the knee and shortened recovery times. Our summary of a study of 132 total knee replacements presented at the 2013 Annual Meeting of the British Association for Surgery of the Knee, or the 2013 BASK Study, indicates that the use of our iTotal CR resulted in a statistically significant reduction in bone resections (p<0.001), thereby preserving more of the patient's bone, and required statistically significantly fewer soft tissue cuts (p=0.046) than an off-the-shelf implant. We determine statistical significance based on a widely used, conventional statistical method that establishes the p-value of observed results. Typically, a p-value of 0.05 or less represents statistical significance, meaning that there is less than a one-in-20 likelihood that the observed results occurred by chance. The investigator who conducted this study was a paid consultant to us and a member of our scientific advisory board at the time this study was conducted.
|
▪
|
Better function
.
We design our customized implants to match the patient's natural "J" curves, corrected for deformities caused by osteoarthritis, preserve the patient's medial and lateral joint lines, and minimize up-and-down rocking and lift-off of the patient's condyles during normal knee movement. As a result, we believe that our implants have the potential to offer a more stable, natural feeling knee with normal kinematic pattern and function. Our summary of a study published online in the peer-reviewed Journal of Arthroplasty in 2016, comparing kinematics of our iTotal CR with off-the-shelf implants indicates that 21 of 24 patients studied with an iTotal CR as compared to only six of fourteen patients studied with off-the-shelf knee replacements showed a normal motion pattern for the lateral condyle during a deep knee bend. Also, the average magnitude of lateral condyle motion was significantly (p≤0.05) higher in patients with our iTotal CR implant when compared to the off-the-shelf implant. There were no differences in the motion pattern of the medial condyle. Additionally, patients with our iTotal CR exhibited significantly higher normal rotation patterns (p≤0.05), on average, when compared to patients with off-the-shelf implants. All procedures were performed by the same surgeon. This differential between the two groups was observed despite the apparent success of the implant procedure in all 38 patients based on a commonly used scoring system. We provided financial support for this study. One of the authors of this study also was a paid consultant to us, and one of them was a member of our scientific advisory board at the time this study was conducted.
|
▪
|
Greater patient satisfaction
.
We believe our customized implants offer patients greater overall satisfaction with the results of their knee replacement. Our summary of a study of 70 patients who had undergone total knee replacement presented at the 2015 International Congress for Joint Reconstruction World Arthroplasty Congress, or 2015 ICJR World Arthroplasty Congress, indicates that the self-reported patient satisfaction score was statistically significantly higher in patients who had received our iTotal CR (p=0.04) than in a control group of patients who had received an off-the-shelf knee implant. Our summary of an ongoing multicenter study of 360 patients with our iTotal CR implant, which was presented at the ICJR Pan Pacific Orthopaedic Congress in 2016, indicates that patients who have completed one year since surgery report an overall satisfaction rate of 92% as determined from their responses in a patient reported outcome survey.
|
▪
|
Earlier intervention
.
We believe that patients who undergo knee replacement with one of our products typically retain more of their bone during the surgical procedure, as compared to patients who undergo knee replacement using an off-the-shelf implant. The more bone that is preserved, the more likely the patient will have sufficient bone available if a revision surgery is necessary. As a result, patients may undergo knee replacement surgery at an earlier age.
|
•
|
For the surgeon.
We believe that our iFit technology platform offers an improved surgical procedure and greater efficiencies for surgeons when compared to knee replacements with off-the-shelf implants based on the following measures:
|
▪
|
Improved
surgical procedure
. We believe that the combination of the use of our iJigs with our customized knee implants enable a more accurate, reproducible and simplified surgical procedure by reducing the number of steps and increasing the precision of implant alignment. In our procedure, the surgeon makes a predetermined number of cuts that are specifically tailored to each patient and designed to result in a precise fit without the need for repetitive cutting of tissue and fitting of trial implants associated with an off-the-shelf knee replacement. Our summary of the 2014 JOA Study indicates that our iTotal CR implants were 1.8 times more likely to be in the desired alignment range after surgery than an off-the-shelf implant.
|
▪
|
Bone preservation
.
We believe our knee implants result in the preservation of more bone for several reasons:
|
▪
|
We use our iFit technology platform to design each of the bone cuts required to fit our customized implants so as to minimize bone resection and maximize bone preservation for the individual patient.
|
▪
|
Our femoral component is fitted using six cuts of the femur as compared to the five cuts typically used with off-the-shelf implants. We reviewed an abstract presented at the 2012 Annual Meeting of the British Association for Surgery of the Knee, which studied stress and fatigue in a six-cut femoral implant model that was thinner than a five-cut model by an average of two millimeters. The six-cut implant model displayed substantially lower maximum stress than a five-cut model at a known high-stress location. At the time of the study, two of the authors of this study were our employees, and two of the authors of this study were paid consultants to us. Based in part on this data, we believe our six-cut implants can be thinner than off-the-shelf implants without sacrificing implant strength. We believe a thinner implant requires the surgeon to remove less bone during implantation.
|
▪
|
Our summary of a peer reviewed study of 169 implants published in Reconstructive Review in 2016 indicates that our iTotal CR showed statistically significant less bone loss resection (p≤0.05) when compared to off-the-shelf implants. At the time of the study, two of the authors of this study were our employees, and one of the authors of this study was a paid consultant to us.
|
▪
|
Fewer post-operative issues
.
We believe our customized knee implants reduce the number of post-operative issues. Our review of a retrospective study of 248 patients who had undergone a total knee replacement, as presented in an abstract and further updated by a poster presented at the 2015 ICJR World Arthroplasty Congress, or the 2015 TKA Study, indicates that patients who received an iTotal CR had significantly lower transfusion rates (p=0.005) and adverse event rates at discharge (p=0.003) than patients who received an off-the-shelf total knee replacement implant. We provided financial support for this study. At the time of this study, one of the authors of this study was a paid consultant to us.
|
▪
|
Greater efficiency
.
Because of the simplified surgical procedure used with our products, we believe total operating room time is reduced when implanting an iTotal CR as compared to an off-the-shelf implant. Our summary of the results of a retrospective study of 70 patients who had undergone total knee replacement presented at the 2015 ICJR World Arthroplasty Congress indicates that average overall operating room time was statistically significantly reduced (p=0.028) for the group of patients who received an iTotal CR in comparison with patients who received an off-the-shelf knee replacement. We believe surgeons can use these time savings to increase their productivity.
|
▪
|
Improved implant and instrument management and reduced sterilization costs
.
As a result of our just-in-time delivery model, we ship our knee implants and iJigs to the hospital or other medical facility in advance of the procedure, greatly reducing the need to store implants and instruments in the hospital. In addition, we estimate that a total knee replacement procedure using an off-the-shelf implant requires approximately five to 10 double-tiered, instrument trays, which must be cleaned, sterilized and stored between procedures at significant cost to the hospital. A knee replacement procedure using our iTotal CR product requires only one tray of reusable instruments. As a result of our just-in-time delivery approach and the reduction in the requirements for reusable instruments in procedures using our products compared to an off-the-shelf implant, we believe our products meaningfully reduce a hospital's instrument cleaning, sterilizing and storage costs.
|
▪
|
Improved productivity in the OR
.
We believe that the iJigs we provide with our implants eliminate many of the intraoperative sizing steps and reduce the number of positioning steps necessary with an off-the-shelf product. In addition, our approach of delivering a single-package with pre-sterilized, single-use instruments allows for a more streamlined and efficient operating room through quick and easy set up and tear down. As a result, we believe that knee replacements with our customized total knee implants can improve turnaround times with the potential for more procedures to be completed within the same amount of time and for hospitals to generate additional revenue.
|
▪
|
Shorter stays
.
We believe that our customized total knee replacements may shorten hospital stays. Our summary of the results of the 2015 TKA Study indicates that a statistically significantly greater percentage of patients who underwent total knee replacement were discharged in fewer than three days following surgery (p=0.037) in the iTotal CR group (42%) than in the off-the-shelf group (30%). Our summary of a study presented at the ICJR Pan Pacific Orthopaedic Congress 2016, of 62 patients with either our iTotal CR or an off-the-shelf implant in a “Fast Track” protocol, also indicates that a significantly higher (p≤0.05) proportion of iTotal CR patients (66%) were discharged in less than 1 day when compared to off-the-shelf patients (30%).
|
▪
|
Fewer adverse events
.
Many insurers and third-party payors, including Medicare, require the hospital to bear the cost of treating infections and post-operative adverse events if they occur within 90 days following the implant procedure. If reusable instruments are not properly prepared prior to surgery, they are a potential source of costly infections. The lower number of reusable instruments used with our knee implants reduces the possibility of contaminated instruments. Our summary of the results of the 2015 TKA Study indicates that use of our iTotal CR statistically significantly reduced blood transfusion rates (p=0.005) and adverse event rates at discharge (p=0.003) as compared to an off-the-shelf knee implant. Our review of unpublished research sponsored by us also leads us to believe that use of our iTotal CR is associated with lower adverse event rates during the 90-day period following surgery. The reduction in adverse events observed during the 90-day period following surgery is meaningful because hospitals may not be reimbursed for additional post-operative follow up care during this period.
|
•
|
Expand our sales efforts to drive adoption of our products.
We systematically analyze market opportunities by considering factors such as the number of orthopedic surgeons, procedure volumes, pricing and reimbursement. We often seek to penetrate these markets by establishing relationships with influential surgeons who perform a high-volume of joint replacement procedures. We work with these surgeons to educate other surgeons. Our goal is to achieve a minimum ten percent market share in these markets.
|
•
|
Leverage the clinical and economic benefits of our products and technologies.
We believe our customized knee implant products offer important clinical and economic benefits to patients, surgeons and hospitals. Potential benefits include better function, less bone resection, less blood loss, greater patient satisfaction, reduced length of stay and lower adverse event rates. These potential economic benefits for hospitals also include reduced procedure times and reduced instrument management, cleaning and sterilization costs. We believe that our iFit technology platform will allow us to offer products for other joints that also afford important clinical and economic benefits. We have designed and sponsored studies that support these clinical and economic data. We will continue to establish these potential benefits through the design and sponsoring of studies to increase our available clinical and economic data.
|
•
|
Broaden our product portfolio by launching additional customized orthopedic implants.
While our initial focus has been on the knee implant market, we believe our iFit technology platform is applicable to customized implants for all major joints in the body and multiple implant subcategories within each joint. In 2015, we initiated the limited launch of iTotal PS, our posterior-stabilized total knee replacement implant, to address the largest segment of the knee replacement market, and we initiated the broad commercial launch of iTotal PS in March 2016. In addition, we initially filed for marketing clearance of the iTotal Hip, our first customized hip replacement implant, in 2015 with the FDA; however, after consultation with the FDA, we elected to withdraw the application and, on September 28, 2016, we filed a new application seeking 510(k) clearance of our iTotal Hip. We also may seek to apply our iFit technology platform to develop additional product opportunities in the knee and hip replacement markets and other orthopedic markets in the longer-term, including shoulder, other extremities, spine and ligament reconstruction.
|
•
|
Expand our just-in-time manufacturing processes.
We have built state of the art manufacturing processes, including proprietary software and 3D printing capabilities. We are continuing to invest in these processes, as we believe they provide us important competitive advantages, including:
|
▪
|
expansion of gross margin through various initiatives, including the ongoing vertical integration of some of our manufacturing processes;
|
▪
|
shorter product design and development time frames; and
|
▪
|
continuous improvement of our products without making obsolete a large inventory of implants and instruments, in contrast to manufacturers of off-the-shelf implants;
|
•
|
Enhance our patent portfolio and continue to exploit our patent position.
As of
February 28, 2017
, we own or exclusively in-license a total of approximately 450 issued patents and pending patent applications that cover customized implants and PSI for all major joints and other elements of our iFit technology platform. See Note J - "Legal Proceedings" in the financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K for information regarding our patent litigation.
|
|
|
|
iTotal CR is the only cruciate-retaining, customized total knee replacement system on the market designed to restore the natural shape of a patient's knee. We introduced the iTotal CR in May 2011 and launched new generations in each of 2012, 2013 and 2015. The iTotal CR includes a femoral implant, a tibial tray, and dual medial and lateral polyethylene inserts, which serve as a cushion between the femoral and tibial components, all of which are individually made for the particular patient, together with a polyethylene patella designed to work with our customized components.
|
|
|
|
|
|
|
|
|
|
|
|
The iTotal PS is the only posterior cruciate ligament substituting, or posterior-stabilized, customized total knee replacement product on the market designed to restore the natural shape of a patient's knee. We initiated a limited launch of the iTotal PS in the United States in February 2015, and we initiated the broad commercial launch of iTotal PS in March
2016. The iTotal PS includes a femoral implant with a metal cam, a tibial tray, and a single polyethylene insert, which includes a plastic spine, all of which are individually made for the particular patient, together with a polyethylene patella designed to work with our customized components.
|
|
|
|
|
|
|
|
|
|
|
|
The iDuo is the only customized bicompartmental knee replacement system on the market. The iDuo is considered a bicruciate-retaining knee replacement because the surgeon may retain both the anterior cruciate ligaments, or ACL, and posterior cruciate ligaments, or PCL. We first launched the iDuo in December 2007 and have launched new generations of the product in each of 2010 and 2012. The iDuo includes a femoral implant, a tibial tray and a single polyethylene insert, all of which are individually made for the particular patient, together with a polyethylene patella designed to work with our customized components.
|
|
|
|
|
|
|
|
|
|
|
|
The iUni is the only customized unicompartmental knee replacement product on the market for treatment of the medial or lateral compartment of the knee. The iUni is considered a bicruciate-retaining knee replacement because the surgeon retains both the ACL and PCL. We first launched the iUni in June 2007 and launched new generations of the product in each of 2009 and 2012. The iUni includes a femoral implant, a tibial tray and a single polyethylene insert, all of which are individually made for the particular patient.
|
|
|
•
|
improvements in our iFit technology platform to further advance production efficiency and decrease the production time from receipt of an order to delivery of our product; and
|
•
|
advancements of our iFit technology platform that will enable us to provide our customized products to a larger customer base, which we refer to as mass customization.
|
•
|
increase the production of certain components of our products that we manufacture in-house, which we believe we can manufacture at a lower unit cost than vendors we currently use;
|
•
|
continue to explore applying our 3D printing technology to select metal components of our products, which we believe can lower our unit costs compared to our current manufacturing methods;
|
•
|
develop new versions of our software used in the design of our customized joint replacement implants, which we believe will reduce costs associated with the design process;
|
•
|
continue expanding our CAD labor overseas; and
|
•
|
obtain more favorable pricing of certain components of our products manufactured for us by third parties.
|
•
|
With respect to the patents that we own relating primarily to our customized joint replacement implants, the first nonprovisional application was filed in 2002 claiming priority to a provisional application filed in 2001 and is expected to expire in 2022 and the other patents are expected to expire between 2022 and 2030.
|
•
|
With respect to the patents that we own relating primarily to our patient-specific instrumentation, the first nonprovisional application was filed in 2002 claiming priority to a provisional application filed in 2001 and is expected to expire in 2022 and the other patents are expected to expire between 2022 and 2031.
|
•
|
With respect to the patents that we own relating primarily to our iFit technology platform, the first nonprovisional application was filed in 2002 claiming priority to a provisional application filed in 2001 and is expected to expire in 2022 and the other patents are expected to expire between 2022 and 2032.
|
•
|
With respect to the patents that we exclusively in-license, the first nonprovisional application was filed in 2000 claiming priority to a provisional application filed in 1998 and is expected to expire in 2019 and the other patents are expected to expire between 2019 and 2021.
|
•
|
With respect to the patent applications that we own relating primarily to our customized joint replacement implants, patient-specific instrumentation, and our iFit technology, the first were filed in 2001 and if patents issue on these applications, they would be expected to expire in 2022 and if patents issued on the other patent applications, such patents would be expected to expire between 2023 and 2036.
|
•
|
With respect to the patent applications that we exclusively in-license, the first was filed in 1998 and if a patent issues on this application, it would be expected to expire in 2019. If patents issue on the other patent applications, such patents would be expected to expire between 2019 and 2026.
|
•
|
customized articular implants for the knee, hip, spine, shoulder, ankle and extremities;
|
•
|
customized instrumentation including for joint replacement and ligament reconstruction;
|
•
|
imaging technology;
|
•
|
3D printing technology for implants and instruments;
|
•
|
methods of designing customized implants and instruments; and
|
•
|
methods of manufacturing customized implants and instruments.
|
•
|
the ability to introduce innovative products that are differentiated from competitors' offerings and represent an improvement over currently available products;
|
•
|
the ease of use of the products and the quality of training, services and clinical support provided to surgeons and hospitals;
|
•
|
the safety and efficacy of products and procedures, as demonstrated in published studies and other clinical reports;
|
•
|
the ability to anticipate and meet customers' needs and commercialize new products in a timely manner;
|
•
|
acceptance and adoption of products by patients, physicians and hospitals; and
|
•
|
the price of products and cost effectiveness of the procedure and availability and rate of third-party reimbursement.
|
•
|
the federal healthcare Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid;
|
•
|
the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
|
•
|
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
|
•
|
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
|
•
|
the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
|
•
|
the federal transparency requirements under the Health Care Reform Law will require manufacturers of devices, drugs and medical supplies to report to the Department of Health and Human Services information related to payments and other transfers of value to physicians and teaching hospitals and physician ownership and investment interests; and
|
•
|
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.
|
•
|
expansion of our sales and marketing efforts;
|
•
|
expansion of our manufacturing capacity;
|
•
|
funding research, development and clinical activities related to our existing products and product platform, including iFit design software and product support;
|
•
|
funding research, development and clinical activities related to new products that we may develop, including other joint replacement products;
|
•
|
pursuing and maintaining appropriate regulatory clearances and approvals for our existing products and any new products that we may develop; and
|
•
|
preparing, filing and prosecuting patent applications, and maintaining and enforcing our intellectual property rights and position.
|
•
|
manage rapidly changing and expanding operations;
|
•
|
establish and increase awareness of our brand and strengthen customer loyalty;
|
•
|
restore and expand physician relationships after disruptions in supply or delays in delivery of our products;
|
•
|
implement the strategies and initiatives of our recently appointed President and Chief Executive Officer;
|
•
|
grow our direct sales force and increase the number of our independent sales representatives and distributors to expand sales of our products in the United States and in targeted international markets;
|
•
|
implement and successfully execute our business and marketing strategy;
|
•
|
respond effectively to competitive pressures, responses and developments;
|
•
|
continue to develop and enhance our products and products in development;
|
•
|
obtain regulatory clearance or approval to commercialize new products and enhance our existing products;
|
•
|
expand our presence in international markets;
|
•
|
perform clinical and economic research and studies on our existing products and current and future product candidates; and
|
•
|
attract, retain and motivate qualified personnel.
|
•
|
greater financial resources, cash flow, capital markets access and other resources for product research and development, sales and marketing and litigation;
|
•
|
significantly greater name recognition;
|
•
|
established relations with, in some cases over decades, orthopedic surgeons, hospitals and other medical facilities and third-party payors;
|
•
|
established products that are more widely accepted by, a greater number of orthopedic surgeons, hospitals and other medical facilities and third-party payors;
|
•
|
more complete lines of products for knee or other joint replacements;
|
•
|
larger and more well-established distribution networks with significant international presence;
|
•
|
products supported by long-term clinical data and long-term product survivorship data;
|
•
|
greater experience in obtaining and maintaining FDA and other regulatory approvals or clearances for products and product enhancements; and
|
•
|
more expansive portfolios of intellectual property rights and greater funds available to engage in legal action.
|
•
|
increase sales of our products;
|
•
|
negotiate more favorable prices for the materials we use to manufacture our products;
|
•
|
negotiate more favorable prices for the manufacture of certain components of our products that are manufactured for us by third parties;
|
•
|
deploy new versions of our software that reduce the costs associated with the design of our products; and
|
•
|
expand our internal manufacturing capabilities to manufacture certain components of our products at a lower unit cost than vendors we currently use.
|
•
|
comfort and experience with competitive products;
|
•
|
perceived differences in surgical technique;
|
•
|
existing relationships with competitors, competitive sales representatives and competitive distributors;
|
•
|
lack or perceived lack of evidence supporting additional patient benefits from use of our products compared to competitive products, especially products that may claim to be "customized," "patient-specific," "personalized" or "individually-made";
|
•
|
perceived convenience of using products from a more complete line of products than we offer, including as a result of our lack of a joint revision system;
|
•
|
perceived liability risks generally associated with the use of new products and procedures, including the lack of long-term clinical data;
|
•
|
perceived risks of failure of timely delivery as a result of our "just in time" manufacturing and delivery model
|
•
|
damage to our reputation as a result of our recent voluntary recall;
|
•
|
unwillingness to wait for the implants to be delivered;
|
•
|
unwillingness to submit patients to computed tomography, or CT, scans;
|
•
|
higher cost or perceived higher cost of our products compared to competitive products; and
|
•
|
the additional time commitment that may be required for training.
|
•
|
create innovative product designs;
|
•
|
accurately anticipate and meet customers' needs;
|
•
|
commercialize new products in a timely manner;
|
•
|
differentiate our offerings from competitors' offerings;
|
•
|
achieve positive clinical outcomes with new products;
|
•
|
demonstrate the safety and reliability of new products;
|
•
|
satisfy the increased demands by healthcare payors, providers and patients for shorter hospital stays, faster post-operative recovery and lower-cost procedures;
|
•
|
provide adequate medical education relating to new products; and
|
•
|
manufacture and deliver implants and instrumentation in sufficient volumes on time.
|
•
|
agreements may terminate prematurely due to disagreements or may result in litigation;
|
•
|
we may not be able to renew existing agreements on acceptable terms;
|
•
|
our independent sales representatives and distributors may not devote sufficient resources to the sale of products;
|
•
|
our independent sales representatives and distributors may be unsuccessful in marketing our products;
|
•
|
our existing relationships with distributors may preclude us from entering into additional future arrangements with other distributors; and
|
•
|
we may not be able to negotiate future agreements on acceptable terms or at all.
|
•
|
an increase in our variable interest rates;
|
•
|
an inability to access credit markets should we require external financing;
|
•
|
a reduction in the purchasing power of our European Union customers due to a deterioration of the value of the euro;
|
•
|
inventory issues due to financial difficulties experienced by our suppliers and customers, including distributors; and
|
•
|
delays in collection.
|
•
|
acquiring raw materials for 3D printing;
|
•
|
deploying new manufacturing processes, including DMLS 3D printing;
|
•
|
acquiring manufacturing equipment;
|
•
|
managing production yields;
|
•
|
maintaining quality control and assurance;
|
•
|
maintaining component availability;
|
•
|
maintaining adequate control policies and procedures;
|
•
|
hiring and retaining qualified personnel; and
|
•
|
complying with state, federal and foreign regulations.
|
•
|
potential shortages of these key raw materials;
|
•
|
potential delays in qualifying a new source of these key raw materials if our current suppliers are unable to supply us with materials that meet our specifications, pass our internal quality control requirements, and meet regulatory requirements;
|
•
|
discontinuation of a material or other component on which we rely;
|
•
|
potential insolvency or change of control transactions involving our suppliers; and
|
•
|
reduced control over delivery schedules, quality and costs.
|
•
|
the location of the supplier and proximity to our facilities in Massachusetts;
|
•
|
the availability of raw materials purchased by our suppliers;
|
•
|
workforce availability and skill required by the suppliers;
|
•
|
the complexity in manufacturing the component and general demand for the component;
|
•
|
delays and disruptions in the manufacturing processes of our vendors; and
|
•
|
disruptions in the supply chain due to weather conditions and natural disasters affecting suppliers, our employees, and freight carriers.
|
•
|
requirements or preferences for domestic products or solutions, which could reduce demand for our products;
|
•
|
differing existing or future regulatory and certification requirements;
|
•
|
extraterritorial effects of U.S. laws such as the Foreign Corrupt Practices Act;
|
•
|
effects of foreign anti-corruption laws, such as the U.K. Bribery Act 2010, or the Bribery Act;
|
•
|
changes in foreign medical reimbursement policies and programs;
|
•
|
management communication and integration problems related to entering new markets with different languages, cultures and political systems;
|
•
|
complex data privacy requirements and labor relations laws;
|
•
|
greater difficulty in collecting accounts receivable and longer collection periods;
|
•
|
difficulties in enforcing contracts;
|
•
|
difficulties and costs of staffing and managing foreign operations;
|
•
|
labor force instability;
|
•
|
the uncertainty of protection for intellectual property rights in some countries;
|
•
|
potentially adverse regulatory requirements regarding our ability to repatriate profits to the United States;
|
•
|
potentially adverse tax consequences, including on the repatriation profits to the United States;
|
•
|
tariffs and trade barriers, export regulations and other regulatory and contractual limitations on our ability to sell our products in certain foreign markets; and
|
•
|
political and economic instability and terrorism.
|
•
|
stop making, selling or using products or technologies that allegedly infringe the asserted intellectual property;
|
•
|
lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others;
|
•
|
incur significant legal expenses;
|
•
|
pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing;
|
•
|
pay the attorney fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing;
|
•
|
redesign those products that contain the allegedly infringing intellectual property, which could be costly, disruptive or infeasible; or
|
•
|
attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all.
|
•
|
decreased demand for our products;
|
•
|
injury to our reputation;
|
•
|
significant litigation costs;
|
•
|
substantial monetary awards to or costly settlements with patients, especially in the event of a class action lawsuit;
|
•
|
product recalls;
|
•
|
loss of revenue;
|
•
|
the inability to commercialize new products or product candidates; and
|
•
|
diversion of management attention from pursuing our business strategy and may be costly to defend.
|
•
|
untitled letters, warning letters, fines, injunctions or civil penalties;
|
•
|
termination of distribution authorizations;
|
•
|
recalls or seizures of products;
|
•
|
delays in the introduction of products into the market;
|
•
|
total or partial suspension of production;
|
•
|
refusal of the FDA or other regulators to grant future clearances or approvals;
|
•
|
withdrawals or suspensions of current clearances or approvals, resulting in prohibitions on sales of our products;
|
•
|
withdrawal of the CE Certificates of Conformity, which authorize us to apply the CE Mark to our products and are necessary to sell our products within the European Economic Area, or EEA, or delay in obtaining these certificates; or
|
•
|
in the most serious cases, criminal penalties.
|
•
|
the FDA or other regulatory authorities or an institutional review board may place a clinical trial on hold or partial hold;
|
•
|
institutional review boards and third-party clinical investigators may delay or reject our trial protocol;
|
•
|
third-party clinical investigators may decline to participate in a trial or may not perform a trial on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices or other FDA requirements;
|
•
|
the FDA, other regulatory authorities or an institutional review board may place a clinical trial on hold;
|
•
|
patients may not enroll in clinical trials, or patient follow-up may not occur, at the rate we expect;
|
•
|
patients may not comply with trial protocols;
|
•
|
third party clinical investigators may decline to participate in a trial or may not perform a trial on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices, or other FDA requirements;
|
•
|
third-party organizations may not perform data collection and analysis in a timely or accurate manner;
|
•
|
regulatory inspections of our clinical trials or manufacturing facilities may, among other things, require us to undertake corrective action or suspend, terminate or invalidate our clinical trials;
|
•
|
changes in governmental regulations or administrative actions; and
|
•
|
the interim or final results of the clinical trials may be inconclusive or unfavorable as to safety or effectiveness.
|
•
|
litigation involving patients who underwent procedures using our products;
|
•
|
restrictions on such products, manufacturers or manufacturing processes;
|
•
|
restrictions on the labeling or marketing of a product;
|
•
|
restrictions on product distribution or use;
|
•
|
requirements to conduct post-marketing studies or clinical trials;
|
•
|
warning letters or untitled letters;
|
•
|
withdrawal of the products from the market;
|
•
|
refusal to approve pending applications or supplements to approved applications that we submit;
|
•
|
recall of products;
|
•
|
repair, replacement, refunds, recalls or detention of our products;
|
•
|
fines, restitution or disgorgement of profits or revenues;
|
•
|
suspension or withdrawal of regulatory clearance or approval;
|
•
|
damage to relationships with any potential collaborators;
|
•
|
operating restrictions or partial suspension or total shutdown of production;
|
•
|
unfavorable press coverage and damage to our reputation;
|
•
|
refusal to permit the import or export of our products;
|
•
|
product seizure;
|
•
|
consent decrees; or
|
•
|
injunctions or the imposition of civil or criminal penalties.
|
•
|
imposes an annual excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the United States, although this tax has been suspended for 2016 and 2017;
|
•
|
establishes a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectiveness research in an effort to coordinate and develop such research;
|
•
|
implements payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models; and
|
•
|
creates an independent payment advisory board that will submit recommendations to reduce Medicare spending if projected Medicare spending exceeds a specified growth rate.
|
•
|
the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation or arranging of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;
|
•
|
the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federal healthcare program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with potential liability including mandatory treble damages and significant per-claim penalties, currently set at $5,500 to $11,000 per false claim;
|
•
|
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
|
•
|
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
|
•
|
the federal Physician Payments Sunshine Act requires applicable manufacturers of covered products to report payments and other transfers of value to physicians and teaching hospitals, with data collection beginning in August 2013; and
|
•
|
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers.
|
•
|
a slowdown in the medical device industry or the general economy;
|
•
|
actual or anticipated quarterly or annual variations in our results of operations or those of our competitors;
|
•
|
changes in accounting principles or changes in interpretations of existing principles, which could affect our financial results;
|
•
|
actual or anticipated changes in our growth rate relative to our competitors;
|
•
|
changes in earnings estimates or recommendations by securities analysts;
|
•
|
fluctuations in the values of companies perceived by investors to be comparable to us;
|
•
|
announcements by us or our competitors of new products or services, significant contracts, commercial relationships, capital commitments or acquisitions;
|
•
|
competition from existing technologies and products or new technologies and products that may emerge;
|
•
|
the entry into or modification or termination of agreements with our distributors;
|
•
|
developments with respect to intellectual property rights;
|
•
|
sales, or the anticipation of sales, of our common stock by us, our insiders or our other stockholders, including upon the expiration of contractual lock-up agreements;
|
•
|
our ability to develop, obtain regulatory approval for and market new and enhanced products on a timely basis;
|
•
|
changes in coverage and reimbursement policies by insurance companies and other third-party payors;
|
•
|
our commencement of, or involvement in, litigation;
|
•
|
additions or departures of key management or technical personnel; and
|
•
|
changes in laws or governmental regulations applicable to us.
|
•
|
seasonality in demand for our products, with reduced orders during the summer months and around year-end, followed by reduced sales of our products during the first and third quarters as a result;
|
•
|
our ability to meet the demand for our products;
|
•
|
increased competition;
|
•
|
the number, timing and significance of new products and product introductions and enhancements by us and our competitors;
|
•
|
our ability to develop, introduce and market new and enhanced versions of our products on a timely basis;
|
•
|
changes in pricing policies by us and our competitors;
|
•
|
changes in the number of cancelled sales orders and surgical cases using our implants that occur in a quarter or during other reporting periods, which may adversely affect our product margins, revenue and other aspects of our business;
|
•
|
changes in the treatment practices of orthopedic surgeons;
|
•
|
changes in distributor relationships and sales force size and composition;
|
•
|
the timing of material expense- or income-generating events and the related recognition of their associated financial impact;
|
•
|
fluctuations in foreign currency rates;
|
•
|
ability to obtain reimbursement for our products;
|
•
|
availability of raw materials;
|
•
|
work stoppages or strikes in the healthcare industry;
|
•
|
changes in FDA and foreign governmental regulatory policies, requirements and enforcement practices;
|
•
|
import and export inspections, which could impact the timing of delivery for either supplies or finished goods;
|
•
|
changes in accounting policies, estimates and treatments; and
|
•
|
general economic factors.
|
•
|
delay, defer or prevent a change in control transaction that you may otherwise perceive to be beneficial;
|
•
|
entrench our management or the board of directors; or
|
•
|
impede a merger, consolidation, takeover or other business combination involving us that other stockholders may desire.
|
•
|
establish a classified board of directors such that all members of the board are not elected at one time;
|
•
|
allow the authorized number of our directors to be changed only by resolution of our board of directors;
|
•
|
limit the manner in which stockholders can remove directors from the board;
|
•
|
establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on at stockholder meetings;
|
•
|
require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;
|
•
|
limit who may call a special meeting of stockholders;
|
•
|
authorize our board of directors to issue preferred stock, without stockholder approval, that could be used to institute a shareholder rights plan, or so called "poison pill," that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and
|
•
|
require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our certificate of incorporation or bylaws.
|
|
|
High
|
|
|
Low
|
|
||
Year ended December 31, 2015:
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
$
|
26.93
|
|
|
$
|
13.33
|
|
Fourth Quarter
|
|
$
|
23.62
|
|
|
$
|
16.53
|
|
Year ended December 31, 2016:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
17.35
|
|
|
$
|
7.555
|
|
Second Quarter
|
|
$
|
13.83
|
|
|
$
|
4.80
|
|
Third Quarter
|
|
$
|
10.00
|
|
|
$
|
6.62
|
|
Fourth Quarter
|
|
$
|
10.93
|
|
|
$
|
6.66
|
|
|
|
Years ended December 31,
|
||||||||||
(in thousands, except share and per share data)
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
|
|
|
|
|
||||||
Consolidated statements of operations data:
|
|
|
|
|
|
|
|
|
||||
Revenue
|
|
$
|
79,899
|
|
|
$
|
66,887
|
|
|
$
|
48,186
|
|
Cost of revenue
|
|
53,192
|
|
|
45,102
|
|
|
32,374
|
|
|||
Gross profit
|
|
26,707
|
|
|
21,785
|
|
|
15,812
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||
Sales and marketing
|
|
41,086
|
|
|
37,558
|
|
|
29,367
|
|
|||
Research and development
|
|
16,608
|
|
|
16,997
|
|
|
15,107
|
|
|||
General and administrative
|
|
25,157
|
|
|
23,191
|
|
|
16,763
|
|
|||
Total operating expenses
|
|
82,851
|
|
|
77,746
|
|
|
61,237
|
|
|||
Loss from operations
|
|
(56,144
|
)
|
|
(55,961
|
)
|
|
(45,425
|
)
|
|||
Other income and expenses
|
|
|
|
|
|
|
|
|
||||
Interest income
|
|
487
|
|
|
138
|
|
|
104
|
|
|||
Interest expense
|
|
(138
|
)
|
|
(1,385
|
)
|
|
(360
|
)
|
|||
Loss on extinguishment of debt
|
|
—
|
|
|
(205
|
)
|
|
—
|
|
|||
Foreign currency transaction loss
|
|
(1,607
|
)
|
|
—
|
|
|
—
|
|
|||
Other income (expense), net
|
|
(123
|
)
|
|
208
|
|
|
—
|
|
|||
Total other income/(expenses), net
|
|
(1,381
|
)
|
|
(1,244
|
)
|
|
(256
|
)
|
|||
Loss before income taxes
|
|
(57,525
|
)
|
|
(57,205
|
)
|
|
(45,681
|
)
|
|||
Income tax provision
|
|
63
|
|
|
41
|
|
|
41
|
|
|||
Net loss
|
|
$
|
(57,588
|
)
|
|
$
|
(57,246
|
)
|
|
$
|
(45,722
|
)
|
Net loss per share applicable to common stockholders—basic and diluted
|
|
$
|
(1.39
|
)
|
|
$
|
(2.60
|
)
|
|
$
|
(10.78
|
)
|
Weighted-average number of common shares used in net loss per share applicable to common stockholders—basic and diluted
|
|
41,521,629
|
|
|
21,993,066
|
|
|
4,239,564
|
|
|
|
December 31,
|
||||||||||
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
|
|
|
|
|
||||||
Consolidated balance sheet data:
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
37,257
|
|
|
$
|
117,185
|
|
|
$
|
37,900
|
|
Investments
|
|
28,242
|
|
|
—
|
|
|
—
|
|
|||
Working capital
|
|
81,577
|
|
|
132,894
|
|
|
45,036
|
|
|||
Total assets
|
|
112,810
|
|
|
159,369
|
|
|
71,278
|
|
|||
Long term debt, including current portion
|
|
—
|
|
|
478
|
|
|
10,620
|
|
|||
Total stockholders' equity
|
|
94,055
|
|
|
141,212
|
|
|
49,827
|
|
•
|
iFit Design
, our proprietary algorithms and computer software that we use to design customized implants and associated single-use patient-specific instrumentation, which we refer to as iJigs, based on computed tomography, or CT scans of the patient and to prepare a surgical plan customized for the patient that we call iView.
|
•
|
iFit Printing
, a three-dimensional, or 3D, printing technology that we use to manufacture iJigs and that we may extend to manufacture certain components of our customized knee replacement implants.
|
•
|
iFit Just-in-Time Delivery
, our just-in-time manufacturing and delivery capabilities.
|
•
|
absorbing overhead costs across a larger volume of product sales;
|
•
|
obtaining more favorable pricing for the materials used in the manufacture of our products;
|
•
|
obtaining more favorable pricing of certain component of our products manufactured for us by third parties;
|
•
|
increasing the proportion of certain components of our products that we manufacture in-house, which we believe we can manufacture at a lower unit cost than vendors we currently use;
|
•
|
developing new versions of our software used in the design of our customized joint replacement implants, which we believe will reduce costs associated with the design process; and
|
•
|
expanding our CAD labor overseas, which we believe will reduce labor costs required to design our products.
|
|
|
2016
|
|
2015
|
|
2016 vs 2015
|
|||||||||||||||
Years Ended December 31,
|
|
Amount
|
|
As a % of
Product
Revenue
|
|
Amount
|
|
As a % of
Product
Revenue
|
|
$
Change
|
|
%
Change
|
|||||||||
United States
|
|
$
|
62,366
|
|
|
79
|
%
|
|
$
|
47,223
|
|
|
75
|
%
|
|
$
|
15,143
|
|
|
32
|
%
|
Germany
|
|
14,701
|
|
|
19
|
|
|
13,795
|
|
|
22
|
|
|
$
|
906
|
|
|
7
|
|
||
Rest of world
|
|
1,854
|
|
|
2
|
|
|
1,773
|
|
|
3
|
|
|
81
|
|
|
5
|
|
|||
Product revenue
|
|
$
|
78,921
|
|
|
100
|
%
|
|
$
|
62,791
|
|
|
100
|
%
|
|
$
|
16,130
|
|
|
26
|
%
|
|
|
2015
|
|
2014
|
|
2015 vs 2014
|
|||||||||||||||
Years Ended December 31,
|
|
Amount
|
|
As a % of
Product
Revenue
|
|
Amount
|
|
As a % of
Product
Revenue
|
|
$
Change
|
|
%
Change
|
|||||||||
United States
|
|
$
|
47,223
|
|
|
75
|
%
|
|
$
|
34,350
|
|
|
71
|
%
|
|
$
|
12,873
|
|
|
37
|
%
|
Germany
|
|
13,795
|
|
|
22
|
|
|
12,549
|
|
|
26
|
|
|
$
|
1,246
|
|
|
10
|
|
||
Rest of world
|
|
1,773
|
|
|
3
|
|
|
1,287
|
|
|
3
|
|
|
486
|
|
|
38
|
|
|||
Product revenue
|
|
$
|
62,791
|
|
|
100
|
%
|
|
$
|
48,186
|
|
|
100
|
%
|
|
$
|
14,605
|
|
|
30
|
%
|
•
|
expansion of our sales and marketing efforts;
|
•
|
expansion of our manufacturing capacity;
|
•
|
funding research, development and clinical activities related to our existing products and product platform, including iFit design software and product support;
|
•
|
funding research, development and clinical activities related to new products that we may develop, including other joint replacement products;
|
•
|
pursuing and maintaining appropriate regulatory clearances and approvals for our existing products and any new products that we may develop; and
|
•
|
preparing, filing and prosecuting patent applications, and maintaining and enforcing our intellectual property rights and position.
|
|
|
Years Ended December 31,
|
|||||||||||||
|
|
2016
|
|
2015
|
|
$ Change
|
|
% Change
|
|||||||
Net cash (used in) provided by:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Operating activities
|
|
$
|
(49,132
|
)
|
|
$
|
(54,450
|
)
|
|
$
|
5,318
|
|
|
10
|
%
|
Investing activities
|
|
(35,425
|
)
|
|
(806
|
)
|
|
(34,619
|
)
|
|
(4,295
|
)
|
|||
Financing activities
|
|
3,602
|
|
|
134,565
|
|
|
(130,963
|
)
|
|
(97
|
)
|
|||
Effect of exchange rate on cash
|
|
1,027
|
|
|
(24
|
)
|
|
1,051
|
|
|
4,379
|
|
|||
Total
|
|
$
|
(79,928
|
)
|
|
$
|
79,285
|
|
|
$
|
(159,213
|
)
|
|
(201
|
)%
|
|
|
Years Ended December 31,
|
|||||||||||||
|
|
2015
|
|
2014
|
|
$ Change
|
|
% Change
|
|||||||
Net cash (used in) provided by:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Operating activities
|
|
$
|
(54,450
|
)
|
|
$
|
(43,539
|
)
|
|
$
|
(10,911
|
)
|
|
(25
|
)%
|
Investing activities
|
|
(806
|
)
|
|
(1,506
|
)
|
|
700
|
|
|
46
|
|
|||
Financing activities
|
|
134,565
|
|
|
29,337
|
|
|
105,228
|
|
|
359
|
|
|||
Effect of exchange rate on cash
|
|
(24
|
)
|
|
(613
|
)
|
|
589
|
|
|
96
|
|
|||
Total
|
|
$
|
79,285
|
|
|
$
|
(16,321
|
)
|
|
$
|
95,606
|
|
|
586
|
%
|
|
Payment Due by Period
|
||||||||||||||||||
Contractual Obligations
|
Total
|
|
Less than 1 year
|
|
Years 1 to 3
|
|
Years 3 to 5
|
|
After 5 years
|
||||||||||
Operating lease obligations - real estate (1)
|
$
|
11,724
|
|
|
$
|
1,179
|
|
|
$
|
3,037
|
|
|
$
|
3,185
|
|
|
$
|
4
|
|
Other (2)
|
1,418
|
|
|
484
|
|
|
409
|
|
|
400
|
|
|
125
|
|
|||||
Total (3)
|
$
|
13,142
|
|
|
$
|
1,663
|
|
|
$
|
3,446
|
|
|
$
|
3,585
|
|
|
$
|
4,448
|
|
•
|
persuasive evidence of an arrangement exists;
|
•
|
the sales price is fixed or determinable;
|
•
|
collection of the relevant receivable is probable at the time of sale; and
|
•
|
delivery has occurred or services have been rendered.
|
|
Page
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
|
|
|
|
||||
Assets
|
|
|
|
||||
Current Assets
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
37,257
|
|
|
$
|
117,185
|
|
Investments
|
28,242
|
|
|
—
|
|
||
Accounts receivable, net
|
14,675
|
|
|
14,867
|
|
||
Inventories
|
11,720
|
|
|
11,520
|
|
||
Prepaid expenses and other current assets
|
3,954
|
|
|
2,451
|
|
||
Total current assets
|
95,848
|
|
|
146,023
|
|
||
Property and equipment, net
|
15,084
|
|
|
10,966
|
|
||
Other Assets
|
|
|
|
|
|
||
Restricted cash
|
300
|
|
|
600
|
|
||
Intangible assets, net
|
746
|
|
|
995
|
|
||
Goodwill
|
753
|
|
|
753
|
|
||
Other long-term assets
|
79
|
|
|
32
|
|
||
Total assets
|
$
|
112,810
|
|
|
$
|
159,369
|
|
|
|
|
|
||||
Liabilities and stockholders' equity
|
|
|
|
|
|
||
Current liabilities
|
|
|
|
|
|
||
Accounts payable
|
$
|
5,474
|
|
|
$
|
4,718
|
|
Accrued expenses
|
8,492
|
|
|
7,811
|
|
||
Deferred revenue
|
305
|
|
|
305
|
|
||
Current portion of long-term debt
|
—
|
|
|
295
|
|
||
Total current liabilities
|
14,271
|
|
|
13,129
|
|
||
Other long-term liabilities
|
164
|
|
|
220
|
|
||
Deferred revenue
|
4,320
|
|
|
4,625
|
|
||
Long-term debt
|
—
|
|
|
183
|
|
||
Total liabilities
|
18,755
|
|
|
18,157
|
|
||
Commitments and contingencies
|
—
|
|
|
—
|
|
||
Stockholders’ equity
|
|
|
|
|
|
||
Preferred stock, $0.00001 par value:
|
|
|
|
|
|
||
Authorized: 5,000,000 shares authorized at December 31, 2016 and December 31, 2015; no shares issued and outstanding as of December 31, 2016 and December 31, 2015
|
—
|
|
|
—
|
|
||
Common stock, $0.00001 par value:
|
|
|
|
|
|
||
Authorized: 200,000,000 shares authorized at December 31, 2016 and December 31, 2015; 43,399,547 and 41,110,127 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
476,486
|
|
|
467,075
|
|
||
Accumulated deficit
|
(382,930
|
)
|
|
(325,342
|
)
|
||
Accumulated other comprehensive income (loss)
|
499
|
|
|
(521
|
)
|
||
Total stockholders’ equity
|
94,055
|
|
|
141,212
|
|
||
Total liabilities and stockholders’ equity
|
$
|
112,810
|
|
|
$
|
159,369
|
|
|
Years Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Revenue
|
|
|
|
|
|
|
|
||||
Product
|
$
|
78,921
|
|
|
$
|
62,791
|
|
|
$
|
48,186
|
|
Royalty
|
978
|
|
|
4,096
|
|
|
—
|
|
|||
Total revenue
|
79,899
|
|
|
66,887
|
|
|
48,186
|
|
|||
Cost of revenue
|
53,192
|
|
|
45,102
|
|
|
32,374
|
|
|||
Gross profit
|
26,707
|
|
|
21,785
|
|
|
15,812
|
|
|||
|
|
|
|
|
|
||||||
Operating expenses
|
|
|
|
|
|
|
|
||||
Sales and marketing
|
41,086
|
|
|
37,558
|
|
|
29,367
|
|
|||
Research and development
|
16,608
|
|
|
16,997
|
|
|
15,107
|
|
|||
General and administrative
|
25,157
|
|
|
23,191
|
|
|
16,763
|
|
|||
Total operating expenses
|
82,851
|
|
|
77,746
|
|
|
61,237
|
|
|||
Loss from operations
|
(56,144
|
)
|
|
(55,961
|
)
|
|
(45,425
|
)
|
|||
|
|
|
|
|
|
||||||
Other income and expenses
|
|
|
|
|
|
|
|
||||
Interest income
|
487
|
|
|
138
|
|
|
104
|
|
|||
Interest expense
|
(138
|
)
|
|
(1,385
|
)
|
|
(360
|
)
|
|||
Loss on extinguishment of debt
|
—
|
|
|
(205
|
)
|
|
—
|
|
|||
Foreign currency transaction loss
|
(1,607
|
)
|
|
—
|
|
|
—
|
|
|||
Other income (expense)
|
(123
|
)
|
|
208
|
|
|
—
|
|
|||
Total other income/(expenses), net
|
(1,381
|
)
|
|
(1,244
|
)
|
|
(256
|
)
|
|||
Loss before income taxes
|
(57,525
|
)
|
|
(57,205
|
)
|
|
(45,681
|
)
|
|||
Income tax provision
|
63
|
|
|
41
|
|
|
41
|
|
|||
|
|
|
|
|
|
||||||
Net loss
|
$
|
(57,588
|
)
|
|
$
|
(57,246
|
)
|
|
$
|
(45,722
|
)
|
|
|
|
|
|
|
||||||
Net loss per share - basic and diluted
|
$
|
(1.39
|
)
|
|
$
|
(2.60
|
)
|
|
$
|
(10.78
|
)
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding - basic and diluted
|
41,521,629
|
|
|
21,993,066
|
|
|
4,239,564
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
Net loss
|
|
$
|
(57,588
|
)
|
|
$
|
(57,246
|
)
|
|
$
|
(45,722
|
)
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments
|
|
1,027
|
|
|
(24
|
)
|
|
(613
|
)
|
|||
Change in unrealized gain (loss) on available-for-sale securities, net of tax
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|||
Comprehensive loss
|
|
$
|
(56,568
|
)
|
|
$
|
(57,270
|
)
|
|
$
|
(46,335
|
)
|
|
Convertible
Preferred Stock
|
|
Common Stock
|
|
|
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
||||||||||||||||||
|
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
|
|
|||||||||||||||||||||||
|
Shares
|
|
Par Value
|
|
Shares
|
|
Par Value
|
|
|
Total
|
|||||||||||||||||||
Balance, December 31, 2013
|
47,811,716
|
|
|
$
|
—
|
|
|
4,161,178
|
|
|
$
|
—
|
|
|
$
|
291,218
|
|
|
$
|
(222,374
|
)
|
|
$
|
116
|
|
|
$
|
68,960
|
|
Issuance of common stock—option exercise
|
|
|
|
|
|
|
124,986
|
|
|
—
|
|
|
121
|
|
|
|
|
|
|
|
|
121
|
|
||||||
Issuance of Series D preferred stock—warrant exercise
|
367,456
|
|
|
—
|
|
|
|
|
|
|
|
|
2,205
|
|
|
|
|
|
|
|
|
2,205
|
|
||||||
Issuance of Series E-1 preferred stock
|
2,806,480
|
|
|
—
|
|
|
|
|
|
|
|
|
22,452
|
|
|
|
|
|
|
|
|
22,452
|
|
||||||
Issuance costs of Series E-1 preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
(302
|
)
|
|
|
|
|
|
|
|
(302
|
)
|
||||||
Issuance of Series E-1 and E-2 preferred stock warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
42
|
|
||||||
Issuance costs of common stock warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
|
134
|
|
||||||
Compensation expense related to issued stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
2,550
|
|
|
|
|
|
|
|
|
2,550
|
|
||||||
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45,722
|
)
|
|
|
|
|
(45,722
|
)
|
||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(613
|
)
|
|
(613
|
)
|
||||||
Balance, December 31, 2014
|
50,985,652
|
|
|
—
|
|
|
4,286,164
|
|
|
—
|
|
|
318,420
|
|
|
(268,096
|
)
|
|
(497
|
)
|
|
49,827
|
|
||||||
Issuance of common stock—option exercise
|
|
|
|
|
|
|
383,458
|
|
|
—
|
|
|
806
|
|
|
|
|
|
|
|
|
806
|
|
||||||
Issuance of common stock—restricted stock
|
|
|
|
|
174,530
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
—
|
|
||||||||||
Issuance of common stock —warrant exercise
|
|
|
|
|
11,734
|
|
|
—
|
|
|
18
|
|
|
|
|
|
|
18
|
|
||||||||||
Issuance of common stock—initial public offering
|
|
|
|
|
10,350,000
|
|
|
—
|
|
|
139,766
|
|
|
|
|
|
|
139,766
|
|
||||||||||
Issuance of common stock—preferred stock conversion to common stock
|
(51,808,561
|
)
|
|
—
|
|
|
25,904,241
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
—
|
|
||||||||
Issuance of Series D preferred stock—warrant exercise
|
321,854
|
|
|
—
|
|
|
|
|
|
|
450
|
|
|
|
|
|
|
450
|
|
||||||||||
Issuance of Series E-1 preferred stock—warrant exercise
|
300,059
|
|
|
—
|
|
|
|
|
|
|
2,400
|
|
|
|
|
|
|
2,400
|
|
||||||||||
Issuance of Series E-2 preferred stock—warrant exercise
|
200,996
|
|
|
—
|
|
|
|
|
|
|
1,608
|
|
|
|
|
|
|
1,608
|
|
||||||||||
Compensation expense related to issued stock options and restricted stock awards
|
|
|
|
|
|
|
|
|
|
|
|
|
3,607
|
|
|
|
|
|
|
|
|
3,607
|
|
||||||
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57,246
|
)
|
|
|
|
|
(57,246
|
)
|
||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
|
(24
|
)
|
||||||
Balance, December 31, 2015
|
—
|
|
|
—
|
|
|
41,110,127
|
|
|
—
|
|
|
467,075
|
|
|
(325,342
|
)
|
|
(521
|
)
|
|
141,212
|
|
||||||
Issuance of common stock—option exercise
|
|
|
|
|
1,467,692
|
|
|
—
|
|
|
4,087
|
|
|
|
|
|
|
4,087
|
|
||||||||||
Issuance of common stock—restricted stock
|
|
|
|
|
804,019
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
—
|
|
||||||||||
Issuance of common stock —warrant exercise
|
|
|
|
|
17,709
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
—
|
|
||||||||||
Compensation expense related to issued stock options and restricted stock awards
|
|
|
|
|
|
|
|
|
5,324
|
|
|
|
|
|
|
5,324
|
|
||||||||||||
Net loss
|
|
|
|
|
|
|
|
|
|
|
(57,588
|
)
|
|
|
|
(57,588
|
)
|
||||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
1,020
|
|
|
1,020
|
|
||||||||||||
Balance, December 31, 2016
|
—
|
|
|
$
|
—
|
|
|
43,399,547
|
|
|
$
|
—
|
|
|
$
|
476,486
|
|
|
$
|
(382,930
|
)
|
|
$
|
499
|
|
|
$
|
94,055
|
|
|
Years Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
|
|
||||
Net loss
|
$
|
(57,588
|
)
|
|
$
|
(57,246
|
)
|
|
$
|
(45,722
|
)
|
|
|
|
|
|
|
||||||
Adjustments to reconcile net loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
||||
Depreciation and amortization expense
|
3,153
|
|
|
2,619
|
|
|
2,080
|
|
|||
Amortization of debt discount
|
7
|
|
|
135
|
|
|
24
|
|
|||
Stock-based compensation expense
|
5,324
|
|
|
3,607
|
|
|
2,550
|
|
|||
Provision for bad debts on trade receivables
|
188
|
|
|
359
|
|
|
6
|
|
|||
Impairment of long term assets
|
123
|
|
|
—
|
|
|
—
|
|
|||
Disposal of long term assets
|
16
|
|
|
2
|
|
|
44
|
|
|||
Loss on extinguishment of debt
|
—
|
|
|
205
|
|
|
—
|
|
|||
Amortization/accretion on investments
|
315
|
|
|
|
|
|
|||||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
||||
Accounts receivable
|
4
|
|
|
(6,107
|
)
|
|
(2,929
|
)
|
|||
Inventories
|
(200
|
)
|
|
(3,829
|
)
|
|
(1,071
|
)
|
|||
Prepaid expenses and other assets
|
(1,550
|
)
|
|
(1,045
|
)
|
|
(332
|
)
|
|||
Accounts payable and accrued liabilities
|
1,437
|
|
|
1,969
|
|
|
2,075
|
|
|||
Deferred royalty revenue
|
(305
|
)
|
|
4,932
|
|
|
—
|
|
|||
Other long-term liabilities
|
(56
|
)
|
|
(51
|
)
|
|
(264
|
)
|
|||
Net cash used in operating activities
|
(49,132
|
)
|
|
(54,450
|
)
|
|
(43,539
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
||||
Acquisition of property and equipment
|
(7,161
|
)
|
|
(4,643
|
)
|
|
(2,614
|
)
|
|||
Decrease in restricted cash
|
300
|
|
|
3,837
|
|
|
1,108
|
|
|||
Purchase of investments
|
(65,614
|
)
|
|
—
|
|
|
—
|
|
|||
Maturity of investments
|
37,050
|
|
|
—
|
|
|
—
|
|
|||
Net cash used in investing activities
|
(35,425
|
)
|
|
(806
|
)
|
|
(1,506
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
||||
Net proceeds from issuance of preferred stock
|
—
|
|
|
—
|
|
|
21,598
|
|
|||
Proceeds from exercise of common stock options
|
4,087
|
|
|
806
|
|
|
121
|
|
|||
Proceeds from exercise of common stock warrant
|
—
|
|
|
18
|
|
|
—
|
|
|||
Proceeds from exercise of preferred stock warrant
|
—
|
|
|
4,458
|
|
|
—
|
|
|||
Proceeds from issuance of debt
|
—
|
|
|
—
|
|
|
10,000
|
|
|||
Payments on notes payable
|
(485
|
)
|
|
(10,278
|
)
|
|
(2,382
|
)
|
|||
Payment on extinguishment of debt
|
—
|
|
|
(205
|
)
|
|
—
|
|
|||
Net proceeds from issuance of common stock
|
—
|
|
|
139,766
|
|
|
—
|
|
|||
Net cash provided by financing activities
|
3,602
|
|
|
134,565
|
|
|
29,337
|
|
|||
Foreign exchange effect on cash and cash equivalents
|
1,027
|
|
|
(24
|
)
|
|
(613
|
)
|
|||
(Decrease) increase in cash and cash equivalents
|
(79,928
|
)
|
|
79,285
|
|
|
(16,321
|
)
|
|||
Cash and cash equivalents, beginning of period
|
117,185
|
|
|
37,900
|
|
|
54,221
|
|
|||
Cash and cash equivalents, end of period
|
$
|
37,257
|
|
|
$
|
117,185
|
|
|
$
|
37,900
|
|
|
|
|
|
|
|
||||||
Supplemental information:
|
|
|
|
|
|
|
|
||||
Cash paid for income taxes
|
$
|
52
|
|
|
$
|
187
|
|
|
$
|
156
|
|
Cash paid for interest
|
48
|
|
|
1,284
|
|
|
162
|
|
|||
Non cash investing and financing activities
|
|
|
|
|
|
|
|
||||
Issuances of Series E-1 preferred stock warrants
|
—
|
|
|
—
|
|
|
177
|
|
•
|
persuasive evidence of an arrangement exists;
|
•
|
the sales price is fixed or determinable;
|
•
|
collection of the relevant receivable is probable at the time of sale; and
|
•
|
delivery has occurred or services have been rendered.
|
|
|
Foreign currency translation adjustments
|
|
Change in unrealized gain (loss) on available-for-sale securities, net of tax
|
|
Accumulated other comprehensive income (loss)
|
||||||
Balance December 31, 2015
|
|
$
|
(521
|
)
|
|
$
|
—
|
|
|
$
|
(521
|
)
|
Change in period
|
|
1,027
|
|
|
(7
|
)
|
|
1,020
|
|
|||
Balance December 31, 2016
|
|
$
|
506
|
|
|
$
|
(7
|
)
|
|
$
|
499
|
|
|
|
Years Ended December 31,
|
||||||||||
(in thousands, except share and per share data)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Numerator:
|
|
|
|
|
|
|
|
|
||||
Numerator for basic and diluted loss per share:
|
|
|
|
|
|
|
|
|
||||
Net loss
|
|
$
|
(57,588
|
)
|
|
$
|
(57,246
|
)
|
|
$
|
(45,722
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
||||
Denominator for basic loss per share:
|
|
|
|
|
|
|
|
|
||||
Weighted average shares
|
|
41,521,629
|
|
|
21,993,066
|
|
|
4,239,564
|
|
|||
Basic loss per share attributable to ConforMIS, Inc. stockholders
|
|
$
|
(1.39
|
)
|
|
$
|
(2.60
|
)
|
|
$
|
(10.78
|
)
|
Diluted loss per share attributable to ConforMIS, Inc. stockholders
|
|
$
|
(1.39
|
)
|
|
$
|
(2.60
|
)
|
|
$
|
(10.78
|
)
|
|
|
Years Ended December 31,
|
|||||||
|
|
2016
|
|
2015
|
|
2014
|
|||
Series A Preferred
|
|
—
|
|
|
873,591
|
|
|
1,705,138
|
|
Series B Preferred
|
|
—
|
|
|
1,144,885
|
|
|
2,234,668
|
|
Series C Preferred
|
|
—
|
|
|
1,256,752
|
|
|
2,453,018
|
|
Series D Preferred
|
|
—
|
|
|
3,410,570
|
|
|
6,415,106
|
|
Series E-1 Preferred
|
|
—
|
|
|
3,748,578
|
|
|
6,530,429
|
|
Series E-2 Preferred
|
|
—
|
|
|
2,628,037
|
|
|
5,129,592
|
|
Series C Preferred Warrants
|
|
—
|
|
|
—
|
|
|
56,202
|
|
Series D Preferred Warrants
|
|
—
|
|
|
—
|
|
|
58,365
|
|
Series E-2 Preferred Warrants
|
|
—
|
|
|
—
|
|
|
5,883
|
|
Common stock warrants
|
|
34,709
|
|
|
303,931
|
|
|
25,733
|
|
Stock options
|
|
1,959,030
|
|
|
3,566,421
|
|
|
2,780,631
|
|
Total
|
|
1,993,739
|
|
|
16,932,765
|
|
|
27,394,765
|
|
December 31, 2016
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Estimated Fair Value
|
Cash and cash equivalents
|
Short-term (1) investments
|
||||||||||||
Cash
|
$
|
8,504
|
|
$
|
—
|
|
$
|
—
|
|
$
|
8,504
|
|
$
|
8,504
|
|
$
|
—
|
|
Level 1 securities:
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
28,753
|
|
—
|
|
—
|
|
28,753
|
|
28,753
|
|
—
|
|
||||||
Level 2 securities:
|
|
|
|
|
|
|
||||||||||||
Corporate bonds
|
6,701
|
|
—
|
|
(4
|
)
|
6,697
|
|
—
|
|
6,697
|
|
||||||
Agency bond
|
$
|
21,548
|
|
$
|
—
|
|
$
|
(3
|
)
|
$
|
21,545
|
|
$
|
—
|
|
$
|
21,545
|
|
Total
|
$
|
65,506
|
|
$
|
—
|
|
$
|
(7
|
)
|
$
|
65,499
|
|
$
|
37,257
|
|
$
|
28,242
|
|
December 31, 2015
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Estimated Fair Value
|
Cash and cash equivalents
|
Short-term (1) investments
|
||||||||||||
Cash
|
$
|
10,302
|
|
$
|
—
|
|
$
|
—
|
|
$
|
10,302
|
|
$
|
10,302
|
|
$
|
—
|
|
Level 1 securities:
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
106,883
|
|
—
|
|
—
|
|
106,883
|
|
106,883
|
|
—
|
|
||||||
Total
|
$
|
117,185
|
|
$
|
—
|
|
$
|
—
|
|
$
|
117,185
|
|
$
|
117,185
|
|
$
|
—
|
|
|
December 31,
2016 |
|
December 31,
2015 |
||||
Total receivables
|
$
|
15,356
|
|
|
$
|
15,421
|
|
Allowance for doubtful accounts and returns
|
(681
|
)
|
|
(554
|
)
|
||
Accounts receivable, net
|
$
|
14,675
|
|
|
$
|
14,867
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
Beginning balance
|
$
|
(554
|
)
|
|
$
|
(162
|
)
|
Provision for bad debts on trade receivables
|
(188
|
)
|
|
(359
|
)
|
||
Other allowances
|
20
|
|
|
(121
|
)
|
||
Accounts receivable write offs
|
41
|
|
|
88
|
|
||
Ending balance
|
$
|
(681
|
)
|
|
$
|
(554
|
)
|
|
December 31,
2016 |
|
December 31,
2015 |
||||
Raw Material
|
$
|
3,331
|
|
|
$
|
4,175
|
|
Work in process
|
2,530
|
|
|
2,683
|
|
||
Finished goods
|
5,859
|
|
|
4,662
|
|
||
Total Inventories
|
$
|
11,720
|
|
|
$
|
11,520
|
|
|
Estimated Useful Life
(Years)
|
|
December 31,
2016 |
|
December 31,
2015 |
||||
Equipment
|
5-7
|
|
$
|
16,651
|
|
|
$
|
12,185
|
|
Furniture and fixtures
|
5-7
|
|
414
|
|
|
391
|
|
||
Computer and software
|
3
|
|
7,027
|
|
|
5,229
|
|
||
Leasehold improvements
|
2-7
|
|
1,294
|
|
|
795
|
|
||
Total property and equipment
|
|
|
25,386
|
|
|
18,600
|
|
||
Accumulated depreciation
|
|
|
(10,302
|
)
|
|
(7,634
|
)
|
||
Property and equipment, net
|
|
|
$
|
15,084
|
|
|
$
|
10,966
|
|
|
Estimated Useful Life
(Years)
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
Developed technology
|
10
|
|
$
|
979
|
|
|
$
|
979
|
|
Accumulated amortization
|
|
|
(681
|
)
|
|
(582
|
)
|
||
Developed technology, net
|
|
|
298
|
|
|
397
|
|
||
|
|
|
|
|
|
||||
License agreements
|
10
|
|
1,508
|
|
|
1,508
|
|
||
Accumulated amortization
|
|
|
(1,060
|
)
|
|
(910
|
)
|
||
License technology, net
|
|
|
448
|
|
|
598
|
|
||
Intangible assets, net
|
10
|
|
$
|
746
|
|
|
$
|
995
|
|
|
Amortization expense
|
||
2017
|
$
|
249
|
|
2018
|
249
|
|
|
2019
|
248
|
|
|
|
$
|
746
|
|
|
December 31,
2016 |
|
December 31,
2015 |
||||
Accrued employee compensation
|
$
|
4,037
|
|
|
$
|
3,585
|
|
Deferred rent
|
101
|
|
|
213
|
|
||
Accrued legal expense
|
710
|
|
|
334
|
|
||
Accrued consulting expense
|
104
|
|
|
134
|
|
||
Accrued vendor charges
|
1,396
|
|
|
692
|
|
||
Accrued revenue share expense
|
992
|
|
|
932
|
|
||
Accrued patent settlement and license costs
|
—
|
|
|
500
|
|
||
Accrued clinical trial expense
|
256
|
|
|
302
|
|
||
Accrued other
|
896
|
|
|
1,119
|
|
||
|
$
|
8,492
|
|
|
$
|
7,811
|
|
Year
|
Minimum lease Payments
|
||
2017
|
$
|
1,179
|
|
2018
|
1,500
|
|
|
2019
|
1,537
|
|
|
2020
|
1,574
|
|
|
2021
|
1,611
|
|
|
2022-2025
|
4,323
|
|
|
|
$
|
11,724
|
|
|
Payment Due by Period
|
||||||||||||||||||
Contractual Obligations
|
Total
|
|
Less than 1 year
|
|
Years 1 to 3
|
|
Years 3 to 5
|
|
After 5 years
|
||||||||||
Operating lease obligations - real estate (1)
|
11,724
|
|
|
1,179
|
|
|
3,037
|
|
|
3,185
|
|
|
4,323
|
|
|||||
Other (2)
|
1,418
|
|
|
484
|
|
|
409
|
|
|
400
|
|
|
125
|
|
|||||
Total (3)
|
$
|
13,142
|
|
|
$
|
1,663
|
|
|
$
|
3,446
|
|
|
$
|
3,585
|
|
|
$
|
4,448
|
|
|
|
Shares
|
|
Outstanding December 31, 2014
|
|
4,286,164
|
|
Issuance of common stock - option & warrant exercises
|
|
395,192
|
|
Issuance of restricted common stock
|
|
174,530
|
|
Issuance of common stock - IPO
|
|
10,350,000
|
|
Issuance of common stock - preferred stock conversion to common stock
|
|
25,904,241
|
|
Outstanding December 31, 2015
|
|
41,110,127
|
|
Issuance of common stock - option & warrant exercises
|
|
1,485,401
|
|
Issuance of restricted common stock
|
|
804,019
|
|
Outstanding December 31, 2016
|
|
43,399,547
|
|
Risk-free interest rate
|
|
0.91%-1.71%
|
Expected term (in years)
|
|
2.50-5.00
|
Dividend yield
|
|
—%
|
Expected volatility
|
|
50.00%-55.00%
|
|
|
Number of
Warrants
|
|
Weighted Average
Exercise Price
Per Share
|
|
Number of
Warrants
Exercisable
|
|
Weighted
Average Price
Per Share
|
|
Weighted
Average Contractual Life
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
Outstanding December 31, 2014
|
|
204,312
|
|
|
$
|
8.90
|
|
|
204,312
|
|
|
$
|
8.90
|
|
|
3.26
|
|
Exercised
|
|
(16,721
|
)
|
|
7.80
|
|
|
(16,721
|
)
|
|
7.80
|
|
|
—
|
|
||
Converted from preferred warrant
|
|
564,188
|
|
|
10.73
|
|
|
564,188
|
|
|
10.73
|
|
|
—
|
|
||
Outstanding December 31, 2015
|
|
751,779
|
|
|
$
|
10.30
|
|
|
751,779
|
|
|
$
|
10.30
|
|
|
1.33
|
|
Exercised
|
|
(166,665
|
)
|
|
9.00
|
|
|
(166,665
|
)
|
|
9.00
|
|
|
—
|
|
||
Cancelled/expired
|
|
(413,331
|
)
|
|
—
|
|
|
(413,331
|
)
|
|
—
|
|
|
—
|
|
||
Outstanding December 31, 2016
|
|
171,783
|
|
|
$
|
7.47
|
|
|
171,783
|
|
|
$
|
7.47
|
|
|
1.62
|
|
|
|
Number of
Options
|
|
Weighted
Average
Exercise Price
per Share
|
|
Aggregate Intrinsic Value (In Thousands)
|
|||||
Outstanding December 31, 2013
|
|
4,869,330
|
|
|
$
|
3.77
|
|
|
|
||
Granted
|
|
1,037,547
|
|
|
9.77
|
|
|
|
|||
Exercised
|
|
(118,738
|
)
|
|
1.50
|
|
|
|
|||
Expired
|
|
(142,206
|
)
|
|
5.29
|
|
|
|
|||
Cancelled/Forfeited
|
|
(290,366
|
)
|
|
5.08
|
|
|
|
|||
Outstanding December 31, 2014
|
|
5,355,567
|
|
|
$
|
4.87
|
|
|
|
||
Granted
|
|
403,086
|
|
|
12.20
|
|
|
|
|||
Exercised
|
|
(383,458
|
)
|
|
2.10
|
|
|
|
|||
Expired
|
|
(30,876
|
)
|
|
5.97
|
|
|
|
|||
Cancelled/Forfeited
|
|
(95,990
|
)
|
|
7.42
|
|
|
|
|||
Outstanding December 31, 2015
|
|
5,248,329
|
|
|
$
|
5.56
|
|
|
|
||
Granted
|
|
179,178
|
|
|
8.78
|
|
|
|
|||
Exercised
|
|
(1,467,692
|
)
|
|
2.78
|
|
|
8,219
|
|
||
Expired
|
|
(81,251
|
)
|
|
9.70
|
|
|
|
|||
Cancelled/Forfeited
|
|
(88,524
|
)
|
|
9.93
|
|
|
|
|||
Outstanding December 31, 2016
|
|
3,790,040
|
|
|
$
|
6.60
|
|
|
$
|
8,547
|
|
|
|
|
|
|
|
|
|||||
Total vested and exercisable
|
|
3,231,167
|
|
|
$
|
6.01
|
|
|
$
|
8,514
|
|
|
|
Number of Shares
|
|
Weighted Average Fair Value
|
|||
Unvested December 31, 2014
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
174,530
|
|
|
22.31
|
|
|
Unvested December 31, 2015
|
|
174,530
|
|
|
$
|
22.31
|
|
Granted
|
|
873,589
|
|
|
8.61
|
|
|
Vested
|
|
(66,839
|
)
|
|
17.72
|
|
|
Forfeited
|
|
(69,570
|
)
|
|
11.83
|
|
|
Unvested December 31, 2016
|
|
911,710
|
|
|
$
|
10.32
|
|
|
|
|
Years Ended December 31,
|
||||
|
|
|
2016
|
|
2015
|
|
2014
|
Risk-free interest rate
|
|
|
1.98%
|
|
1.37% - 1.77%
|
|
1.66% - 2.29%
|
Expected term (in years)
|
|
|
6.25
|
|
5.47 - 6.45
|
|
5.00 - 7.25
|
Dividend yield
|
|
|
—%
|
|
—%
|
|
—%
|
Expected volatility
|
|
|
51.00%
|
|
49.00% - 50.00%
|
|
50.00%
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
Cost of revenues
|
|
$
|
333
|
|
|
$
|
239
|
|
|
$
|
162
|
|
Sales and marketing
|
|
1,197
|
|
|
730
|
|
|
597
|
|
|||
Research and development
|
|
1,466
|
|
|
784
|
|
|
628
|
|
|||
General and administrative
|
|
2,328
|
|
|
1,854
|
|
|
1,163
|
|
|||
|
|
$
|
5,324
|
|
|
$
|
3,607
|
|
|
$
|
2,550
|
|
|
Years ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Income (loss) from continuing operations before income taxes:
|
|
|
|
|
|
||||||
U.S.
|
$
|
(51,576
|
)
|
|
$
|
(50,155
|
)
|
|
$
|
(40,328
|
)
|
Non‑U.S.
|
(5,949
|
)
|
|
(7,050
|
)
|
|
(5,353
|
)
|
|||
|
$
|
(57,525
|
)
|
|
$
|
(57,205
|
)
|
|
$
|
(45,681
|
)
|
|
Years ended December 31,
|
|||||||
|
2016
|
|
2015
|
|
2014
|
|||
Tax at U.S. statutory rate
|
(34.00
|
)%
|
|
(34.00
|
)%
|
|
(34.00
|
)%
|
State taxes, net of federal benefits
|
(2.70
|
)
|
|
(2.27
|
)
|
|
(2.36
|
)
|
Permanent items
|
0.42
|
|
|
1.52
|
|
|
1.46
|
|
Tax credit
|
(1.06
|
)
|
|
(0.85
|
)
|
|
(8.59
|
)
|
Change in valuation allowance
|
33.95
|
|
|
31.07
|
|
|
37.49
|
|
Foreign rate differential
|
1.04
|
|
|
1.68
|
|
|
0.68
|
|
Rate change
|
(0.06
|
)
|
|
0.01
|
|
|
(0.02
|
)
|
Uncertain tax positions
|
2.06
|
|
|
2.21
|
|
|
2.97
|
|
Other
|
0.46
|
|
|
0.7
|
|
|
2.47
|
|
|
0.11
|
%
|
|
0.07
|
%
|
|
0.10
|
%
|
|
Years ended December 31,
|
||||||
|
2016
|
|
2015
|
||||
Deferred tax assets:
|
|
|
|
||||
Federal and state net operating loss carryforwards
|
$
|
115,719
|
|
|
$
|
99,823
|
|
Foreign net operating loss carryforwards
|
2,561
|
|
|
2,973
|
|
||
Accrued expenses
|
280
|
|
|
—
|
|
||
Credits
|
5,091
|
|
|
4,483
|
|
||
Deferred revenue
|
1,709
|
|
|
—
|
|
||
Other
|
5,703
|
|
|
4,138
|
|
||
Total deferred tax assets
|
131,063
|
|
|
111,417
|
|
||
Valuation allowance
|
(130,005
|
)
|
|
(110,518
|
)
|
||
Net deferred tax assets
|
1,058
|
|
|
899
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Fixed assets
|
(841
|
)
|
|
(612
|
)
|
||
Intangibles
|
(217
|
)
|
|
(287
|
)
|
||
Other
|
—
|
|
|
—
|
|
||
Net deferred tax liabilities
|
(1,058
|
)
|
|
(899
|
)
|
||
Net deferred tax assets
|
$
|
—
|
|
|
$
|
—
|
|
Current net deferred tax asset
|
33
|
|
|
15
|
|
||
Long‑term net deferred tax liability
|
(33
|
)
|
|
(15
|
)
|
||
Net deferred tax asset
|
$
|
—
|
|
|
$
|
—
|
|
|
Years ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Unrecognized tax benefits beginning of year
|
$
|
3,730
|
|
|
$
|
2,466
|
|
|
$
|
1,109
|
|
Gross change for current year positions
|
1,187
|
|
|
1,264
|
|
|
1,357
|
|
|||
Decrease for prior period positions
|
—
|
|
|
—
|
|
|
—
|
|
|||
Decrease due to settlements and payments
|
—
|
|
|
—
|
|
|
—
|
|
|||
Decrease due to statute limitations
|
—
|
|
|
—
|
|
|
—
|
|
|||
Unrecognized tax benefits end of the year
|
$
|
4,917
|
|
|
$
|
3,730
|
|
|
$
|
2,466
|
|
|
|
December 31,
|
||||||
|
|
2016
|
|
2015
|
||||
Property and equipment, net
|
|
|
|
|
|
|
||
United States
|
|
$
|
14,971
|
|
|
$
|
10,836
|
|
Rest of World
|
|
113
|
|
|
130
|
|
||
|
|
$
|
15,084
|
|
|
$
|
10,966
|
|
|
|
Three Months Ended
|
||||||||||||||
|
|
December 31, 2016
|
|
September 30, 2016
|
|
June 30, 2016
|
|
March 31, 2016
|
||||||||
Total revenue
|
|
$
|
21,673
|
|
|
$
|
18,643
|
|
|
$
|
19,333
|
|
|
$
|
20,250
|
|
Gross profit
|
|
8,045
|
|
|
5,998
|
|
|
6,001
|
|
|
6,663
|
|
||||
Net loss
|
|
(15,705
|
)
|
|
(12,762
|
)
|
|
(14,052
|
)
|
|
(15,034
|
)
|
||||
Net loss per share - basic and diluted
|
|
$
|
(0.37
|
)
|
|
$
|
(0.31
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(0.37
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended
|
||||||||||||||
|
|
December 31, 2015
|
|
September 30, 2015
|
|
June 30, 2015
|
|
March 31, 2015
|
||||||||
Total revenue
|
|
$
|
19,071
|
|
|
$
|
13,894
|
|
|
$
|
19,222
|
|
|
$
|
14,700
|
|
Gross profit
|
|
6,340
|
|
|
2,762
|
|
|
7,827
|
|
|
4,856
|
|
||||
Net loss
|
|
(14,990
|
)
|
|
(17,107
|
)
|
|
(10,892
|
)
|
|
(14,257
|
)
|
||||
Net loss per share - basic and diluted
|
|
$
|
(0.37
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(2.51
|
)
|
|
$
|
(3.32
|
)
|
(1)
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
|
|
|
(2)
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management; and
|
|
|
(3)
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
1.
|
Consolidated Financial Statement
|
|
|
|
|
|
|
|
CONFORMIS, INC.
|
||
|
|
By:
|
|
/s/Mark A. Augusti
|
|
|
|
|
Mark A. Augusti
President and Chief Executive Officer
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
/s/Mark A. Augusti
|
|
|
|
|
Mark A. Augusti
|
|
President and Chief Executive Officer (Principal Executive Officer) and Director
|
|
March 8, 2017
|
/s/Paul Weiner
|
|
|
|
|
Paul Weiner
|
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|
|
March 8, 2017
|
/s/Kenneth Fallon III
|
|
|
|
|
Kenneth Fallon III
|
|
Chairman of the Board of Directors
|
|
March 8, 2017
|
|
|
|
|
|
Philipp Lang, M.D.
|
|
Director
|
|
March 8, 2017
|
/s/Bradley Langdale
|
|
|
|
|
Bradley Langdale
|
|
Director
|
|
March 8, 2017
|
/s/Colm Lanigan
|
|
|
|
|
Colm Lanigan
|
|
Director
|
|
March 8, 2017
|
/s/Richard Meelia
|
|
|
|
|
Richard Meelia
|
|
Director
|
|
March 8, 2017
|
/s/Michael Milligan
|
|
|
|
|
Michael Milligan
|
|
Director
|
|
March 8, 2017
|
/s/Aditya Puri
|
|
|
|
|
Aditya Puri
|
|
Director
|
|
March 8, 2017
|
Exhibit
Number
|
|
Description of Exhibit
|
|
|
|
3.1
|
|
Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s current report on Form 8-K (File No. 001-3747) filed on July 8, 2015)
|
3.2
|
|
Amended and Restated By-laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s current report on Form 8-K (File No. 001-3747) filed on July 8, 2015)
|
4.1
|
|
Specimen certificate evidencing shares of common stock (incorporated by reference to Exhibit 4.1 to the Registrant’s registration statement on Form S-1/A (File No. 333-204384) filed on June 18, 2015)
|
10.1
|
|
Amended and Restated Information and Registration Rights Agreement, dated as of June 29, 2015, among the Registrant and the other parties thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s registration statement on Form S-1/A (File No. 333-204384) filed on June 29, 2015)
|
10.2+
|
|
2004 Stock Option Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.3+
|
|
Form of Incentive Stock Option Agreement under 2004 Stock Option Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.4+
|
|
Form of Nonqualified Stock Option Agreement under 2004 Stock Option Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.5+
|
|
Form of Stock Purchase Agreement for Incentive Stock Option Agreement under 2004 Stock Option Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.6+
|
|
Form of Stock Purchase Agreement for Nonqualified Stock Option Agreement under 2004 Stock Option Plan (incorporated by reference to Exhibit 10.6 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.7+
|
|
2011 Stock Option/Stock Issuance Plan (incorporated by reference to Exhibit 10.7 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.8+
|
|
Form of Notice of Grant of Incentive Stock Option under 2011 Stock Option/Stock Issuance Plan (incorporated by reference to Exhibit 10.8 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.9+
|
|
Form of Notice of Grant of Nonstatutory Stock Option under 2011 Stock Option/Stock Issuance Plan (incorporated by reference to Exhibit 10.9 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.10+
|
|
Form of Stock Purchase Agreement under 2011 Stock Option/Stock Issuance Plan (incorporated by reference to Exhibit 10.10 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.11+
|
|
2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.11 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.12+
|
|
Form of Incentive Stock Option Agreement under 2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.12 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.13+
|
|
Form of Nonstatutory Stock Option Agreement under 2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.13 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.14+
|
|
Form of Restricted Stock Agreement under 2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.34 to the Registrant’s registration statement on Form S-1/A (File No. 333-204384) filed on June 18, 2015)
|
10.15+
|
|
First Amended and Restated Employment Agreement, dated as of January 14, 2015, between the Registrant and Philipp Lang, as amended by Amendment No. 1 to First Amended and Restated Employment Agreement, dated as of May 29, 2015 between the Registrant and Philipp Lang (incorporated by reference to Exhibit 10.14 to the Registrant’s registration statement on Form S-1/A (File No. 333-204384) filed on June 11, 2015)
|
10.16+
|
|
Amended and Restated Employment Agreement, dated as of May 21, 2015, between the Registrant and Paul Weiner, together with the Employee Confidential Information, Inventions and Non-Competition Agreement, dated as of May 21, 2015, between the Registrant and Paul Weiner (incorporated by reference to Exhibit 10.15 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.17+
|
|
Amended and Restated Employment Agreement, dated as of May 21, 2015, between the Registrant and Daniel Steines, together with the Amended and Restated Employee Confidential Information, Inventions and Non-Competition Agreement, dated as of June 10, 2015, between the Registrant and Daniel Steines(incorporated by reference to Exhibit 10.16 to the Registrant’s registration statement on Form S-1/A (File No. 333-204384) filed on June 11, 2015)
|
10.18+
|
|
Amended and Restated Employment Agreement, dated as of May 21, 2015, between the Registrant and David Cerveny, together with the Employee Confidential Information, Inventions and Non-Competition Agreement, dated as of May 21, 2015, between the Registrant and David Cerveny (incorporated by reference to Exhibit 10.17 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.19+
|
|
Amended and Restated Employment Agreement, dated as of May 21, 2015, between the Registrant and Robert Law III, together with the Employee Confidential Information, Inventions and Non-Competition Agreement, dated as of May 21, 2015, between the Registrant and Robert Law III (incorporated by reference to Exhibit 10.27 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.20+
|
|
Amended and Restated Revenue Sharing Agreement, dated as of September 2, 2011, between the Registrant and Philipp Lang (incorporated by reference to Exhibit 10.18 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.21+
|
|
Amended and Restated Employee Confidential Information, Inventions and Non-Competition Agreement, effective as of January 14, 2015, between the Registrant and Philipp Lang (incorporated by reference to Exhibit 10.19 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.22+
|
|
Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.20 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.23
|
|
Loan and Security Agreement, dated as of November 7, 2014, among the Registrant, Silicon Valley Bank, and the other parties thereto, as amended by First Amendment to Loan and Security Agreement, dated as of March 4, 2015, among the Registrant, Silicon Valley Bank and the other parties thereto (incorporated by reference to Exhibit 10.21 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.24
|
|
Lease Agreement, dated as of August 20, 2014, between the Registrant and Wakefield Investments, Inc. (incorporated by reference to Exhibit 10.23 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.25
|
|
Sublease, dated as of May 30, 2012, between the Registrant and Reveal Imaging Technologies, Inc. (incorporated by reference to Exhibit 10.24 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.26*
|
|
First Amendment to Lease dated July 25, 2016 between Wakefield Investments, Inc. and Registrant for 600 Research Drive, Wilmington, Massachusetts
|
10.27
|
|
Lease dated September 19, 2016 between Technology Park I Limited Partnership and Registrant for 600 Technology Park Drive, Billerica, Massachusetts (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2016, filed with the Securities and Exchange Commission on November 10, 2016, File No. 001-37474)
|
10.28
|
|
License Agreement, effective as of April 10, 2007, between the Registrant and Vertegen, Inc., as amended by First Amendment to License Agreement, dated as of May 20, 2015, between the Registrant and Vertegen, Inc. (incorporated by reference to Exhibit 10.26 to the Registrant’s registration statement on Form S-1/A (File No. 333-204384) filed on June 11, 2015)
|
10.29
|
|
Sponsor Designee Recommendation Agreement, dated as of May 21, 2015, between the Registrant and Procific (incorporated by reference to Exhibit 10.29 to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
10.30†
|
|
License Agreement, dated as of April 13, 2015, between the Registrant and MicroPort Orthopedics Inc. (incorporated by reference to Exhibit 10.32 to the Registrant’s registration statement on Form S-1/A (File No. 333-204384) filed on June 11, 2015)
|
10.31
|
|
License Agreement, dated as of April 13, 2015, between the Registrant and each of Wright Medical Group, Inc. and Wright Medical Technology, Inc. (incorporated by reference to Exhibit 10.33 to the Registrant’s registration statement on Form S-1/A (File No. 333-204384) filed on June 11, 2015)
|
10.32
|
|
Form of Retention Agreements of Certain Officers (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2016, filed with the Securities and Exchange Commission on August 11, 2016, File No. 001-37474)
|
10.33
|
|
Summary of Compensatory Arrangements of Certain Officers (incorporated by reference to the Registrant’s Form 8-K filed on February 9, 2016, File No. 001-37474)
|
10.34*
|
|
Employment Agreement, dated October 19, 2016, by and between the Registrant and Mark A. Augusti
|
21.1
|
|
Subsidiaries of the Registrant (incorporated by reference to Exhibit 10.21. to the Registrant’s registration statement on Form S-1 (File No. 333-204384) filed on May 22, 2015)
|
23.1*
|
|
Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm
|
31.1*
|
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2*
|
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1#
|
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2#
|
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Database
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
*
|
Filed herewith.
|
†
|
Confidential treatment has been granted as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission.
|
+
|
Indicates management contract or plan.
|
#
|
This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically incorporated by reference into such filing.
|
A.
|
The Stock Option will consist of an option to acquire shares of the Company’s common stock having a Black Scholes value as of the date of grant of $533,333, with such option (i) granted under and subject to the terms of the Company’s stock incentive plan, (ii) having an exercise price equal to the fair market value of the Company’s common stock on the date of grant of the option, (iii) vesting in equal monthly installments over a four (4) year period, subject to your continued employment with the Company on each applicable vesting date, and (iv) having such other terms as are set forth in the applicable stock option agreement and the annual long-term incentive program.
|
B.
|
The Restricted Stock Award will consist of the right to receive shares of the Company’s common stock having a value of $266,667 (as calculated using the average closing price during the 60 calendar days prior to the grant date), with such shares (i) granted under and subject to the terms of the Company’s stock incentive plan, (ii) vesting in equal annual installments over a four (4) year period beginning on the first anniversary of the date of grant of the award subject to your continued employment on each applicable vesting date and (iii) having such other terms as are set forth in the applicable restricted stock award agreement and the annual long-term incentive program.
|
A.
|
The New Hire Option will consist of an option to acquire shares of the Company’s common stock having a Black Scholes value as of the date of grant of $800,000, with such option (i) granted under and subject to the terms of the Company’s stock incentive plan, (ii) having an exercise price equal to the fair market value of the Company’s common stock on the date of grant of the New Hire Option, (iii) vesting as to 25% on the first anniversary of the date of grant of the New Hire Option and in equal installments monthly for the subsequent 36 months, subject to your continued employment with the Company on each applicable vesting date, and (iv) having such other terms as are set forth in the applicable stock option agreement.
|
B.
|
The Restricted Stock Award will consist of the right to receive Forty-Four Thousand Seven Hundred Fifty (44,750) shares of the Company’s common stock, with such shares (i) granted under and subject to the terms of the Company’s stock incentive plan, (ii) vesting in equal annual installments over a four (4) year period beginning on the first anniversary of the date of grant of the award subject to your continued employment on each applicable vesting date and (iii) having such other terms as are set forth in the applicable Restricted Stock Award agreement.
|
A.
|
If a Qualifying Termination occurs prior to, or more than twenty-four (24) months following, a Change in Control Transaction (as defined below), and the Qualifying Termination occurs prior to the two-year anniversary of the Effective Date: (i) The Company will provide you with severance pay in the form of continuation of your base salary for a total of eighteen (18) months, such amount to be paid in accordance with the Company’s then current payroll practices, except as otherwise specified in this letter agreement, beginning on the Company’s first regular payroll date that occurs after the Payment Date (as defined below); (ii) the Company will pay to you an amount equal to 1.5 times the Target Bonus;
and (iii) subject to the terms and conditions provided for in COBRA, and subject to your timely election of COBRA and copayment of premium amounts at the active employee rate, the Company shall pay its then current share of premium payments for you and your eligible dependents for group health and dental insurance after the date on which your employment terminates through (1) the end of the period during which you are receiving base salary continuation, or (2) the date you become employed with benefits substantially comparable to the benefits provided under the corresponding Company plan, or (3) the date you become ineligible for COBRA benefits (the “COBRA Period”);
provided, however
, that such Company-paid premiums may be recorded as additional income pursuant to Section 6041 of the Internal Revenue Code of 1986, as amended (the “Code”) and not entitled to any tax qualified treatment to the extent necessary to comply with or avoid the discriminatory treatment prohibited by the Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010 or Section 105(h) of the Code. You shall be responsible for the entire COBRA premium should you elect to maintain this coverage after the earlier of the dates specified in Sections 13.A.iv(1)-(3) above.
|
B.
|
If a Qualifying Termination occurs prior to, or more than twenty-four (24) months following, a Change in Control Transaction, and the Qualifying Termination occurs on or after the two-year anniversary of the Effective Date: (i) The Company will provide you with severance pay in the form of continuation of your base salary for a total of twelve (12) months, such amount to be paid in accordance with the Company’s then current payroll practices, except as otherwise specified in this letter agreement, beginning on the Company’s first regular payroll date that occurs after the Payment Date; (ii) the Company will pay to you an amount equal to the Target Bonus;
and (iii) you will be eligible for the same COBRA premium assistance as set forth in Section 13.A.iii above, subject to the same terms, conditions, and limitations as described therein.
|
C.
|
If a Qualifying Termination occurs within twenty-four (24) months following a Change in Control Transaction, and regardless of whether the Qualifying Termination occurs prior to, on, or after the two-year anniversary of the Effective Date: (i) The Company will provide you with severance pay in the form of continuation of your base salary for a total of eighteen (18) months, such amount to be paid in accordance with the Company’s then current payroll practices, except as otherwise specified in this letter agreement, beginning on the Company’s first regular payroll date that occurs after the Payment Date; (ii) the Company will pay to you an amount equal to
1.5 times the Target Bonus, to be paid in one lump sum on the Company’s first regular payroll date that occurs after the Payment Date; (iii) you will be eligible for the same COBRA premium assistance as set forth in Section 13.A.iii above, subject to the same terms, conditions, and limitations as described therein; and (iv) the vesting of 100% of your then outstanding unvested equity grants shall be accelerated, such that all unvested equity grants vest and become fully exercisable or non-forfeitable as of the date your employment terminates.
|
D.
|
The Severance Benefits will be subject to the following terms and conditions:
|
(a)
|
“
Accrued Compensation
” means any accrued base salary earned by you prior to the date of termination, any accrued but unused PTO, and any amounts for reimbursement of any appropriate business expenses incurred you in connection with the performance of your duties hereunder, all to the extent unpaid on the date of termination. Your entitlement to any other compensation or benefit under any plan of the Company shall be governed by and determined in accordance with the terms of such plans, except as otherwise specified in this letter agreement.
|
(b)
|
“for Cause” shall mean (i) your engagement in any conduct that has materially and adversely affected, or is reasonably likely to materially and adversely affect, the business, interests or reputation of the Company (for avoidance of doubt, “conduct” in this subsection does not mean poor performance or failure to meet Company objectives); (ii) any breach by you of the Restrictive Covenant Agreement; (iii) your failure to perform, or negligence in your performance of, any material duties required of or assigned to you if such duties are consistent with duties customary for the position held by you, provided that you were given fourteen (14) calendar days’ written notice of such deficiencies and an opportunity to cure such deficiencies (but only if the Board, in its reasonable discretion, deems such deficiencies susceptible to cure); (iv) your fraud, embezzlement, or willful misconduct; (v) your material breach of this letter agreement; or (vi) your conviction of, or plea of guilty or
nolo
|
(c)
|
“Change in Control Transaction” shall mean (i) a merger or consolidation of the Company with or into another corporation under circumstances where the stockholders of the Company immediately prior to such merger or consolidation do not own after such merger or consolidation shares representing at least fifty percent (50%) of the voting power of the Company or the surviving, resulting or parent corporation, as the case may be, (ii) a transfer of shares representing fifty percent (50%) or more of the voting power of the Company to any person who was not, on the Effective Date, a holder of stock of any class or preference or any stock option of the Company, (iii) a liquidation of the Company, or (iv) a sale or other disposition of all or substantially all of the Company’s assets.
|
(d)
|
“Good Reason” shall mean you have complied with the “Good Reason Process” as defined below, following the occurrence of one or more of the following events without your written consent: (i) any material diminution in your title, duties, authority or responsibilities or a change in your reporting directly to the Board, (ii) any material diminution in your base compensation; (iii) the relocation of your primary place of work more than fifty (50) miles from your primary place of work for the Company on the Effective Date of this letter agreement, other than in a direction that reduces your daily commute, or (iv) the material breach by the Company of any provision of this letter agreement.
|
(e)
|
“Disability” shall mean your inability (as determined by the Company in good faith) to perform the essential functions of your position due to physical or mental disability (after taking into account the Company’s obligation to provide reasonable
|
A.
|
The Company shall not be obligated to provide to you any portion of any “Contingent Compensation Payments” (as defined below) that you would otherwise be entitled to receive to the extent necessary to eliminate any “excess parachute payments” (as defined in Section 280G(b)(1) of the Code) for you. For purposes of this Section 16, the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated Payments” and the aggregate amount (determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision) of the Contingent Compensation Payments so eliminated shall be referred to as the “Eliminated Amount.”
|
B.
|
Notwithstanding the provisions of Section 16.A, no such reduction in Contingent Compensation Payments shall be made if (1) the Eliminated Amount (computed without regard to this sentence) exceeds (2) 100% of the aggregate present value (determined in accordance with Treasury Regulation Section 1.280G-1, Q/A-31 and Q/A-32 or any successor provisions) of the amount of any additional taxes that would be incurred by you if the Eliminated Payments (determined without regard to this sentence) were paid to you (including, state and federal income taxes on the Eliminated Payments, the excise tax imposed by Section 4999 of the Code payable with respect to all of the Contingent Compensation Payments in excess of your “base amount” (as defined in Section 280G(b)(3) of the Code), and any withholding taxes). The override of such reduction in Contingent Compensation Payments pursuant to this Section 16.B shall be referred to as a “Section 16.B Override.” For purpose of this Section, if any federal or state income taxes would be attributable to the receipt of any Eliminated Payment, the amount of such taxes shall be computed by multiplying the amount of the Eliminated Payment by the maximum combined federal and state income tax rate provided by law.
|
C.
|
For purposes of this Section 16 the following terms shall have the following respective meanings:
|
D.
|
Any payments or other benefits otherwise due to you following a Change in Ownership or Control that could reasonably be characterized (as determined by the Company) as Contingent Compensation Payments (the “Potential Payments”) shall not be made until the dates provided for in this Section 16.D. Within 30 days after each date on which you first become entitled to receive (whether or not then due) a Contingent Compensation Payment relating to such Change in Ownership or Control, the Company shall determine and notify you (with reasonable detail regarding the basis for its determinations) (1) which Potential Payments constitute Contingent Compensation Payments, (2) the Eliminated Amount and (3) whether the Section 16.B Override is applicable. Within 30 days after delivery of such notice to you, you shall deliver a response to the Company (the “Executive Response”) stating either (A) that you agree with the Company’s determination pursuant to the preceding sentence or (B) that you disagrees with such determination, in which case you shall set forth (x) which Potential Payments should be characterized as Contingent Compensation Payments, (y) the Eliminated Amount, and (z) whether the Section 16.B Override is applicable. In the event that you fail to deliver an Executive Response on or before the required date, the Company’s initial determination shall be final. If you state in the Executive Response that you agree with the Company’s determination, the Company shall make the Potential Payments to you within three (3) business days following delivery to the Company of the Executive Response (except for any Potential Payments which are not due to be made until after such date, which Potential Payments shall be made on the date on which they are due). If you state in the Executive Response that you disagree with the Company’s determination, then, for a period of sixty (60) days following delivery of the Executive Response, you and the Company shall use good faith efforts to resolve such dispute. If such dispute is not resolved within such 60-day period, such dispute shall be settled
|
E.
|
The Contingent Compensation Payments to be treated as Eliminated Payments shall be determined by the Company by determining the “Contingent Compensation Payment Ratio” (as defined below) for each Contingent Compensation Payment and then reducing the Contingent Compensation Payments in order beginning with the Contingent Compensation Payment with the highest Contingent Compensation Payment Ratio. For Contingent Compensation Payments with the same Contingent Compensation Payment Ratio, such Contingent Compensation Payment shall be reduced based on the time of payment of such Contingent Compensation Payments with amounts having later payment dates being reduced first. For Contingent Compensation Payments with the same Contingent Compensation Payment Ratio and the same time of payment, such Contingent Compensation Payments shall be reduced on a pro rata basis (but not below zero) prior to reducing Contingent Compensation Payment with a lower Contingent Compensation Payment Ratio. The term “Contingent Compensation Payment Ratio” shall mean a fraction the numerator of which is the value of the applicable Contingent Compensation Payment that must be taken into account by you for purposes of Section 4999(a) of the Code, and the denominator of which is the actual amount to be received by you in respect of the applicable Contingent Compensation Payment. For example, in the case of an equity grant that is treated as contingent on the Change in Ownership or Control because the time at which the payment is made or the payment vests is accelerated, the denominator shall be determined by reference to the fair market value of the equity at the acceleration date, and not in accordance with the methodology for determining the value of accelerated payments set forth in Treasury Regulation Section 1.280G-1Q/A-24(b) or (c)).
|
F.
|
The provisions of this Section 16 are intended to apply to any and all payments or benefits available to you under this letter agreement or any other agreement or
|
Date:
|
March 8, 2017
|
|
By:
|
/s/ Mark A. Augusti
|
|
|
|
|
Mark A. Augusti
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
Date:
|
March 8, 2017
|
By:
|
/s/Paul Weiner
|
|
|
|
Paul Weiner
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|
Date:
|
March 8, 2017
|
|
By:
|
/s/ Mark A. Augusti
|
|
|
|
|
Mark A. Augusti
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
Date:
|
March 8, 2017
|
By:
|
/s/Paul Weiner
|
|
|
|
Paul Weiner
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|