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Delaware
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56-2463152
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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600 Technology Park Drive
Billerica, MA
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01821
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(Address of principal executive offices)
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(Zip Code)
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Title of Class
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Name of Exchange on Which Registered
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Common Stock, $0.00001 par value
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NASDAQ Global Select Market
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Emerging growth company
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x
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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x
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Page
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Item 8. Financial Statements
and Supplementary Data
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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 ConforMIS Hip System, which we previously referred to as our iTotal Hip system;
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our expectations regarding our sales, expenses, gross margin and other results of operations;
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our strategies for growth and sources of new sales;
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maintaining and expanding our customer base and our relationships with our independent sales representatives and distributors;
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our current and future products and plans to promote them;
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anticipated trends and challenges in our business and in the markets in which we operate;
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the implementation of our business model, strategic plans for our business, products, product candidates and technology;
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the anticipated timing of our product launches;
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the future availability of raw materials used to manufacture, and finished components for, our products from third-party suppliers, including single source suppliers;
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product liability claims;
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patent infringement claims;
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our ability to retain and hire necessary employees and to staff our operations appropriately;
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our ability to compete in our industry and with innovations by our competitors;
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potential reductions in reimbursement levels by third-party payors and cost containment efforts of accountable care organizations;
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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;
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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;
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the anticipated adequacy of our capital resources to meet the needs of our business or our ability to raise any additional capital; and
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our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;
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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.
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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.
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iFit Just-in-Time Delivery
, our just-in-time manufacturing and delivery capabilities.
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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:
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Better fit
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We design our customized knee implants to restore the patient's own native anatomy. As a result, we believe that our implants fit better.
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Faster recovery
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We believe an individual fit requires less bone and soft tissue removal by the surgeon, thereby shortening recovery times.
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Better function
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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.
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Greater patient satisfaction
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We believe our implants offer patients greater overall satisfaction with the results of their knee replacement.
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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. A study of 63 knee replacement surgeries, published in 2017 in the peer-reviewed
Journal of Knee Surgery
, indicates that 84% of patients achieved perfect neutral coronal mechanical alignment after surgery, and that 100% of patients were within the desired alignment range after surgery. Similarly, a prior retrospective study of 200 knee replacement surgeries published in 2014 in the peer-reviewed
Journal of Arthroplasty
, or the 2014 JOA Study, indicated that our iTotal CR implant was 1.8 times more likely to be in the desired alignment range after surgery than an off-the-shelf implant. At the time the 2014 JOA Study was conducted, one of the authors of this study was a paid consultant to us.
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For the hospital.
We believe that our customized knee replacement implants and iFit technology platform provide a better economic outcome for hospitals by:
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improving patient recovery times, reducing blood loss and reducing adverse event rates;
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reducing the costs associated with managing and sterilizing large numbers of reusable instruments;
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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.
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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.
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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.
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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.
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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:
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Better fit
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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.
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Faster recovery
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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.
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Better function
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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.
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Greater patient satisfaction
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We believe that, as a result of our customized implants fitting and functioning better, patients have greater overall satisfaction with the results of their knee replacement.
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Earlier intervention
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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.
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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:
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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.
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Bone preservation
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We believe our knee implants result in the preservation of more bone for several reasons:
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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.
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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.
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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.
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Fewer post-operative issues
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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, published in the peer-reviewed journal
Arthroplasty Today
in 2017, or the 2017 AT 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) and at 90 days post-discharge (p=0.023) 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.
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Greater efficiency
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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.
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For the hospital.
We believe that our customized implants and iFit technology platform provide a better economic outcome for hospitals through:
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Improved implant and instrument management and reduced sterilization costs
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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, 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
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Improved productivity in the OR
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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.
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Shorter stays
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We believe that our customized total knee replacements may shorten hospital stays. Our summary of the results of the 2017 AT 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 in 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%).
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Economic Savings
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We believe that our technology offers the potential of significant economic savings to hospitals and payors. For example, the 2017 AT Study compared adverse events rates and cost of care for total knee arthroplasty (TKA) patients treated with either customized individually made (CIM) implants or standard off-the-shelf (OTS) implants. In that study, the total average real hospital costs between the customized implant and OTS groups were nearly identical (customized implant $16,192 vs OTS $16,240), suggesting that patients with customized implants received improved hospital outcomes at no additional cost to the hospital. However, risk-adjusted per patient total cost of care showed a net savings of $913.87 per patient for the customized implant group for bundle of care, including the preoperative computed tomography scan, TKA hospitalization, and discharge disposition. Follow-up care costs demonstrated a savings of $1,313 per patient.
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Fewer adverse events
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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 2017 AT 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 this published research, sponsored by us, also indicates that use of our iTotal CR is associated with lower adverse event rates during the 90-day period following surgery (p=0.023). 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.
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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.
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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.
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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 2017, we received clearance from the FDA for the ConforMIS Hip System, our first customized hip replacement implant, which we plan to launch on a limited basis in the second half of 2018. Additionally, we are currently developing the next generation of our iUni partial knee replacement system, which we expect to launch on a limited basis in the first half of 2019, and we are developing the next generation of our iTotal CR and iTotal PS systems. We expect to launch the next generation of the iTotal CR in the second half of 2019, including the launch of instrumentation that will be used in our next generation iTotal PS system. 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.
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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:
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expansion of gross margin through various initiatives, including the ongoing vertical integration of some of our manufacturing processes;
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shorter product design and development time frames; and
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continuous improvement of our products without making obsolete a large inventory of implants and instruments, in contrast to manufacturers of off-the-shelf implants;
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Enhance our patent portfolio and continue to exploit our patent position.
As of
February 28, 2018
, we own or exclusively in-license a total of approximately 420 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 - "Commitments and Contingencies" in the financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K for information regarding our patent litigation.
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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.
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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.
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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. 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.
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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. The iUni includes a femoral implant, a tibial tray and a single polyethylene insert, all of which are individually made for the particular patient.
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new product development;
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enhancements of existing products and software;
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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
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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.
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continue to 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;
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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;
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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;
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continue expanding our CAD labor force in India; and
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obtain more favorable pricing of certain components of our products manufactured for us by third parties.
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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.
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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.
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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.
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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. Our patent portfolio covers a range of subject matter, including:
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customized articular implants for the knee, hip, spine, shoulder, ankle and extremities;
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customized instrumentation including for joint replacement and ligament reconstruction;
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imaging technology;
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3D printing technology for implants and instruments;
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methods of designing customized implants and instruments; and
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methods of manufacturing customized implants and instruments.
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the ability to introduce innovative products that are differentiated from competitors' offerings and represent an improvement over currently available products;
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the ease of use of the products and the quality of training, services and clinical support provided to surgeons and hospitals;
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the safety and efficacy of products and procedures, as demonstrated in published studies and other clinical reports;
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the ability to anticipate and meet customers' needs and commercialize new products in a timely manner;
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acceptance and adoption of products by patients, physicians and hospitals; and
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the price of products and cost effectiveness of the procedure and availability and rate of third-party reimbursement.
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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;
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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;
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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;
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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;
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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;
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the federal transparency requirements under the Health Care Reform Law 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
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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.
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expansion of our sales and marketing efforts;
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expansion of our manufacturing capacity;
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funding research, development and clinical activities related to our existing products and product platform, including iFit design software and product support;
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funding research, development and clinical activities related to new products that we may develop, including new versions of our existing products and other joint replacement products;
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pursuing and maintaining appropriate regulatory clearances and approvals for our existing products and any new products that we may develop; and
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preparing, filing and prosecuting patent applications, and maintaining and enforcing our intellectual property rights and position.
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greater financial resources, cash flow and other resources for product research and development, sales and marketing and litigation;
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significantly greater name recognition;
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established relations with, in some cases over decades, orthopedic surgeons, hospitals and other medical facilities and third-party payors;
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established products that are more widely accepted by, a greater number of orthopedic surgeons, hospitals and other medical facilities and third-party payors;
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more complete lines of products for knee or other joint replacements;
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larger and more well-established distribution networks with significant international presence;
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products supported by long-term clinical data and long-term product survivorship data;
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greater experience in obtaining and maintaining FDA and other regulatory approvals or clearances for products and product enhancements; and
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more expansive portfolios of intellectual property rights and greater funds available to protect their intellectual property.
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increase sales of our products;
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negotiate more favorable prices for the materials we use to manufacture our products;
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negotiate more favorable prices for the manufacture of certain components of our products that are manufactured for us by third parties;
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deploy new versions of our software that reduce the costs associated with the design of our products; and
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expand our internal manufacturing capabilities to manufacture certain components of our products at a lower unit cost than vendors we currently use.
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comfort and experience with competitive products;
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perceived differences in surgical technique;
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existing relationships with competitors, competitive sales representatives and competitive distributors;
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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";
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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;
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perceived liability risks generally associated with the use of new products and procedures, including the lack of long-term clinical data;
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perceived risks of failure of timely delivery as a result of our "just in time" manufacturing and delivery model
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unwillingness to wait for the implants to be delivered;
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unwillingness to submit patients to computed tomography, or CT, scans;
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higher cost or perceived higher cost of our products compared to competitive products; and
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the additional time commitment that may be required for training.
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create innovative product designs;
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accurately anticipate and meet customers' needs;
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commercialize new products in a timely manner;
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differentiate our offerings from competitors' offerings;
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achieve positive clinical outcomes with new products;
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demonstrate the safety and reliability of new products;
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satisfy the increased demands by healthcare payors, providers and patients for shorter hospital stays, faster post-operative recovery and lower-cost procedures;
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provide adequate medical education relating to new products; and
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manufacture and deliver implants and instrumentation in sufficient volumes on time.
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agreements may terminate prematurely due to disagreements or may result in litigation;
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we may not be able to renew existing agreements on acceptable terms;
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our independent sales representatives and distributors may not devote sufficient resources to the sale of products;
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our independent sales representatives and distributors may be unsuccessful in marketing our products;
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our existing relationships with distributors may preclude us from entering into additional future arrangements with other distributors; and
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we may not be able to negotiate future agreements on acceptable terms or at all.
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an increase in our variable interest rates;
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an inability to access credit markets should we require external financing;
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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;
|
•
|
technology assessment requirements that we are not able to satisfactorily meet with our current published clinical and health economic outcomes studies;
|
•
|
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 of 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;
|
•
|
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; and
|
•
|
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;
|
•
|
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 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;
|
•
|
repair, replacement, refunds, recalls or detention of our products;
|
•
|
fines, restitution or disgorgement of profits or revenue;
|
•
|
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.
|
•
|
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; 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;
|
•
|
issuance of additional shares of our common stock related to raising capital for the Company;
|
•
|
actual or perceived need of the Company to raise additional capital and the actual or perceived inability to raise such capital on favorable terms;
|
•
|
actual or perceive inability of the Company to satisfy the financial and other requirements of our 2017 Secured Loan Agreement;
|
•
|
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
|
|
|
$
|
7.55
|
|
Second Quarter
|
|
$
|
13.83
|
|
|
$
|
4.80
|
|
Third Quarter
|
|
$
|
10.00
|
|
|
$
|
6.62
|
|
Fourth Quarter
|
|
$
|
10.93
|
|
|
$
|
6.66
|
|
Year ended December 31, 2017:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
8.72
|
|
|
$
|
4.35
|
|
Second Quarter
|
|
$
|
5.98
|
|
|
$
|
3.79
|
|
Third Quarter
|
|
$
|
5.73
|
|
|
$
|
3.22
|
|
Fourth Quarter
|
|
$
|
4.17
|
|
|
$
|
2.22
|
|
|
|
Years ended December 31,
|
||||||||||
(in thousands, except share and per share data)
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
|
||||||
Consolidated statements of operations data:
|
|
|
|
|
|
|
|
|
||||
Revenue
|
|
$
|
78,115
|
|
|
$
|
79,899
|
|
|
$
|
66,887
|
|
Cost of revenue
|
|
49,301
|
|
|
53,192
|
|
|
45,102
|
|
|||
Gross profit
|
|
28,814
|
|
|
26,707
|
|
|
21,785
|
|
|||
Operating expenses:
|
|
|
|
|
|
|
|
|
||||
Sales and marketing
|
|
38,788
|
|
|
41,086
|
|
|
37,558
|
|
|||
Research and development
|
|
17,136
|
|
|
16,608
|
|
|
16,997
|
|
|||
General and administrative
|
|
28,737
|
|
|
25,157
|
|
|
23,191
|
|
|||
Total operating expenses
|
|
84,661
|
|
|
82,851
|
|
|
77,746
|
|
|||
Loss from operations
|
|
(55,847
|
)
|
|
(56,144
|
)
|
|
(55,961
|
)
|
|||
Other income and expenses
|
|
|
|
|
|
|
|
|
||||
Interest income
|
|
491
|
|
|
487
|
|
|
138
|
|
|||
Interest expense
|
|
(2,119
|
)
|
|
(138
|
)
|
|
(1,385
|
)
|
|||
Loss on extinguishment of debt
|
|
—
|
|
|
—
|
|
|
(205
|
)
|
|||
Foreign currency transaction income (loss)
|
|
4,057
|
|
|
(1,607
|
)
|
|
—
|
|
|||
Other income (expense), net
|
|
—
|
|
|
(123
|
)
|
|
208
|
|
|||
Total other income/(expenses), net
|
|
2,429
|
|
|
(1,381
|
)
|
|
(1,244
|
)
|
|||
Loss before income taxes
|
|
(53,418
|
)
|
|
(57,525
|
)
|
|
(57,205
|
)
|
|||
Income tax provision
|
|
162
|
|
|
63
|
|
|
41
|
|
|||
Net loss
|
|
$
|
(53,580
|
)
|
|
$
|
(57,588
|
)
|
|
$
|
(57,246
|
)
|
Net loss per share applicable to common stockholders—basic and diluted
|
|
$
|
(1.24
|
)
|
|
$
|
(1.39
|
)
|
|
$
|
(2.60
|
)
|
Weighted-average number of common shares used in net loss per share applicable to common stockholders—basic and diluted
|
|
43,343,459
|
|
|
41,521,629
|
|
|
21,993,066
|
|
|
|
December 31,
|
||||||||||
(in thousands)
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
|
||||||
Consolidated balance sheet data:
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
18,348
|
|
|
$
|
37,257
|
|
|
$
|
117,185
|
|
Investments
|
|
26,880
|
|
|
28,242
|
|
|
—
|
|
|||
Working capital
|
|
56,942
|
|
|
81,577
|
|
|
132,894
|
|
|||
Total assets
|
|
93,798
|
|
|
112,810
|
|
|
157,099
|
|
|||
Long term debt, including current portion
|
|
29,667
|
|
|
—
|
|
|
478
|
|
|||
Total stockholders' equity
|
|
46,513
|
|
|
94,055
|
|
|
141,212
|
|
•
|
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 in India, which we believe will reduce labor costs required to design our products.
|
|
|
2017
|
|
2016
|
|
2017 vs 2016
|
|||||||||||||||
Years Ended December 31,
|
|
Amount
|
|
As a % of
Product
Revenue
|
|
Amount
|
|
As a % of
Product
Revenue
|
|
$
Change
|
|
%
Change
|
|||||||||
United States
|
|
$
|
64,390
|
|
|
84
|
%
|
|
$
|
62,366
|
|
|
79
|
%
|
|
$
|
2,024
|
|
|
3
|
%
|
Germany
|
|
11,217
|
|
|
14
|
|
|
14,701
|
|
|
19
|
|
|
$
|
(3,484
|
)
|
|
(24
|
)
|
||
Rest of world
|
|
1,493
|
|
|
2
|
|
|
1,854
|
|
|
2
|
|
|
(361
|
)
|
|
(19
|
)
|
|||
Product revenue
|
|
$
|
77,100
|
|
|
100
|
%
|
|
$
|
78,921
|
|
|
100
|
%
|
|
$
|
(1,821
|
)
|
|
(2
|
)%
|
|
|
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
|
%
|
•
|
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,
|
|||||||||||||
|
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|||||||
Net cash (used in) provided by:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Operating activities
|
|
$
|
(37,856
|
)
|
|
$
|
(49,132
|
)
|
|
$
|
11,276
|
|
|
23
|
%
|
Investing activities
|
|
(10,041
|
)
|
|
(35,425
|
)
|
|
25,384
|
|
|
72
|
|
|||
Financing activities
|
|
32,697
|
|
|
3,602
|
|
|
29,095
|
|
|
808
|
|
|||
Effect of exchange rate on cash
|
|
(3,709
|
)
|
|
1,027
|
|
|
(4,736
|
)
|
|
(461
|
)
|
|||
Total
|
|
$
|
(18,909
|
)
|
|
$
|
(79,928
|
)
|
|
$
|
61,019
|
|
|
76
|
%
|
|
|
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
|
)%
|
|
Payment Due by Period
|
|||||||||||||||||||
Contractual Obligations
|
Total
|
|
Less than 1 year
|
|
Years 1 to 3
|
|
Years 3 to 5
|
|
After 5 years
|
|||||||||||
Senior secured debt (1)
|
$
|
30,000
|
|
|
$
|
—
|
|
|
$
|
13,750
|
|
|
$
|
16,250
|
|
|
$
|
—
|
|
|
Operating lease obligations - real estate (2)
|
10,643
|
|
|
1,521
|
|
3,153
|
|
3,153
|
|
|
3,030
|
|
|
2,939
|
|
|||||
Other (3)
|
1,435
|
|
|
378
|
|
|
756
|
|
|
301
|
|
|
—
|
|
||||||
Total (4)
|
$
|
42,078
|
|
|
$
|
1,899
|
|
|
$
|
17,659
|
|
|
$
|
19,581
|
|
|
$
|
2,939
|
|
•
|
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, 2017
|
|
December 31, 2016
|
||||
|
|
|
|
||||
Assets
|
|
|
|
||||
Current Assets
|
|
|
|
|
|
||
Cash and cash equivalents
|
$
|
18,348
|
|
|
$
|
37,257
|
|
Investments
|
26,880
|
|
|
28,242
|
|
||
Accounts receivable, net
|
13,200
|
|
|
14,675
|
|
||
Inventories
|
9,184
|
|
|
11,720
|
|
||
Prepaid expenses and other current assets
|
2,246
|
|
|
3,954
|
|
||
Total current assets
|
69,858
|
|
|
95,848
|
|
||
Property and equipment, net
|
16,514
|
|
|
15,084
|
|
||
Other Assets
|
|
|
|
|
|
||
Restricted cash
|
462
|
|
|
300
|
|
||
Intangible assets, net
|
210
|
|
|
746
|
|
||
Goodwill
|
6,731
|
|
|
753
|
|
||
Other long-term assets
|
23
|
|
|
79
|
|
||
Total assets
|
$
|
93,798
|
|
|
$
|
112,810
|
|
|
|
|
|
||||
Liabilities and stockholders' equity
|
|
|
|
|
|
||
Current liabilities
|
|
|
|
|
|
||
Accounts payable
|
$
|
4,891
|
|
|
$
|
5,474
|
|
Accrued expenses
|
7,720
|
|
|
8,492
|
|
||
Deferred revenue
|
305
|
|
|
305
|
|
||
Total current liabilities
|
12,916
|
|
|
14,271
|
|
||
Other long-term liabilities
|
651
|
|
|
164
|
|
||
Deferred tax liabilities
|
37
|
|
|
—
|
|
||
Deferred revenue
|
4,014
|
|
|
4,320
|
|
||
Long-term debt, less debt issuance costs
|
29,667
|
|
|
—
|
|
||
Total liabilities
|
47,285
|
|
|
18,755
|
|
||
Commitments and contingencies
|
—
|
|
|
—
|
|
||
Stockholders’ equity
|
|
|
|
|
|
||
Preferred stock, $0.00001 par value:
|
|
|
|
|
|
||
Authorized: 5,000,000 shares authorized at December 31, 2017 and December 31, 2016; no shares issued and outstanding as of December 31, 2017 and December 31, 2016
|
—
|
|
|
—
|
|
||
Common stock, $0.00001 par value:
|
|
|
|
|
|
||
Authorized: 200,000,000 shares authorized at December 31, 2017 and December 31, 2016; 45,528,519 and 43,399,547 shares issued and outstanding at December 31, 2017 and December 31, 2016, respectively
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
486,570
|
|
|
476,486
|
|
||
Accumulated deficit
|
(436,821
|
)
|
|
(382,930
|
)
|
||
Accumulated other comprehensive (loss) income
|
(3,236
|
)
|
|
499
|
|
||
Total stockholders’ equity
|
46,513
|
|
|
94,055
|
|
||
Total liabilities and stockholders’ equity
|
$
|
93,798
|
|
|
$
|
112,810
|
|
|
Years Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Revenue
|
|
|
|
|
|
|
|
||||
Product
|
$
|
77,100
|
|
|
$
|
78,921
|
|
|
$
|
62,791
|
|
Royalty
|
1,015
|
|
|
978
|
|
|
4,096
|
|
|||
Total revenue
|
78,115
|
|
|
79,899
|
|
|
66,887
|
|
|||
Cost of revenue
|
49,301
|
|
|
53,192
|
|
|
45,102
|
|
|||
Gross profit
|
28,814
|
|
|
26,707
|
|
|
21,785
|
|
|||
|
|
|
|
|
|
||||||
Operating expenses
|
|
|
|
|
|
|
|
||||
Sales and marketing
|
38,788
|
|
|
41,086
|
|
|
37,558
|
|
|||
Research and development
|
17,136
|
|
|
16,608
|
|
|
16,997
|
|
|||
General and administrative
|
28,737
|
|
|
25,157
|
|
|
23,191
|
|
|||
Total operating expenses
|
84,661
|
|
|
82,851
|
|
|
77,746
|
|
|||
Loss from operations
|
(55,847
|
)
|
|
(56,144
|
)
|
|
(55,961
|
)
|
|||
|
|
|
|
|
|
||||||
Other income and expenses
|
|
|
|
|
|
|
|
||||
Interest income
|
491
|
|
|
487
|
|
|
138
|
|
|||
Interest expense
|
(2,119
|
)
|
|
(138
|
)
|
|
(1,385
|
)
|
|||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
(205
|
)
|
|||
Foreign currency transaction income (loss)
|
4,057
|
|
|
(1,607
|
)
|
|
—
|
|
|||
Other income (expense)
|
—
|
|
|
(123
|
)
|
|
208
|
|
|||
Total other income (expenses), net
|
2,429
|
|
|
(1,381
|
)
|
|
(1,244
|
)
|
|||
Loss before income taxes
|
(53,418
|
)
|
|
(57,525
|
)
|
|
(57,205
|
)
|
|||
Income tax provision
|
162
|
|
|
63
|
|
|
41
|
|
|||
|
|
|
|
|
|
||||||
Net loss
|
$
|
(53,580
|
)
|
|
$
|
(57,588
|
)
|
|
$
|
(57,246
|
)
|
|
|
|
|
|
|
||||||
Net loss per share - basic and diluted
|
$
|
(1.24
|
)
|
|
$
|
(1.39
|
)
|
|
$
|
(2.60
|
)
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding - basic and diluted
|
43,343,459
|
|
|
41,521,629
|
|
|
21,993,066
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Net loss
|
|
$
|
(53,580
|
)
|
|
$
|
(57,588
|
)
|
|
$
|
(57,246
|
)
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments
|
|
(3,709
|
)
|
|
1,027
|
|
|
(24
|
)
|
|||
Change in unrealized gain (loss) on available-for-sale securities, net of tax
|
|
(26
|
)
|
|
(7
|
)
|
|
—
|
|
|||
Comprehensive loss
|
|
$
|
(57,315
|
)
|
|
$
|
(56,568
|
)
|
|
$
|
(57,270
|
)
|
|
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, 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
|
|
||||||
Issuance of common stock—option exercise
|
|
|
|
|
535,734
|
|
|
—
|
|
|
2,108
|
|
|
|
|
|
|
2,108
|
|
||||||||||||||||
Issuance of common stock—restricted stock
|
|
|
|
|
1,195,196
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
—
|
|
||||||||||||||||
Issuance of common stock—ATM offering
|
|
|
|
|
228,946
|
|
|
—
|
|
|
1,023
|
|
|
|
|
|
|
1,023
|
|
||||||||||||||||
Issuance of common stock— Broad Peak Manufacturing, LLC acquisition
|
|
|
|
|
169,096
|
|
|
—
|
|
|
594
|
|
|
|
|
|
|
594
|
|
||||||||||||||||
Compensation expense related to issued stock options and restricted stock awards
|
|
|
|
|
|
|
|
|
6,048
|
|
|
|
|
|
|
6,048
|
|
||||||||||||||||||
Cumulative-effect adjustment from adoption of ASU 2016-09
|
|
|
|
|
|
|
|
|
311
|
|
|
(311
|
)
|
|
|
|
—
|
|
|||||||||||||||||
Net loss
|
|
|
|
|
|
|
|
|
|
|
(53,580
|
)
|
|
|
|
(53,580
|
)
|
||||||||||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,735
|
)
|
|
(3,735
|
)
|
||||||||||||||||||
Balance, December 31, 2017
|
—
|
|
|
$
|
—
|
|
—
|
|
45,528,519
|
|
—
|
|
$
|
—
|
|
—
|
|
$
|
486,570
|
|
—
|
|
$
|
(436,821
|
)
|
—
|
|
$
|
(3,236
|
)
|
—
|
|
$
|
46,513
|
|
|
Years Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Cash flows from operating activities
|
|
|
|
|
|
|
|
||||
Net loss
|
$
|
(53,580
|
)
|
|
$
|
(57,588
|
)
|
|
$
|
(57,246
|
)
|
|
|
|
|
|
|
||||||
Adjustments to reconcile net loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
||||
Depreciation and amortization expense
|
3,669
|
|
|
3,153
|
|
|
2,619
|
|
|||
Amortization of debt discount
|
—
|
|
|
7
|
|
|
135
|
|
|||
Stock-based compensation expense
|
6,048
|
|
|
5,324
|
|
|
3,607
|
|
|||
Provision for bad debts on trade receivables
|
(15
|
)
|
|
188
|
|
|
359
|
|
|||
Impairment of long term assets
|
1,113
|
|
|
123
|
|
|
—
|
|
|||
Disposal of long term assets
|
—
|
|
|
16
|
|
|
2
|
|
|||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
205
|
|
|||
Non-cash interest expense
|
100
|
|
|
—
|
|
|
—
|
|
|||
Amortization/accretion on investments
|
202
|
|
|
315
|
|
|
—
|
|
|||
Deferred tax
|
37
|
|
|
—
|
|
|
—
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
||||
Accounts receivable
|
1,490
|
|
|
4
|
|
|
(6,107
|
)
|
|||
Inventories
|
2,535
|
|
|
(200
|
)
|
|
(3,829
|
)
|
|||
Prepaid expenses and other assets
|
1,770
|
|
|
(1,550
|
)
|
|
(1,045
|
)
|
|||
Accounts payable and accrued liabilities
|
(1,406
|
)
|
|
1,437
|
|
|
1,969
|
|
|||
Deferred royalty revenue
|
(306
|
)
|
|
(305
|
)
|
|
4,932
|
|
|||
Other long-term liabilities
|
487
|
|
|
(56
|
)
|
|
(51
|
)
|
|||
Net cash used in operating activities
|
(37,856
|
)
|
|
(49,132
|
)
|
|
(54,450
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
||||
Acquisition of property and equipment
|
(5,233
|
)
|
|
(7,161
|
)
|
|
(4,643
|
)
|
|||
Business acquisition, net of cash acquired
|
(5,780
|
)
|
|
—
|
|
|
—
|
|
|||
(Increase) decrease in restricted cash
|
(162
|
)
|
|
300
|
|
|
3,837
|
|
|||
Purchase of investments
|
(30,991
|
)
|
|
(65,614
|
)
|
|
—
|
|
|||
Maturity of investments
|
32,125
|
|
|
37,050
|
|
|
—
|
|
|||
Net cash used in investing activities
|
(10,041
|
)
|
|
(35,425
|
)
|
|
(806
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
||||
Proceeds from exercise of common stock options
|
2,108
|
|
|
4,087
|
|
|
806
|
|
|||
Proceeds from exercise of common stock warrant
|
—
|
|
|
—
|
|
|
18
|
|
|||
Proceeds from exercise of preferred stock warrant
|
—
|
|
|
—
|
|
|
4,458
|
|
|||
Debt issuance costs
|
(434
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from issuance of debt
|
30,000
|
|
|
—
|
|
|
—
|
|
|||
Payments on long-term debt
|
—
|
|
|
(485
|
)
|
|
(10,278
|
)
|
|||
Payment on extinguishment of debt
|
—
|
|
|
—
|
|
|
(205
|
)
|
|||
Net proceeds from issuance of common stock
|
1,023
|
|
|
—
|
|
|
139,766
|
|
|||
Net cash provided by financing activities
|
32,697
|
|
|
3,602
|
|
|
134,565
|
|
|||
Foreign exchange effect on cash and cash equivalents
|
(3,709
|
)
|
|
1,027
|
|
|
(24
|
)
|
|||
(Decrease) increase in cash and cash equivalents
|
(18,909
|
)
|
|
(79,928
|
)
|
|
79,285
|
|
|||
Cash and cash equivalents, beginning of period
|
37,257
|
|
|
117,185
|
|
|
37,900
|
|
|||
Cash and cash equivalents, end of period
|
$
|
18,348
|
|
|
$
|
37,257
|
|
|
$
|
117,185
|
|
|
|
|
|
|
|
||||||
Supplemental information:
|
|
|
|
|
|
|
|
||||
Cash paid for income taxes
|
$
|
36
|
|
|
$
|
52
|
|
|
$
|
187
|
|
Cash paid for interest
|
1,449
|
|
|
48
|
|
|
1,284
|
|
|||
Non cash investing and financing activities
|
|
|
|
|
|
|
|
||||
Issuance of common stock for business acquisition
|
594
|
|
|
—
|
|
|
—
|
|
•
|
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, 2016
|
|
$
|
506
|
|
|
$
|
(7
|
)
|
|
$
|
499
|
|
Change in period
|
|
(3,709
|
)
|
|
(26
|
)
|
|
(3,735
|
)
|
|||
Balance December 31, 2017
|
|
$
|
(3,203
|
)
|
|
$
|
(33
|
)
|
|
$
|
(3,236
|
)
|
|
|
Years Ended December 31,
|
||||||||||
(in thousands, except share and per share data)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Numerator:
|
|
|
|
|
|
|
|
|
||||
Numerator for basic and diluted loss per share:
|
|
|
|
|
|
|
|
|
||||
Net loss
|
|
$
|
(53,580
|
)
|
|
$
|
(57,588
|
)
|
|
$
|
(57,246
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
||||
Denominator for basic loss per share:
|
|
|
|
|
|
|
|
|
||||
Weighted average shares
|
|
43,343,459
|
|
|
41,521,629
|
|
|
21,993,066
|
|
|||
Basic loss per share attributable to ConforMIS, Inc. stockholders
|
|
$
|
(1.24
|
)
|
|
$
|
(1.39
|
)
|
|
$
|
(2.60
|
)
|
Diluted loss per share attributable to ConforMIS, Inc. stockholders
|
|
$
|
(1.24
|
)
|
|
$
|
(1.39
|
)
|
|
$
|
(2.60
|
)
|
|
|
Years Ended December 31,
|
|||||||
|
|
2017
|
|
2016
|
|
2015
|
|||
Series A Preferred
|
|
—
|
|
|
—
|
|
|
873,591
|
|
Series B Preferred
|
|
—
|
|
|
—
|
|
|
1,144,885
|
|
Series C Preferred
|
|
—
|
|
|
—
|
|
|
1,256,752
|
|
Series D Preferred
|
|
—
|
|
|
—
|
|
|
3,410,570
|
|
Series E-1 Preferred
|
|
—
|
|
|
—
|
|
|
3,748,578
|
|
Series E-2 Preferred
|
|
—
|
|
|
—
|
|
|
2,628,037
|
|
Common stock warrants
|
|
—
|
|
|
34,709
|
|
|
303,931
|
|
Stock options
|
|
365,105
|
|
|
1,959,030
|
|
|
3,566,421
|
|
Total
|
|
365,105
|
|
|
1,993,739
|
|
|
16,932,765
|
|
December 31, 2017
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Estimated Fair Value
|
Cash and cash equivalents
|
Short-term (1) investments
|
||||||||||||
Cash
|
$
|
9,849
|
|
$
|
—
|
|
$
|
—
|
|
$
|
9,849
|
|
$
|
9,849
|
|
$
|
—
|
|
Level 1 securities:
|
|
|
|
|
|
|
||||||||||||
Money market funds
|
3,499
|
|
—
|
|
—
|
|
3,499
|
|
3,499
|
|
—
|
|
||||||
U.S. treasury bonds
|
9,243
|
|
—
|
|
(4
|
)
|
9,239
|
|
—
|
|
9,239
|
|
||||||
Level 2 securities:
|
|
|
|
|
|
|
||||||||||||
Corporate bonds
|
4,935
|
|
—
|
|
(6
|
)
|
4,929
|
|
—
|
|
4,929
|
|
||||||
Agency bond
|
12,734
|
|
—
|
|
(22
|
)
|
12,712
|
|
—
|
|
12,712
|
|
||||||
Repurchase agreement
|
5,000
|
|
—
|
|
—
|
|
5,000
|
|
5,000
|
|
—
|
|
||||||
Total
|
$
|
45,260
|
|
$
|
—
|
|
$
|
(32
|
)
|
$
|
45,228
|
|
$
|
18,348
|
|
$
|
26,880
|
|
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 bonds
|
21,548
|
|
—
|
|
(3
|
)
|
21,545
|
|
—
|
|
21,545
|
|
||||||
Total
|
$
|
65,506
|
|
$
|
—
|
|
$
|
(7
|
)
|
$
|
65,499
|
|
$
|
37,257
|
|
$
|
28,242
|
|
|
December 31,
2017 |
|
December 31,
2016 |
||||
Total receivables
|
$
|
13,835
|
|
|
$
|
15,356
|
|
Allowance for doubtful accounts and returns
|
(635
|
)
|
|
(681
|
)
|
||
Accounts receivable, net
|
$
|
13,200
|
|
|
$
|
14,675
|
|
|
December 31, 2017
|
|
December 31, 2016
|
||||
Beginning balance
|
$
|
(681
|
)
|
|
$
|
(554
|
)
|
Provision for bad debts on trade receivables
|
15
|
|
|
(188
|
)
|
||
Other allowances
|
(61
|
)
|
|
20
|
|
||
Accounts receivable write offs
|
92
|
|
|
41
|
|
||
Ending balance
|
$
|
(635
|
)
|
|
$
|
(681
|
)
|
|
December 31,
2017 |
|
December 31,
2016 |
||||
Raw Material
|
$
|
2,905
|
|
|
$
|
3,331
|
|
Work in process
|
1,718
|
|
|
2,530
|
|
||
Finished goods
|
4,561
|
|
|
5,859
|
|
||
Total Inventories
|
$
|
9,184
|
|
|
$
|
11,720
|
|
|
Estimated Useful Life
(Years)
|
|
December 31,
2017 |
|
December 31,
2016 |
||||
Equipment
|
5-7
|
|
$
|
19,331
|
|
|
$
|
16,651
|
|
Furniture and fixtures
|
5-7
|
|
955
|
|
|
414
|
|
||
Computer and software
|
3
|
|
7,877
|
|
|
7,027
|
|
||
Leasehold improvements
|
2-8
|
|
1,830
|
|
|
1,294
|
|
||
Total property and equipment
|
|
|
29,993
|
|
|
25,386
|
|
||
Accumulated depreciation
|
|
|
(13,479
|
)
|
|
(10,302
|
)
|
||
Property and equipment, net
|
|
|
$
|
16,514
|
|
|
$
|
15,084
|
|
|
Estimated Useful Life (Years)
|
|
December 31, 2017
|
|
December 31, 2016
|
||||
Developed technology
|
10
|
|
$
|
979
|
|
|
$
|
979
|
|
Accumulated amortization
|
|
|
(783
|
)
|
|
(681
|
)
|
||
Developed technology, net
|
|
|
196
|
|
|
298
|
|
||
|
|
|
|
|
|
||||
License agreements
|
10
|
|
—
|
|
|
1,508
|
|
||
Accumulated amortization
|
|
|
—
|
|
|
(1,060
|
)
|
||
License technology, net
|
|
|
—
|
|
|
448
|
|
||
|
|
|
|
|
|
||||
Acquired favorable lease
|
5
|
|
15
|
|
|
—
|
|
||
Accumulated amortization
|
|
|
(1
|
)
|
|
—
|
|
||
Acquired favorable lease, net
|
|
|
14
|
|
|
—
|
|
||
|
|
|
|
|
|
||||
Intangible assets, net
|
|
|
$
|
210
|
|
|
$
|
746
|
|
|
Amortization expense
|
||
2018
|
$
|
101
|
|
2019
|
101
|
|
|
2020
|
3
|
|
|
2021
|
3
|
|
|
2022
|
2
|
|
|
|
$
|
210
|
|
|
December 31, 2017
|
|
December 31, 2016
|
||||
Accrued employee compensation
|
$
|
2,989
|
|
|
$
|
4,037
|
|
Deferred rent
|
115
|
|
|
101
|
|
||
Accrued legal expense
|
1,231
|
|
|
710
|
|
||
Accrued consulting expense
|
115
|
|
|
104
|
|
||
Accrued vendor charges
|
912
|
|
|
1,396
|
|
||
Accrued revenue share expense
|
968
|
|
|
992
|
|
||
Accrued clinical trial expense
|
196
|
|
|
256
|
|
||
Accrued other
|
1,194
|
|
|
896
|
|
||
|
$
|
7,720
|
|
|
$
|
8,492
|
|
Year
|
Minimum lease Payments
|
||
2018
|
$
|
1,521
|
|
2019
|
1,558
|
|
|
2020
|
1,595
|
|
|
2021
|
1,633
|
|
|
2022
|
1,397
|
|
|
2023-2025
|
2,939
|
|
|
|
$
|
10,643
|
|
|
Payment Due by Period
|
||||||||||||||||||
|
Total
|
|
Less than 1 year
|
|
Years 1 to 3
|
|
Years 3 to 5
|
|
After 5 years
|
||||||||||
Contractual Obligations (1)(2)
|
$
|
1,435
|
|
|
$
|
378
|
|
|
$
|
756
|
|
|
$
|
301
|
|
|
$
|
—
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
||
Oxford Finance, LLC, Term A Loan
|
$
|
15,000
|
|
|
$
|
—
|
|
Oxford Finance, LLC, Term B Loan
|
15,000
|
|
|
|
|||
|
30,000
|
|
|
—
|
|
||
Less unamortized debt issuance costs
|
(333
|
)
|
|
—
|
|
||
Long-term debt, less debt issuance costs
|
$
|
29,667
|
|
|
$
|
—
|
|
|
Principal
Payment |
||
2018
|
$
|
—
|
|
2019
|
—
|
|
|
2020
|
13,750
|
|
|
2021
|
15,000
|
|
|
2022
|
1,250
|
|
|
Total
|
$
|
30,000
|
|
|
|
Shares
|
|
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
|
|
Issuance of common stock - option
|
|
535,734
|
|
Issuance of restricted common stock
|
|
1,195,196
|
|
Issuance of common stock - ATM offering
|
|
228,946
|
|
Issuance of common stock - BPM acquisition
|
|
169,096
|
|
Outstanding December 31, 2017
|
|
45,528,519
|
|
|
|
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, 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
|
|
Cancelled/expired
|
|
(142,857
|
)
|
|
7.00
|
|
|
(142,857
|
)
|
|
7.00
|
|
|
—
|
|
||
Outstanding December 31, 2017
|
|
28,926
|
|
|
$
|
9.80
|
|
|
28,926
|
|
|
$
|
9.80
|
|
|
5.66
|
|
|
|
Number of
Options
|
|
Weighted Average
Exercise Price
per Share
|
|
Aggregate Intrinsic Value (In Thousands)
|
|||||
Outstanding December 31, 2014
|
|
5,355,567
|
|
|
$
|
4.87
|
|
|
|
||
Granted
|
|
403,086
|
|
|
12.20
|
|
|
|
|||
Exercised
|
|
(383,458
|
)
|
|
2.10
|
|
|
$
|
5,691
|
|
|
Expired
|
|
(30,876
|
)
|
|
5.97
|
|
|
|
|||
Cancelled/Forfeited
|
|
(95,990
|
)
|
|
7.42
|
|
|
|
|||
Outstanding December 31, 2015
|
|
5,248,329
|
|
|
$
|
5.56
|
|
|
$
|
61,741
|
|
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
|
|
Granted
|
|
963,350
|
|
|
4.95
|
|
|
|
|||
Exercised
|
|
(535,734
|
)
|
|
3.94
|
|
|
1,688
|
|
||
Expired
|
|
(466,210
|
)
|
|
7.17
|
|
|
|
|||
Cancelled/Forfeited
|
|
(123,451
|
)
|
|
6.54
|
|
|
|
|||
Outstanding December 31, 2017
|
|
3,627,995
|
|
|
$
|
6.48
|
|
|
$
|
96
|
|
|
|
|
|
|
|
|
|||||
Total vested and exercisable
|
|
2,696,151
|
|
|
$
|
6.66
|
|
|
$
|
96
|
|
|
|
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
|
|
Granted
|
|
1,421,364
|
|
|
4.20
|
|
|
Vested
|
|
(767,785
|
)
|
|
7.11
|
|
|
Forfeited
|
|
(226,168
|
)
|
|
7.36
|
|
|
Unvested December 31, 2017
|
|
1,339,121
|
|
|
$
|
6.06
|
|
|
|
|
Years Ended December 31,
|
||||
|
|
|
2017
|
|
2016
|
|
2015
|
Risk-free interest rate
|
|
|
2.10% - 2.30%
|
|
1.98%
|
|
1.37% - 1.77%
|
Expected term (in years)
|
|
|
6.02 - 6.25
|
|
6.25
|
|
5.47 - 6.45
|
Dividend yield
|
|
|
—%
|
|
—%
|
|
—%
|
Expected volatility
|
|
|
51.00% - 53.00%
|
|
51.00%
|
|
49.00% - 50.00%
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cost of revenue
|
|
$
|
441
|
|
|
$
|
333
|
|
|
$
|
239
|
|
Sales and marketing
|
|
919
|
|
|
1,197
|
|
|
730
|
|
|||
Research and development
|
|
1,920
|
|
|
1,466
|
|
|
784
|
|
|||
General and administrative
|
|
2,768
|
|
|
2,328
|
|
|
1,854
|
|
|||
|
|
$
|
6,048
|
|
|
$
|
5,324
|
|
|
$
|
3,607
|
|
|
Years ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Loss before income taxes:
|
|
|
|
|
|
||||||
U.S.
|
$
|
(53,274
|
)
|
|
$
|
(51,576
|
)
|
|
$
|
(50,155
|
)
|
Non‑U.S.
|
(144
|
)
|
|
(5,949
|
)
|
|
(7,050
|
)
|
|||
|
$
|
(53,418
|
)
|
|
$
|
(57,525
|
)
|
|
$
|
(57,205
|
)
|
|
Years ended December 31,
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
Tax at U.S. statutory rate
|
(34.00
|
)%
|
|
(34.00
|
)%
|
|
(34.00
|
)%
|
State taxes, net of federal benefits
|
(3.12
|
)
|
|
(2.70
|
)
|
|
(2.27
|
)
|
Permanent items
|
1.96
|
|
|
0.42
|
|
|
1.52
|
|
Tax credit
|
(1.35
|
)
|
|
(1.06
|
)
|
|
(0.85
|
)
|
Change in valuation allowance
|
(54.85
|
)
|
|
33.95
|
|
|
31.07
|
|
Foreign rate differential
|
(0.17
|
)
|
|
1.04
|
|
|
1.68
|
|
Rate change
|
90.78
|
|
|
(0.06
|
)
|
|
0.01
|
|
Uncertain tax positions
|
0.41
|
|
|
2.06
|
|
|
2.21
|
|
Other
|
0.64
|
|
|
0.46
|
|
|
0.70
|
|
|
0.30
|
%
|
|
0.11
|
%
|
|
0.07
|
%
|
|
Years ended December 31,
|
||||||
|
2017
|
|
2016
|
||||
Deferred tax assets:
|
|
|
|
||||
Federal and state net operating loss carryforwards
|
$
|
90,437
|
|
|
$
|
115,719
|
|
Foreign net operating loss carryforwards
|
2,561
|
|
|
2,561
|
|
||
Accrued expenses
|
157
|
|
|
280
|
|
||
Credits
|
6,055
|
|
|
5,091
|
|
||
Deferred revenue
|
1,068
|
|
|
1,709
|
|
||
Stock compensation expense
|
1,805
|
|
|
2,946
|
|
||
Other
|
2,111
|
|
|
2,757
|
|
||
Total deferred tax assets
|
104,194
|
|
|
131,063
|
|
||
Valuation allowance
|
(103,430
|
)
|
|
(130,005
|
)
|
||
Net deferred tax assets
|
764
|
|
|
1,058
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Fixed assets
|
(664
|
)
|
|
(841
|
)
|
||
Intangibles
|
(134
|
)
|
|
(217
|
)
|
||
Other
|
(3
|
)
|
|
—
|
|
||
Net deferred tax liabilities
|
(801
|
)
|
|
(1,058
|
)
|
||
Net deferred tax liabilities
|
$
|
(37
|
)
|
|
$
|
—
|
|
|
Years ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Unrecognized tax benefits beginning of year
|
$
|
4,918
|
|
|
$
|
3,730
|
|
|
$
|
2,466
|
|
Gross change for current year positions
|
219
|
|
|
1,187
|
|
|
1,264
|
|
|||
Unrecognized tax benefits end of the year
|
$
|
5,136
|
|
|
$
|
4,918
|
|
|
$
|
3,730
|
|
|
|
December 31,
|
||||||
|
|
2017
|
|
2016
|
||||
Property and equipment, net
|
|
|
|
|
|
|
||
United States
|
|
$
|
16,424
|
|
|
$
|
14,971
|
|
Rest of World
|
|
90
|
|
|
113
|
|
||
|
|
$
|
16,514
|
|
|
$
|
15,084
|
|
|
|
Three Months Ended
|
||||||||||||||
|
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
||||||||
Total revenue
|
|
$
|
20,751
|
|
|
$
|
18,425
|
|
|
$
|
18,484
|
|
|
$
|
20,455
|
|
Gross profit
|
|
8,757
|
|
|
7,314
|
|
|
6,248
|
|
|
6,495
|
|
||||
Net loss
|
|
(11,858
|
)
|
|
(12,472
|
)
|
|
(12,090
|
)
|
|
(17,160
|
)
|
||||
Net loss per share - basic and diluted
|
|
$
|
(0.27
|
)
|
|
$
|
(0.29
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.40
|
)
|
|
|
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
|
|
(15,740
|
)
|
|
(12,762
|
)
|
|
(14,052
|
)
|
|
(15,034
|
)
|
||||
Net loss per share - basic and diluted
|
|
$
|
(0.37
|
)
|
|
$
|
(0.31
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(0.37
|
)
|
(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
|
Exhibit
Number
|
|
Description of Exhibit
|
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
|
|
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
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.
|
|
|
|
|
|
|
|
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 9, 2018
|
/s/Paul Weiner
|
|
|
|
|
Paul Weiner
|
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
|
|
March 9, 2018
|
/s/Kenneth Fallon III
|
|
|
|
|
Kenneth Fallon III
|
|
Chairman of the Board of Directors
|
|
March 9, 2018
|
/s/Philip W. Johnston
|
|
|
|
|
Philip W. Johnston
|
|
Director
|
|
March 9, 2018
|
|
|
|
|
|
Philipp Lang, M.D.
|
|
Director
|
|
March 9, 2018
|
/s/Bradley Langdale
|
|
|
|
|
Bradley Langdale
|
|
Director
|
|
March 9, 2018
|
/s/Richard Meelia
|
|
|
|
|
Richard Meelia
|
|
Director
|
|
March 9, 2018
|
/s/Michael Milligan
|
|
|
|
|
Michael Milligan
|
|
Director
|
|
March 9, 2018
|
BORROWER
|
|
|
|
CONFORMIS
|
|
|
|
By
|
/s/Paul S. Weiner
|
Name:
|
Paul S. Weiner
|
Title:
|
CFO
|
IMATX, INC.
|
|
|
|
By
|
/s/Paul S.Weiner
|
Name:
|
Paul S. Weiner
|
Title:
|
CFO
|
COLLATERAL AGENT AND LENDER:
|
|
|
|
OXFORD FINANCE LLC
|
|
|
|
By
|
/s/Colette H. Featherly
|
Name:
|
Colette H. Featherly
|
Title:
|
Senior Vice President
|
By:
|
/s/Mark Augusti
|
By:
|
/s/Paul S. Weiner
|
|
Mark Augusti
Chief Executive Officer
ConforMIS, Inc.
|
|
Paul S. Weiner
|
By:
|
/s/Mark Augusti
|
By:
|
/s/Daniel Steines
|
|
Mark Augusti
Chief Executive Officer
ConforMIS, Inc.
|
|
Daniel Steines
|
Date:
|
March 9, 2018
|
|
By:
|
/s/ Mark A. Augusti
|
|
|
|
|
Mark A. Augusti
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
Date:
|
March 9, 2018
|
By:
|
/s/Paul Weiner
|
|
|
|
Paul Weiner
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|
Date:
|
March 9, 2018
|
|
By:
|
/s/ Mark A. Augusti
|
|
|
|
|
Mark A. Augusti
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
Date:
|
March 9, 2018
|
By:
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/s/Paul Weiner
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Paul Weiner
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Chief Financial Officer
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(Principal Financial and Accounting Officer)
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