☑
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Florida
|
|
26-2792552
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification Number)
|
Title of each class
|
Trading Symbol
|
Name of each exchange on which registered
|
N/A
|
N/A
|
N/A
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☑
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
Emerging growth company
|
☐
|
|
|
Item
|
Description
|
Page
|
|
|
|
|
Explanatory Note
|
|
Part I
|
||
Item 1.
|
Business
|
|
Item 1A.
|
Risk Factors
|
|
Item 2.
|
Properties
|
|
Item 3.
|
Legal Proceedings
|
|
Item 4.
|
Mine Safety Disclosures
|
|
|
|
|
Part II
|
||
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
|
Item 6.
|
Selected Financial Data
|
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
Item 9.
|
Changes in Disagreements with Accountants on Accounting and Financial Disclosure
|
|
Item 9A.
|
Controls and Procedures
|
|
Item 9B.
|
Other Information
|
|
|
|
|
Part III
|
||
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
|
Item 11.
|
Executive Compensation
|
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
|
Item 14.
|
Principal Accounting Fees and Services
|
|
|
|
|
Part IV
|
||
Item 15.
|
Exhibits, Financial Statement Schedules
|
|
Item 16.
|
Form 10-K Summary
|
|
Signatures
|
|
•
|
a distributor was given a lucrative consulting agreement simultaneous with a large purchase near the end of a reporting period;
|
•
|
instances of intentionally shipping types and volumes of product that were not needed by the customer and recording revenue, typically near the end of a reporting period, and facilitating such sales by agreeing at the time of shipment to allow customers to return or exchange these products in subsequent accounting periods without recording specific provisions for such return or exchanges;
|
•
|
the booking of a large end of quarter sale to a distributor that the Company was in the process of acquiring and for which the Company never received payment;
|
•
|
several “side deals” with distributors and other customers, whereby the purchasers agreed to take product but were not required to pay for the product until the purchasers were successful in re-selling the product; however, the Company recorded revenue at the time of shipment rather than when the purchasers were obligated to pay, which was inconsistent with GAAP; and
|
•
|
in at least one instance, Mr. Taylor concealed such a side deal from the Company’s Finance and Accounting group. In late 2015, Mr. Taylor forwarded to Messrs. Senken and Cranston a significant purchase order from an international distributor that provided for 180-day payment terms. Shortly after doing so, Mr. Taylor sent the distributor an email stating that if the distributor was unable to resell the product as expected, MiMedx would grant extended payment terms, assist the distributor with reselling the product or repurchase the product from the distributor. Mr. Taylor did not inform Messrs. Senken or Cranston about this side deal, and as a result MiMedx improperly recognized $2.5 million in revenue from this sale near the end of the fourth quarter of 2015.
|
•
|
After Mr. Cranston’s predecessor questioned the Company’s accounting for revenue from its largest distributor, Messrs. Petit, Taylor, Senken and Cranston did not disclose to the Audit Committee or the Company’s outside auditors that the Company routinely issued credits to the distributor for lost, damaged or missing tissues, nor did they disclose that the distributor only paid the Company for a tissue after it had sold that tissue to its customer.
|
•
|
On multiple occasions, Messrs. Petit, Senken and Cranston signed letters to the Company’s outside auditors misrepresenting that the Company had no side deals or other arrangements that had not been disclosed to the outside auditors.
|
•
|
In November 2016, after two former employees alleged that the Company had engaged in channel stuffing and improper revenue recognition practices, Messrs. Petit and Senken signed a letter to the Company’s outside auditors misrepresenting that they had no knowledge of any allegations of fraud affecting the Company made by current or former employees.
|
•
|
In early 2017, after the Audit Committee had retained counsel to investigate the allegations made by these former employees, Mr. Petit forwarded to the Board a set of written responses in which counsel for the Company’s largest distributor explicitly stated that it only paid the Company for tissues after receiving payment from the distributor’s customer. Mr. Petit misled the Board about the accuracy of the information provided by the distributor’s counsel.
|
•
|
Also in early 2017, the Company retained an outside expert to opine on the appropriateness of the Company’s recognition of revenue from sales to its largest distributor. Messrs. Petit, Senken and Cranston made misrepresentations to the expert concerning the actual course of dealing between the Company and its largest distributor.
|
•
|
In early 2017, in letters signed by Mr. Senken, the Company responded to comment letters received from the SEC’s Division of Corporation Finance by misrepresenting that the Company’s largest distributor was obligated to pay the Company, regardless of whether the distributor resold the product. As noted above, the Company routinely issued credits
|
•
|
In early 2018, the Company’s former senior management prepared a misleading memorandum to the Company’s outside auditors that misrepresented key facts regarding the Company’s historical relationship with its largest distributor, which were relevant to determining the appropriate revenue recognition under GAAP.
|
•
|
During a deposition, Mr. Petit falsely testified under oath that it was not true that the Company’s largest distributor only paid the Company after the distributor had received a purchase order from its customer.
|
•
|
Former senior management disregarded revenue recognition rules under GAAP and directed others to take actions that caused the Company to take actions that caused the Company to improperly recognize revenue under GAAP, which was a key factor in the Audit Committee concluding it was necessary to restate the Company’s financials, as described above.
|
•
|
Former senior management was involved in conduct that appears to have been designed to manipulate the timing and recognition of revenue - in some instances where the improper recognition of revenue allowed the Company to meet its published guidance.
|
•
|
After questions began to be raised regarding the Company’s accounting practices, former senior management made material misstatements and omissions to a number of key stakeholders and regulators, including the SEC’s Division of Corporation Finance, the Board, the Audit Committee and the Company’s outside auditors.
|
•
|
Former senior management engaged in a pattern of taking action against employees who raised concerns about the Company’s practices.
|
•
|
Former senior management overrode internal controls that otherwise might have mitigated certain issues identified in the Investigation. These included former senior management personally overseeing, outside of the Company’s normal control processes, the Company’s relationships with certain health care providers.
|
•
|
Former senior management marginalized the Company’s legal and accounting departments and outside legal and accounting advisors, by dismissing or ignoring professional advice, withholding information from legal and accounting advisors necessary to appropriately exercise professional judgments and determinations and excluding senior legal and accounting personnel from regular senior management meetings.
|
•
|
our strategic focus, as illustrated by our strategic priorities and our ability to implement these priorities;
|
•
|
our ability to access capital sufficient to implement our strategic priorities;
|
•
|
our expectations regarding our ability to fund our ongoing and future operating costs;
|
•
|
our expectations regarding future income tax liability;
|
•
|
the advantages of our products and development of new products;
|
•
|
market opportunities for our products;
|
•
|
the regulatory pathway for our products, including the design and success of our clinical trials and pursuit of BLAs (as defined below) for certain products;
|
•
|
our expectations regarding our ability to manufacture certain of our products in compliance with current Good Manufacturing Practices (“cGMP”);
|
•
|
our expectations regarding costs relating to compliance with regulatory standards, including those arising from our clinical trials, pursuit of BLAs, and cGMP compliance;
|
•
|
our ability to continue marketing our micronized, injectable products and certain other products during and following the end of the period of enforcement discretion announced by the United States Food and Drug Administration (“FDA”);
|
•
|
expectations regarding government and other third-party coverage and reimbursement for our products;
|
•
|
expectations regarding future revenue growth;
|
•
|
our belief in the sufficiency of our intellectual property rights in our technology;
|
•
|
our ability to procure sufficient supplies of human tissue to manufacture and process our products;
|
•
|
the outcome of pending litigation and investigations;
|
•
|
our ability to complete remedial actions to address all observations in the Forms FDA 483 issued to us by the FDA;
|
•
|
our ability to regain and remain in compliance with SEC reporting obligations;
|
•
|
our ability to relist our Common Stock on The Nasdaq Capital Market in connection with becoming current in our SEC reporting obligations;
|
•
|
ongoing and future effects arising from the Audit Committee Investigation, the Restatement, the SEC investigation, and related litigation;
|
•
|
demographic and market trends;
|
•
|
our expectations regarding future compliance with our debt obligations, including under the Term Loan Agreement (as described below);
|
•
|
our plans to remediate the identified material weaknesses in our internal control environment and to strengthen our internal control environment; and
|
•
|
our ability to compete effectively.
|
•
|
AmnioFix is provided in sheet form for homologous use as a barrier membrane. (“Homologous use” is when a tissue is intended to have the same basic function or functions in the recipient as it performed in the donor.) It has been used in spine, orthopedic, sports medicine, lower extremity repair, urology and general surgery applications.
|
•
|
AmnioFix Injectable is supplied in micronized powder form and is reconstituted with 0.9% sterile saline for injection. This product is our lead BLA candidate. We are studying the product’s potential to address musculoskeletal degeneration across multiple indications. We have three IND studies underway: plantar fasciitis, Achilles tendonitis and knee osteoarthritis. We currently are in Phase 3 trial for the plantar fasciitis, Phase 2B for knee osteoarthritis, and Phase 3 for Achilles tendonitis.
|
•
|
it must be minimally manipulated;
|
•
|
it must be intended for homologous use;
|
•
|
its manufacture must not involve combination with another article, except for water, crystalloids or a sterilizing, preserving or storage agent; and
|
•
|
it must not have a systemic effect and must not be dependent upon the metabolic activity of living cells for its primary function.
|
•
|
Completion of preclinical laboratory tests, animal studies and formulations studies under the FDA’s Good Laboratory Practice regulations;
|
•
|
Submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical trials may begin and which must include independent Institutional Review Board approval at each clinical site before the trials may be initiated;
|
•
|
Performance of adequate and well-controlled clinical trials in accordance with Good Clinical Practices to establish the safety and efficacy of the product for each indication;
|
•
|
Development of purity, potency and identity tests to demonstrate consistency and reliability of the manufacturing process through a chemistry, manufacturing and control program;
|
•
|
Submission to the FDA of a BLA for marketing the product, which includes, among other things, reports of the outcomes and full data sets of the clinical trials, and proposed labeling and packaging for the product;
|
•
|
Satisfactory review of the contents of the BLA by the FDA, including the satisfactory resolution of any questions raised during the review;
|
•
|
Satisfactory completion of an FDA Advisory Committee review, if applicable;
|
•
|
Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with FDA’s cGMP regulations, to assure that the facilities, methods and controls are adequate to ensure the product’s identity, strength, quality and purity; and
|
•
|
FDA approval of the BLA, including agreement on post-marketing commitments, if applicable.
|
•
|
The federal Anti-Kickback Statute, which is a criminal law that prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward referrals, purchases or orders, or arranging for or recommending the purchase, order or referral of any item or service for which payment may be made in whole or in part by a federal healthcare program, such as the Medicare and Medicaid programs. The term “remuneration” has been broadly interpreted to include anything of value. The Patient Protection and Affordable Care Act amended the intent requirement of the federal Anti-Kickback Statute, so that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. A conviction for violation of the Anti-Kickback Statute results in criminal fines and requires mandatory exclusion from participation in federal health care programs. Although there are a number of statutory exceptions and regulatory safe harbors to the federal Anti-Kickback Statute that protect certain common industry practices from prosecution, the exceptions and safe harbors are drawn narrowly, and arrangements may be subject to scrutiny or penalty if they do not fully satisfy all elements of an available exception or safe harbor. See discussion below under “Risk Factors–We and our sales representatives, whether employees or independent contractors, must comply with various federal and state anti-kickback, self-referral, false claims and similar laws, any breach of which could cause an adverse effect on our business, results of operations and financial condition.”
|
•
|
The federal False Claims Act (“FCA”) imposes significant civil liability on any person or entity that knowingly presents, or causes to be presented, a claim for payment to the U.S. government, including the Medicare and Medicaid programs, that is false or fraudulent. The FCA also allows a private individual or entity as a whistleblower to sue on behalf of the government to recover civil penalties and treble damages. FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties of between $11,181 and $22,363 per false claim or statement for penalties assessed after January 29, 2018, with respect to violations occurring after November 2, 2015. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government.
|
•
|
The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) fraud and abuse provisions prohibit executing a scheme to defraud any healthcare benefit program, willfully obstructing a criminal investigation of a health care offense, or making false statements or concealing a material fact relating to payment for healthcare benefits, items or services.
|
•
|
While manufacturers of human cell and tissue products regulated solely under Section 361 are not subject to the federal Physician Payments Sunshine Act and its implementing regulations (together with the Act, the “Sunshine Act”), in the future, if we receive a BLA, this law will require us (with certain exceptions) to report information to CMS related to certain payments or other transfers of value we make to U.S.-licensed physicians and teaching hospitals, and for reports submitted on or after January 1, 2022, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists and certified nurse-midwives. If we receive a BLA, the Sunshine Act would also require us to report annually certain ownership and investment interests held by U.S.-licensed physicians and their immediate family members. Such information will subsequently be made publicly available by CMS on the Open Payments website.
|
•
|
Federal conflicts of interest laws, the Standards of Ethical Conduct for Employees of the Executive Branch, and local site policies for each federal institution we call upon govern our interactions federal employees at our various government accounts (e.g., Department of Defense (“DoD”), VA, etc.) and impose a number of limitations on such interactions.
|
•
|
There are state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payer, including commercial insurers, many of which differ from each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts.
|
•
|
the revenues generated by sales of our products;
|
•
|
the costs associated with expanding our sales and marketing efforts;
|
•
|
the expenses we incur in manufacturing and selling our products;
|
•
|
the costs of developing and commercializing new products or technologies;
|
•
|
the cost of obtaining and maintaining regulatory approval or clearance of certain products and products in development;
|
•
|
the costs associated with capital expenditures, including those required in connection with our efforts to become cGMP compliant; and
|
•
|
unanticipated general and administrative expenses.
|
•
|
incur indebtedness;
|
•
|
make investments;
|
•
|
incur liens;
|
•
|
pay dividends; and
|
•
|
engage in mergers and consolidations, sale and leasebacks and asset dispositions.
|
•
|
limiting our flexibility in operating our business and planning for, or reacting to, changes in our business and our industry;
|
•
|
limiting our ability to withstand a future downturn in our business or the economy in general;
|
•
|
requiring the dedication of a portion of any cash flow from operations to the payment of principal of, and interest on, the indebtedness, thereby reducing the availability of such cash flow to fund our operations, working capital, capital expenditures, future business opportunities and other general corporate purposes;
|
•
|
restricting us from making acquisitions or causing us to make divestitures;
|
•
|
limiting our ability to obtain additional financing;
|
•
|
limiting our ability to adjust to changing market conditions; and
|
•
|
placing us at a competitive disadvantage relative to our competitors who are less highly leveraged.
|
•
|
properly identify and anticipate physician and patient needs;
|
•
|
acquire, through licensing, co-development or outright purchase, new technology developed outside of MiMedx;
|
•
|
develop and introduce new products or product enhancements in a timely manner;
|
•
|
adequately protect our intellectual property and avoid infringing upon the intellectual property rights of third parties;
|
•
|
demonstrate the safety and efficacy of new products; and
|
•
|
obtain the necessary regulatory clearances or approvals for new products or product enhancements.
|
•
|
their lack of experience with prior procedures in the field using our products;
|
•
|
lack of evidence supporting additional patient benefits of our products over conventional methods in certain therapeutic applications;
|
•
|
perceived liability risks generally associated with the use of new products and procedures;
|
•
|
limited availability of reimbursement from third-party payers; and
|
•
|
the time that must be dedicated to physician training in the use of our products.
|
•
|
issue additional equity securities that would dilute the value of equity currently held by our shareholders;
|
•
|
divest or license existing products or technology;
|
•
|
use cash that we may need in the future to operate our business;
|
•
|
incur debt that could have terms unfavorable to us or that we might be unable to repay;
|
•
|
structure the transaction in a manner that has unfavorable tax consequences, such as a stock purchase that does not permit a step-up in the tax basis for the assets acquired;
|
•
|
be unable to realize the anticipated benefits, such as increased revenues, cost savings, or synergies from additional sales;
|
•
|
be unable to secure the services of key employees related to the acquisition; and
|
•
|
be unable to succeed in the marketplace with the acquisition.
|
•
|
untitled letters, warning letters, cease and desist orders, fines, injunctions, and civil penalties;
|
•
|
recall or seizure of our products;
|
•
|
operating restrictions, partial suspension or total shutdown of production;
|
•
|
refusing our requests for clearance or approval of new products;
|
•
|
withdrawing or suspending current applications for approval or approvals already granted;
|
•
|
refusal to grant export approval for our products; and
|
•
|
criminal prosecution.
|
•
|
provisions of HIPAA that limit how covered entities and business associates may use and disclose protected health information, provide certain rights to individuals with respect to that information and impose certain security requirements;
|
•
|
HITECH, which strengthened and expanded the HIPAA Privacy Rule and Security Rules, imposed data breach notification obligations, created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates and gave state attorneys general new authority to file civil actions for damages or injunctions in U.S. federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions;
|
•
|
other federal and state laws restricting the use and protecting the privacy and security of personal information, including health information, many of which are not preempted by HIPAA;
|
•
|
federal and state consumer protection laws; and
|
•
|
federal and state laws regulating the conduct of research with human subjects.
|
•
|
Fluctuations in stock market prices and trading volumes of similar companies or of the markets generally;
|
•
|
Our ability to successfully launch, market and earn significant revenue from our products;
|
•
|
Our ability to obtain additional financing to support our continuing operations;
|
•
|
Disclosure of the details and results of regulatory applications and proceedings;
|
•
|
Developments in and disclosure or publicity regarding existing or new litigation or contingent liabilities;
|
•
|
Changes in government regulations or our failure to comply with any such regulations;
|
•
|
Additions or departures of key personnel;
|
•
|
Our investments in research and development or other corporate resources;
|
•
|
Announcements of technological innovations or new commercial products by us or our competitors;
|
•
|
Developments in the patents or other proprietary rights owned or licensed by us or our competitors;
|
•
|
The timing of new product introductions;
|
•
|
Actual or anticipated fluctuations in our operating results, including any restatements of previously reported results;
|
•
|
Our ability to effectively and consistently manufacture our products and avoid costs associated with the recall of defective or potentially defective products;
|
•
|
Our ability and the ability of our distribution partners to market and sell our products;
|
•
|
Changes in reimbursement for our products or the price for our products to our customers;
|
•
|
Removal of our products from the Federal Supply Schedule, or changes in how government accounts purchase products such as ours or in the price for our products to government accounts;
|
•
|
Material amounts of short-selling of our Common Stock; and
|
•
|
The other risks detailed in this Item 1A.
|
Period
|
Total Number of
Shares Purchased |
Average Price Paid
per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans
or Programs |
Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs (4)
|
||||||
Total amount remaining October 1, 2017
|
|
|
|
$
|
12,740
|
|
||||
October 2017 increased spending authorization
|
|
|
|
$
|
20,000,000
|
|
||||
October 1, 2017 - October 31, 2017
|
227,626
|
|
$
|
13.00
|
|
188,500
|
|
$
|
17,562,241
|
|
November 1, 2017 - November 30, 2017
|
1,471,986
|
|
$
|
11.90
|
|
1,460,227
|
|
$
|
184,057
|
|
December 2017 increased spending authorization
|
|
|
|
$
|
10,000,000
|
|
||||
December 1, 2017 - December 31, 2017
|
352,205
|
|
$
|
12.69
|
|
342,023
|
|
$
|
5,842,079
|
|
Total for the quarter (1)
|
2,051,817
|
|
$
|
12.14
|
|
1,990,750
|
|
|
||
January 2018 increased spending authorization
|
|
|
|
$
|
10,000,000
|
|
||||
January 1, 2018 - January 31, 2018
|
379,535
|
|
$
|
14.11
|
|
366,550
|
|
$
|
10,668,339
|
|
February 1, 2018 - February 28, 2018
|
589,968
|
|
$
|
16.89
|
|
141,050
|
|
$
|
8,285,732
|
|
March 1, 2018 - March 31, 2018
|
2,898
|
|
—
|
|
—
|
|
$
|
8,285,732
|
|
|
Total for the quarter (2)
|
972,401
|
|
|
507,600
|
|
|
||||
April 1, 2018 - April 30, 2018
|
28,571
|
|
—
|
|
—
|
|
$
|
8,285,732
|
|
|
May 1, 2018 - May 31, 2018
|
11,749
|
|
—
|
|
—
|
|
$
|
8,285,732
|
|
|
June 1, 2018 - June 30, 2018
|
1,939
|
|
—
|
|
—
|
|
$
|
8,285,732
|
|
|
Total for the quarter (3)
|
42,259
|
|
|
—
|
|
|
||||
July 1, 2018 - July 31, 2018
|
43,956
|
|
—
|
|
—
|
|
$
|
8,285,732
|
|
|
August 1, 2018 - August 31, 2018
|
3,665
|
|
—
|
|
—
|
|
$
|
8,285,732
|
|
|
September 1, 2018 - September 30, 2018
|
2,567
|
|
—
|
|
—
|
|
$
|
8,285,732
|
|
|
Total for the quarter (3)
|
50,188
|
|
|
—
|
|
|
||||
October 1, 2018 - October 31, 2018
|
51,516
|
|
—
|
|
—
|
|
$
|
8,285,732
|
|
|
November 1, 2018 - November 31, 2018
|
648
|
|
—
|
|
—
|
|
$
|
8,285,732
|
|
|
December 1, 2018 - December 31, 2018
|
4,711
|
|
—
|
|
—
|
|
$
|
8,285,732
|
|
|
Total for the quarter (3)
|
56,875
|
|
|
—
|
|
|
|
|
Year Ended December 31, in thousands
|
|||||||||||||||||||
|
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
|
|
|
|
|
(Restated)
|
|
(Restated)
|
|
(Restated)
|
||||||||||
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||
Net sales (1)
|
|
|
$
|
359,111
|
|
|
$
|
321,139
|
|
|
$
|
221,712
|
|
|
$
|
153,131
|
|
|
$
|
105,257
|
|
Gross profit
|
|
|
322,725
|
|
|
285,920
|
|
|
190,774
|
|
|
137,579
|
|
|
92,835
|
|
|||||
Operating income (loss) (2)
|
|
|
(3,924
|
)
|
|
46,223
|
|
|
884
|
|
|
(5,880
|
)
|
|
(3,644
|
)
|
|||||
Net income (loss) (3)
|
|
|
(29,979
|
)
|
|
64,727
|
|
|
390
|
|
|
(16,354
|
)
|
|
(4,743
|
)
|
|||||
Net income (loss) per common share - basic
|
|
|
$
|
(0.28
|
)
|
|
$
|
0.61
|
|
|
$
|
—
|
|
|
$
|
(0.15
|
)
|
|
$
|
(0.04
|
)
|
Net income (loss) per common share - diluted
|
|
|
$
|
(0.28
|
)
|
|
$
|
0.56
|
|
|
$
|
—
|
|
|
$
|
(0.14
|
)
|
|
$
|
(0.04
|
)
|
•
|
Sales to external customers by Stability Biologics, LLC, our wholly-owned subsidiary acquired on January 13, 2016 and sold on September 30, 2017, were $7.0 million and $11.7 million during the years ended December 31, 2017 and 2016, respectively.
|
•
|
Investigation, restatement and related expenses were $51.3 million in 2018 as compared with $0.0 million in 2017;
|
•
|
As a result of the December 2018 broad-based organizational realignment, cost reduction and efficiency program, the Company incurred pre-tax charges of $6.1 million during 2018.
|
•
|
Loss on sale of Stability Biologics, LLC of $1.0 million recognized during the year ended December 31, 2017 and further discussed in Item 8, Note 5 “Stability Biologics, LLC.”
|
|
|
|
|
|
As of December 31, in thousands
|
|
|||||||||||||||
|
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
|
|
|
|
|
|
(Restated)
|
|
(Restated)
|
|
(Restated)
|
||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
||||||||||
Cash and cash equivalents
|
|
|
$
|
45,118
|
|
|
$
|
27,476
|
|
|
$
|
30,321
|
|
|
$
|
26,301
|
|
|
$
|
46,337
|
|
Short term investments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,000
|
|
|
5,750
|
|
|||||
Accounts receivable, net
|
|
|
—
|
|
|
—
|
|
|
1,927
|
|
|
—
|
|
|
—
|
|
|||||
Inventory, net
|
|
|
15,986
|
|
|
9,467
|
|
|
15,872
|
|
|
7,460
|
|
|
5,133
|
|
|||||
Prepaid expenses
|
|
|
6,673
|
|
|
2,125
|
|
|
1,838
|
|
|
945
|
|
|
1,132
|
|
|||||
Income tax receivable
|
|
|
454
|
|
|
656
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other current assets
|
|
|
5,818
|
|
|
9,023
|
|
|
9,516
|
|
|
7,260
|
|
|
2,527
|
|
|||||
Total current assets
|
|
|
74,049
|
|
|
48,747
|
|
|
59,474
|
|
|
44,966
|
|
|
60,879
|
|
|||||
Total assets
|
|
|
$
|
122,844
|
|
|
$
|
121,255
|
|
|
$
|
117,274
|
|
|
$
|
69,560
|
|
|
$
|
84,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
|
|
$
|
14,864
|
|
|
$
|
8,454
|
|
|
$
|
12,412
|
|
|
$
|
6,987
|
|
|
$
|
3,908
|
|
Accrued compensation
|
|
|
23,024
|
|
|
20,941
|
|
|
12,691
|
|
|
15,276
|
|
|
11,464
|
|
|||||
Accrued expenses
|
|
|
31,842
|
|
|
15,768
|
|
|
19,207
|
|
|
9,679
|
|
|
4,793
|
|
|||||
Current portion of earn out liability
|
|
|
—
|
|
|
—
|
|
|
8,260
|
|
|
—
|
|
|
—
|
|
|||||
Deferred tax liability
|
|
|
—
|
|
|
—
|
|
|
1,129
|
|
|
803
|
|
|
493
|
|
|||||
Income taxes
|
|
|
—
|
|
|
—
|
|
|
5,611
|
|
|
410
|
|
|
452
|
|
|||||
Other current liabilities
|
|
|
1,817
|
|
|
647
|
|
|
1,482
|
|
|
533
|
|
|
264
|
|
|||||
Total current liabilities
|
|
|
71,547
|
|
|
45,810
|
|
|
60,792
|
|
|
33,688
|
|
|
21,374
|
|
|||||
Long term liabilities
|
|
|
1,642
|
|
|
1,648
|
|
|
8,415
|
|
|
1,148
|
|
|
1,526
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Additional paid in capital
|
|
|
164,744
|
|
|
164,649
|
|
|
161,481
|
|
|
163,438
|
|
|
162,323
|
|
|||||
Accumulated deficit
|
|
|
(76,560
|
)
|
|
(46,581
|
)
|
|
(111,308
|
)
|
|
(111,698
|
)
|
|
(95,345
|
)
|
|||||
Total stockholders' equity
|
|
|
49,655
|
|
|
73,797
|
|
|
48,067
|
|
|
34,724
|
|
|
61,449
|
|
|||||
Total liabilities and stockholders' equity
|
|
|
$
|
122,844
|
|
|
$
|
121,255
|
|
|
$
|
117,274
|
|
|
$
|
69,560
|
|
|
$
|
84,349
|
|
Working capital
|
|
|
2,502
|
|
|
2,937
|
|
|
(1,318
|
)
|
|
11,278
|
|
|
39,505
|
|
•
|
the timing of revenue recognition for sales through distributors and direct sales to customers, except for the sales recognized by our wholly-owned subsidiary, Stability, for the period from January 13, 2016 to September 30, 2017, which were not restated and continued to be recognized at the time of physical delivery of the product;
|
•
|
the presentation of net revenue instead of gross revenue for administrative fees paid to GPOs;
|
•
|
the impact of changes in revenue recognition on cost of goods sold;
|
•
|
the timing of recognizing certain general and administrative expenses;
|
•
|
the impact on losses associated with contingency exposures;
|
•
|
the impact of other miscellaneous adjustments, such as patent cost and share-based compensation, and
|
•
|
the impact of the above on income tax.
|
•
|
changes in the amount of reported cash, due to the timing of certain cash collections;
|
•
|
changes to reported accounts receivable and other current assets and the related reserves on each, due to the restatement of revenue recognition;
|
•
|
accrual balances that are impacted by the expense and contingency determinations discussed above; and
|
•
|
the related income tax effects of the above.
|
•
|
improved processes and controls to monitor sales practices and recognize revenue;
|
•
|
a restructured and bolstered pricing committee;
|
•
|
tightened policies, procedures, and governance of credit and returns;
|
•
|
revised criteria for granting credit and periodic credit limit and terms reviews;
|
•
|
improved cash collection procedures and efforts;
|
•
|
the enhancement of the cash forecast process;
|
•
|
the establishment of an independent compliance department reporting to the Board;
|
•
|
the assessment and initial implementation of remediation of controls required under the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”);
|
•
|
the hiring of a Vice President of Internal Audit to develop and implement an internal audit function for the Company; and
|
•
|
executing on the realignment program announced in December 2018.
|
|
Year Ended December 31, 2016 (in thousands, except for per share information)
|
||||||||||||||||||||||||||
|
Adjustments by Category
|
||||||||||||||||||||||||||
|
Previously
|
|
Cash
|
|
|
|
Revenue
|
|
|
|
Total
|
|
|
||||||||||||||
Statement of Operations Data:
|
Reported
|
|
Revenue
|
|
GPO Fees
|
|
Related
|
|
Other
|
|
Adjustments
|
|
Restated
|
||||||||||||||
Net sales
|
$
|
245,015
|
|
|
$
|
(14,725
|
)
|
|
$
|
(4,487
|
)
|
|
$
|
(4,091
|
)
|
|
$
|
—
|
|
|
$
|
(23,303
|
)
|
|
$
|
221,712
|
|
Gross profit
|
212,608
|
|
|
(14,725
|
)
|
|
(4,487
|
)
|
|
(2,622
|
)
|
|
—
|
|
|
(21,834
|
)
|
|
190,774
|
|
|||||||
Operating income
|
18,446
|
|
|
(14,725
|
)
|
|
—
|
|
|
(878
|
)
|
|
(1,959
|
)
|
|
(17,562
|
)
|
|
884
|
|
|||||||
Net income (loss)
|
11,974
|
|
|
(14,725
|
)
|
|
—
|
|
|
(878
|
)
|
|
4,019
|
|
|
(11,584
|
)
|
|
390
|
|
|||||||
Net income (loss) per common share - basic
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.00
|
|
||||||||||
Net income (loss) per common share - diluted
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.00
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Year Ended December 31, 2015 (in thousands, except for per share information)
|
||||||||||||||||||||||||||
|
Adjustments by Category
|
||||||||||||||||||||||||||
|
Previously
|
|
Cash
|
|
|
|
Revenue
|
|
|
|
Total
|
|
|
||||||||||||||
Statement of Operations Data:
|
Reported
|
|
Revenue
|
|
GPO Fees
|
|
Related
|
|
Other
|
|
Adjustments
|
|
Restated
|
||||||||||||||
Net sales
|
$
|
187,296
|
|
|
$
|
(32,708
|
)
|
|
$
|
(1,457
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(34,165
|
)
|
|
$
|
153,131
|
|
Gross profit
|
167,094
|
|
|
(32,708
|
)
|
|
(1,457
|
)
|
|
4,650
|
|
|
—
|
|
|
(29,515
|
)
|
|
137,579
|
|
|||||||
Operating income (loss)
|
24,364
|
|
|
(32,708
|
)
|
|
—
|
|
|
6,057
|
|
|
(3,593
|
)
|
|
(30,244
|
)
|
|
(5,880
|
)
|
|||||||
Net income (loss)
|
29,446
|
|
|
(32,708
|
)
|
|
—
|
|
|
6,057
|
|
|
(19,149
|
)
|
|
(45,800
|
)
|
|
(16,354
|
)
|
|||||||
Net income (loss) per common share - basic
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.15
|
)
|
||||||||||
Net income (loss) per common share - diluted
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.14
|
)
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Year Ended December 31, 2014 (in thousands, except for per share information)
|
||||||||||||||||||||||||||
|
Adjustments by Category
|
||||||||||||||||||||||||||
|
Previously
|
|
Cash
|
|
|
|
Revenue
|
|
|
|
Total
|
|
|
||||||||||||||
Statement of Operations Data:
|
Reported
|
|
Revenue
|
|
GPO Fees
|
|
Related
|
|
Other
|
|
Adjustments
|
|
Restated
|
||||||||||||||
Net sales
|
$
|
118,223
|
|
|
$
|
(12,654
|
)
|
|
$
|
(312
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(12,966
|
)
|
|
$
|
105,257
|
|
Gross profit
|
105,558
|
|
|
(12,654
|
)
|
|
(312
|
)
|
|
243
|
|
|
—
|
|
|
(12,723
|
)
|
|
92,835
|
|
|||||||
Operating income (loss)
|
7,100
|
|
|
(12,654
|
)
|
|
—
|
|
|
1,500
|
|
|
410
|
|
|
(10,744
|
)
|
|
(3,644
|
)
|
|||||||
Net income (loss)
|
6,220
|
|
|
(12,654
|
)
|
|
—
|
|
|
1,500
|
|
|
191
|
|
|
(10,963
|
)
|
|
(4,743
|
)
|
|||||||
Net income (loss) per common share - basic
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.04
|
)
|
||||||||||
Net income (loss) per common share - diluted
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.04
|
)
|
|
As of December 31, 2016 (in thousands)
|
||||||||||||||||||||||||||
|
Adjustments by Category
|
||||||||||||||||||||||||||
|
Previously
|
|
Cash
|
|
Revenue
|
|
Deposits in
|
|
|
|
Total
|
|
|
||||||||||||||
Balance Sheet Data
|
Reported
|
|
Revenue
|
|
Related
|
|
Transit
|
|
Other
|
|
Adjustments
|
|
Restated
|
||||||||||||||
Cash and cash equivalents
|
$
|
34,391
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(4,070
|
)
|
|
$
|
—
|
|
|
$
|
(4,070
|
)
|
|
$
|
30,321
|
|
Accounts receivable, net
|
67,151
|
|
|
(69,400
|
)
|
|
106
|
|
|
4,070
|
|
|
—
|
|
|
(65,224
|
)
|
|
1,927
|
|
|||||||
Inventory, net
|
17,814
|
|
|
—
|
|
|
(1,942
|
)
|
|
—
|
|
|
—
|
|
|
(1,942
|
)
|
|
15,872
|
|
|||||||
Prepaid expenses
|
5,894
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,056
|
)
|
|
(4,056
|
)
|
|
1,838
|
|
|||||||
Other current assets
|
1,288
|
|
|
805
|
|
|
7,423
|
|
|
—
|
|
|
—
|
|
|
8,228
|
|
|
9,516
|
|
|||||||
Total current assets
|
126,538
|
|
|
(68,595
|
)
|
|
5,587
|
|
|
—
|
|
|
(4,056
|
)
|
|
(67,064
|
)
|
|
59,474
|
|
|||||||
Total assets
|
$
|
193,263
|
|
|
$
|
(68,595
|
)
|
|
$
|
5,587
|
|
|
$
|
—
|
|
|
$
|
(12,981
|
)
|
|
$
|
(75,989
|
)
|
|
$
|
117,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Accounts payable
|
$
|
11,436
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
976
|
|
|
$
|
976
|
|
|
$
|
12,412
|
|
Accrued compensation
|
12,365
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
326
|
|
|
326
|
|
|
12,691
|
|
|||||||
Accrued expenses
|
10,941
|
|
|
6,194
|
|
|
(204
|
)
|
|
—
|
|
|
2,276
|
|
|
8,266
|
|
|
19,207
|
|
|||||||
Current portion of earn out liability
|
8,740
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(480
|
)
|
|
(480
|
)
|
|
8,260
|
|
|||||||
Deferred tax liability
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,129
|
|
|
1,129
|
|
|
1,129
|
|
|||||||
Income taxes
|
5,768
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(157
|
)
|
|
(157
|
)
|
|
5,611
|
|
|||||||
Other current liabilities
|
1,482
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,482
|
|
|||||||
Total current liabilities
|
50,732
|
|
|
6,194
|
|
|
(204
|
)
|
|
—
|
|
|
4,070
|
|
|
10,060
|
|
|
60,792
|
|
|||||||
Long term liabilities
|
9,531
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,116
|
)
|
|
(1,116
|
)
|
|
8,415
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Additional paid in capital
|
161,261
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
220
|
|
|
220
|
|
|
161,481
|
|
|||||||
Accumulated deficit
|
(26,155
|
)
|
|
(74,789
|
)
|
|
5,791
|
|
|
—
|
|
|
(16,155
|
)
|
|
(85,153
|
)
|
|
(111,308
|
)
|
|||||||
Total stockholders' equity
|
133,000
|
|
|
(74,789
|
)
|
|
5,791
|
|
|
—
|
|
|
(15,935
|
)
|
|
(84,933
|
)
|
|
48,067
|
|
|||||||
Total liabilities and stockholders' equity
|
$
|
193,263
|
|
|
$
|
(68,595
|
)
|
|
$
|
5,587
|
|
|
$
|
—
|
|
|
$
|
(12,981
|
)
|
|
$
|
(75,989
|
)
|
|
$
|
117,274
|
|
Working capital
|
$
|
75,806
|
|
|
$
|
(74,789
|
)
|
|
$
|
5,791
|
|
|
$
|
—
|
|
|
$
|
(8,126
|
)
|
|
$
|
(77,124
|
)
|
|
$
|
(1,318
|
)
|
|
As of December 31, 2015 (in thousands)
|
||||||||||||||||||||||||||
|
Adjustments by Category
|
||||||||||||||||||||||||||
|
Previously
|
|
Cash
|
|
Revenue
|
|
Deposits in
|
|
|
|
Total
|
|
|
||||||||||||||
Balance Sheet Data
|
Reported
|
|
Revenue
|
|
Related
|
|
Transit
|
|
Other
|
|
Adjustments
|
|
Restated
|
||||||||||||||
Cash and cash equivalents
|
$
|
28,486
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2,185
|
)
|
|
$
|
—
|
|
|
$
|
(2,185
|
)
|
|
$
|
26,301
|
|
Short term investments
|
3,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,000
|
|
|||||||
Accounts receivable, net
|
53,755
|
|
|
(55,940
|
)
|
|
—
|
|
|
2,185
|
|
|
—
|
|
|
(53,755
|
)
|
|
—
|
|
|||||||
Inventory, net
|
7,460
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,460
|
|
|||||||
Prepaid expenses
|
3,609
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,664
|
)
|
|
(2,664
|
)
|
|
945
|
|
|||||||
Other current assets
|
—
|
|
|
376
|
|
|
6,669
|
|
|
—
|
|
|
215
|
|
|
7,260
|
|
|
7,260
|
|
|||||||
Total current assets
|
96,310
|
|
|
(55,564
|
)
|
|
6,669
|
|
|
—
|
|
|
(2,449
|
)
|
|
(51,344
|
)
|
|
44,966
|
|
|||||||
Total assets
|
$
|
135,913
|
|
|
$
|
(55,564
|
)
|
|
$
|
6,669
|
|
|
$
|
—
|
|
|
$
|
(17,458
|
)
|
|
$
|
(66,353
|
)
|
|
$
|
69,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Accounts payable
|
$
|
6,633
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
354
|
|
|
$
|
354
|
|
|
$
|
6,987
|
|
Accrued compensation
|
15,034
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
242
|
|
|
242
|
|
|
15,276
|
|
|||||||
Accrued expenses
|
4,644
|
|
|
4,500
|
|
|
—
|
|
|
—
|
|
|
535
|
|
|
5,035
|
|
|
9,679
|
|
|||||||
Deferred tax liability
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
803
|
|
|
803
|
|
|
803
|
|
|||||||
Income taxes
|
(67
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
477
|
|
|
477
|
|
|
410
|
|
|||||||
Other current liabilities
|
533
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
533
|
|
|||||||
Total current liabilities
|
26,777
|
|
|
4,500
|
|
|
—
|
|
|
—
|
|
|
2,411
|
|
|
6,911
|
|
|
33,688
|
|
|||||||
Long term liabilities
|
1,148
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,148
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Additional paid in capital
|
163,133
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
305
|
|
|
305
|
|
|
163,438
|
|
|||||||
Accumulated deficit
|
(38,129
|
)
|
|
(60,064
|
)
|
|
6,669
|
|
|
—
|
|
|
(20,174
|
)
|
|
(73,569
|
)
|
|
(111,698
|
)
|
|||||||
Total stockholders' equity
|
107,988
|
|
|
(60,064
|
)
|
|
6,669
|
|
|
—
|
|
|
(19,869
|
)
|
|
(73,264
|
)
|
|
34,724
|
|
|||||||
Total liabilities and stockholders' equity
|
$
|
135,913
|
|
|
$
|
(55,564
|
)
|
|
$
|
6,669
|
|
|
$
|
—
|
|
|
$
|
(17,458
|
)
|
|
$
|
(66,353
|
)
|
|
$
|
69,560
|
|
Working capital
|
$
|
69,533
|
|
|
$
|
(60,064
|
)
|
|
$
|
6,669
|
|
|
$
|
—
|
|
|
$
|
(4,860
|
)
|
|
$
|
(58,255
|
)
|
|
$
|
11,278
|
|
|
As of December 31, 2014 (in thousands)
|
||||||||||||||||||||||||||
|
Adjustments by Category
|
||||||||||||||||||||||||||
|
Previously
|
|
Cash
|
|
Revenue
|
|
Deposits in
|
|
|
|
Total
|
|
|
||||||||||||||
Balance Sheet Data
|
Reported
|
|
Revenue
|
|
Related
|
|
Transit
|
|
Other
|
|
Adjustments
|
|
Restated
|
||||||||||||||
Cash and cash equivalents
|
$
|
46,582
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(245
|
)
|
|
$
|
—
|
|
|
$
|
(245
|
)
|
|
$
|
46,337
|
|
Short term investments
|
5,750
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,750
|
|
|||||||
Accounts receivable, net
|
26,672
|
|
|
(26,917
|
)
|
|
—
|
|
|
245
|
|
|
—
|
|
|
(26,672
|
)
|
|
—
|
|
|||||||
Inventory, net
|
5,133
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,133
|
|
|||||||
Prepaid expenses
|
1,540
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(408
|
)
|
|
(408
|
)
|
|
1,132
|
|
|||||||
Other current assets
|
—
|
|
|
244
|
|
|
2,283
|
|
|
—
|
|
|
—
|
|
|
2,527
|
|
|
2,527
|
|
|||||||
Total current assets
|
85,677
|
|
|
(26,673
|
)
|
|
2,283
|
|
|
—
|
|
|
(408
|
)
|
|
(24,798
|
)
|
|
60,879
|
|
|||||||
Total assets
|
$
|
109,259
|
|
|
$
|
(26,673
|
)
|
|
$
|
2,283
|
|
|
$
|
—
|
|
|
$
|
(520
|
)
|
|
$
|
(24,910
|
)
|
|
$
|
84,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Accounts payable
|
$
|
3,661
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
247
|
|
|
$
|
247
|
|
|
$
|
3,908
|
|
Accrued compensation
|
11,523
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(59
|
)
|
|
(59
|
)
|
|
11,464
|
|
|||||||
Accrued expenses
|
2,504
|
|
|
2,355
|
|
|
—
|
|
|
—
|
|
|
(66
|
)
|
|
2,289
|
|
|
4,793
|
|
|||||||
Deferred tax liability
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
493
|
|
|
493
|
|
|
493
|
|
|||||||
Income taxes
|
452
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
452
|
|
|||||||
Other current liabilities
|
264
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
264
|
|
|||||||
Total current liabilities
|
18,404
|
|
|
2,355
|
|
|
—
|
|
|
—
|
|
|
615
|
|
|
2,970
|
|
|
21,374
|
|
|||||||
Long term liabilities
|
1,526
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,526
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Additional paid in capital
|
162,433
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(110
|
)
|
|
(110
|
)
|
|
162,323
|
|
|||||||
Accumulated deficit
|
(67,575
|
)
|
|
(29,028
|
)
|
|
2,283
|
|
|
—
|
|
|
(1,025
|
)
|
|
(27,770
|
)
|
|
(95,345
|
)
|
|||||||
Total stockholders' equity
|
89,329
|
|
|
(29,028
|
)
|
|
2,283
|
|
|
—
|
|
|
(1,135
|
)
|
|
(27,880
|
)
|
|
61,449
|
|
|||||||
Total liabilities and stockholders' equity
|
$
|
109,259
|
|
|
$
|
(26,673
|
)
|
|
$
|
2,283
|
|
|
$
|
—
|
|
|
$
|
(520
|
)
|
|
$
|
(24,910
|
)
|
|
$
|
84,349
|
|
Working capital
|
$
|
67,273
|
|
|
$
|
(29,028
|
)
|
|
$
|
2,283
|
|
|
$
|
—
|
|
|
$
|
(1,023
|
)
|
|
$
|
(27,768
|
)
|
|
$
|
39,505
|
|
|
As of December 31, 2013
|
||||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
|
|
|
Adjustments by Category
|
|
|
|
|
||||||||||||||||
|
Previously Reported
|
|
Cash Revenue
|
|
Revenue Related
|
|
Other
|
|
Total Adjustments
|
|
Restated
|
||||||||||||
Common stock
|
$
|
104
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
104
|
|
Additional paid-in capital
|
147,284
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
147,284
|
|
||||||
Treasury stock
|
(25
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25
|
)
|
||||||
Accumulated deficit
|
(73,795
|
)
|
|
(17,655
|
)
|
|
2,064
|
|
|
(1,216
|
)
|
|
(16,807
|
)
|
|
(90,602
|
)
|
||||||
Total stockholders' equity
|
$
|
73,568
|
|
|
$
|
(17,655
|
)
|
|
$
|
2,064
|
|
|
$
|
(1,216
|
)
|
|
$
|
(16,807
|
)
|
|
$
|
56,761
|
|
•
|
For sales to distributors, revenue was recorded upon shipment to the distributor;
|
•
|
Certain sales to direct customers were treated as consignment sales as the customer could return the product at any time and was not required to pay until the product was used, despite no formal consignment agreement being in place. Therefore, the Company did not record revenue until the product was sold to an end-user (i.e., the recipient of the product);
|
•
|
For other sales to direct customers, revenue was recorded upon shipment to the customer.
|
1.
|
Persuasive evidence of an arrangement exists - The Company’s sales are driven either by contracts or purchase orders. These documents are typically used to establish persuasive evidence of an arrangement. The Company’s customary business practices, however, must be taken into account as a contract can be written, oral, or based on customary business practices. Throughout 2012-2017, although the Company may have created a legal contract upon the execution of a contract and/or fulfillment of a purchase order, the lack of clarity around the final terms of the arrangement due to the pervasive side agreements with customers preclude the Company’s sales transactions from meeting this criterion upon shipment of the product. Therefore, even though there may have been a legal contract governing the arrangement (which typically would indicate persuasive evidence of an arrangement), the Company’s selling and collection practices amended the stated contract terms. After considering these factors, the Company concluded that persuasive evidence of an arrangement did not exist upon shipment of the product.
|
2.
|
Delivery has occurred or services have been rendered - For sales to customers, physical possession and title transferred upon shipment to the customer. However, the Company concluded that it did not pass the risks of ownership to the customer upon shipment because customers were allowed to return product for multiple reasons, which included being unable to sell the product, damages which may have occurred subsequent to delivery, and dropped product. See below for additional discussion of the Company’s rationale for concluding that delivery had not yet occurred upon shipment to the customer.
|
3.
|
The seller’s price to the buyer is fixed or determinable - At certain quarter-ends, the Company was significantly increasing sales to customers without having visibility into the level of product remaining unsold at the customer’s location. This practice made it difficult to develop an appropriate estimate of future credits to be issued to customers at the time of sale, which, in turn, impacted whether the price at the time of transfer of physical possession to the customer was fixed or determinable. This previous practice in combination with the following actions of the Company preclude the price of the Company’s sales transactions from being fixed or determinable upon shipment of product:
|
a.
|
Offering customers an unconditional right of return with many items being returned over a year after the initial sale.
|
b.
|
Offering extended payment terms to customers with days sales outstanding averaging almost 3 months, and
|
c.
|
A history of exceeding established credit limits for customers.
|
4.
|
Collectability is reasonably assured - At the time of transfer of physical possession to the customer, collectability of the sales was questionable. As noted in the Investigation and described further below, the customers’ intention to pay amounts when due was uncertain in light of the conflicting messages customers received with respect to the payment terms, rights of return and lack of adherence to credit limits. Although the Company did have a process in place to establish credit
|
•
|
timing adjustments for prepaid expenses and expense accruals for research and development expenses related to clinical trials, employee compensation and other employee-related costs, legal costs and other accruals;
|
•
|
adjustments to stock-based compensation, primarily to reflect share-based awards granted to consultants as non-employee instead of as employee awards; and
|
•
|
an adjustment for a change in fair value of $1.7 million for earn-out. See Note 5. “Stability Biologics, LLC” in the Consolidated Financial Statements.
|
|
Year Ended December 31,
|
|||||||||||||
|
(in thousands)
|
|||||||||||||
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
Revenue
|
$
|
359,111
|
|
|
$
|
321,139
|
|
|
$
|
37,972
|
|
|
11.8
|
%
|
Gross profit
|
322,725
|
|
|
285,920
|
|
|
36,805
|
|
|
12.9
|
%
|
|||
Selling, general and administrative
|
258,528
|
|
|
220,119
|
|
|
38,409
|
|
|
17.4
|
%
|
|||
Investigation, restatement and related
|
51,322
|
|
|
—
|
|
|
51,322
|
|
|
100.0
|
%
|
|||
Research and development
|
15,765
|
|
|
17,900
|
|
|
(2,135
|
)
|
|
(11.9
|
)%
|
|||
Amortization of intangible assets
|
1,034
|
|
|
1,678
|
|
|
(644
|
)
|
|
(38.4
|
)%
|
|||
Loss on divestiture
|
—
|
|
|
(1,048
|
)
|
|
1,048
|
|
|
n/a
|
|
|||
Other income (expense), net
|
527
|
|
|
(87
|
)
|
|
614
|
|
|
705.7
|
%
|
|||
Income tax provision (expense) benefit
|
(26,582
|
)
|
|
19,639
|
|
|
(46,221
|
)
|
|
235.4
|
%
|
|||
Net income (loss)
|
$
|
(29,979
|
)
|
|
$
|
64,727
|
|
|
$
|
(94,706
|
)
|
|
(146.3
|
)%
|
|
Year Ended December 31,
|
|||||||||||||
|
(in thousands)
|
|||||||||||||
|
2017
|
|
2016
|
|
$ Change
|
|
% Change
|
|||||||
|
|
|
(Restated)
|
|
|
|
|
|||||||
Revenue
|
$
|
321,139
|
|
|
$
|
221,712
|
|
|
$
|
99,427
|
|
|
44.8
|
%
|
Gross profit
|
285,920
|
|
|
190,774
|
|
|
95,146
|
|
|
49.9
|
%
|
|||
Selling, general and administrative
|
220,119
|
|
|
173,412
|
|
|
46,707
|
|
|
26.9
|
%
|
|||
Research and development
|
17,900
|
|
|
14,341
|
|
|
3,559
|
|
|
24.8
|
%
|
|||
Amortization of intangible assets
|
1,678
|
|
|
2,137
|
|
|
(459
|
)
|
|
(21.5
|
)%
|
|||
Loss on divestiture
|
(1,048
|
)
|
|
—
|
|
|
(1,048
|
)
|
|
n/a
|
|
|||
Other expense, net
|
(87
|
)
|
|
(339
|
)
|
|
252
|
|
|
74.3
|
%
|
|||
Income taxes
|
19,639
|
|
|
(155
|
)
|
|
19,794
|
|
|
(12,770.3
|
)%
|
|||
Net income (loss)
|
$
|
64,727
|
|
|
$
|
390
|
|
|
$
|
64,337
|
|
|
16,496.7
|
%
|
|
|
|
Less than
|
|
|
|
|
|
|
||||||||||
Contractual Obligations
|
Total
|
|
1 year
|
|
1-3 years
|
|
3-5 years
|
|
Thereafter
|
||||||||||
Operating lease obligations
|
$
|
6,722
|
|
|
$
|
1,640
|
|
|
$
|
4,877
|
|
|
$
|
205
|
|
|
$
|
—
|
|
Meeting space commitments
|
1,756
|
|
|
965
|
|
|
791
|
|
|
—
|
|
|
—
|
|
|||||
|
$
|
8,478
|
|
|
$
|
2,605
|
|
|
$
|
5,668
|
|
|
$
|
205
|
|
|
$
|
—
|
|
•
|
shareholder derivative lawsuits, for which we are not able to estimate a loss;
|
•
|
private securities lawsuits, for which we are unable to estimate a loss and for which it is unclear whether we would be indemnified under various insurance policies;
|
•
|
the Company’s self-disclosure to the VA concerning the eligibility of one of its products for inclusion in the Company’s FSS contract, for which we recorded a liability of $6.9 million as of December 31, 2018, representing our best estimate for a potential loss. As explained below, the Company has reached an agreement in principle with the Department of Justice to resolve a qui tam matter relating to that issue. The settlement amount is within the Company’s previously-recorded liability;
|
•
|
litigation involving former employees of the Company; we have settled with one former employee for $4.8 million, but we have potential exposure in other cases brought by former employees for which a loss is not currently estimable;
|
•
|
$2.3 million in payments owed to Mr. Borkowski under the terms of the Separation and Transition Services Agreement dated November 18, 2019;
|
•
|
payments in connection with our operating and capital lease agreements; and
|
•
|
investments and other expenditures required in order to bring the Company’s facilities into compliance with cGMPs.
|
•
|
Maximum total leverage ratio, defined as funded debt divided by consolidated adjusted EBITDA, of not more than 3.0 to 1.0 as of the last day of the four consecutive fiscal quarters. We estimate our total leverage ratio to have been 2.0 times at December 31, 2019, a cushion of 1.0 times.
|
•
|
Minimum liquidity of the Company, defined as unrestricted cash and cash equivalents, is not permitted, as of the last business day of each fiscal month following the term loan closing date through and including the fiscal month ending May 31, 2020, to be less than $40 million, and (b) beginning with the fiscal month ending June 30, 2020 and for each month ending thereafter, to be less than $30 million; provided that, beginning with fiscal month ending December 31, 2020, the total leverage ratio is less than 2.50 to 1.00 as of the last business day of any fiscal month, the liquidity of the Company shall not be less than $20 million. Our cash on hand was $69.1 million at December 31, 2019, exceeding the $40 million minimum liquidity by $29.1 million.
|
•
|
During the period from June 10, 2019 through June 10, 2020, an amount equal to 3% of the principal amount of the Term Loan prepaid on such date; and
|
•
|
During the period from June 11, 2020 through June 10, 2021, an amount equal to 2% of the principal amount of the Term Loan prepaid on such date.
|
|
Years Ended December 31
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
(Restated)
|
||||||
Net (loss) income
|
$
|
(29,979
|
)
|
|
$
|
64,727
|
|
|
$
|
390
|
|
|
|
|
|
|
|
||||||
Non-GAAP Adjustments:
|
|
|
|
|
|
|
|||||
Depreciation expense
|
5,882
|
|
|
4,087
|
|
|
3,333
|
|
|||
Amortization of intangible assets
|
1,034
|
|
|
1,678
|
|
|
2,137
|
|
|||
Income tax provision
|
26,582
|
|
|
(19,639
|
)
|
|
155
|
|
|||
EBITDA
|
3,519
|
|
|
50,853
|
|
|
6,015
|
|
|||
|
|
|
|
|
|
||||||
Additional Non-GAAP Adjustments:
|
|
|
|
|
|
||||||
Loss on divestiture
|
—
|
|
|
1,048
|
|
|
—
|
|
|||
One-time costs incurred in connection with acquisition
|
—
|
|
|
—
|
|
|
1,088
|
|
|||
One-time inventory fair value adjustments in connection with acquisition
|
—
|
|
|
203
|
|
|
1,485
|
|
|||
Costs incurred in connection with investigation and restatement
|
51,322
|
|
|
—
|
|
|
—
|
|
|||
Interest (income) expense, net
|
(527
|
)
|
|
87
|
|
|
339
|
|
|||
Impairment of intangible assets
|
—
|
|
|
590
|
|
|
—
|
|
|||
Share-based compensation
|
14,768
|
|
|
21,195
|
|
|
17,732
|
|
|||
Adjusted EBITDA
|
$
|
69,082
|
|
|
$
|
73,976
|
|
|
$
|
26,659
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
(Restated)
|
||||||
Gross profit (Per GAAP)
|
$
|
322,725
|
|
|
$
|
285,920
|
|
|
$
|
190,774
|
|
|
|
|
|
|
|
||||||
Non-GAAP Adjustments:
|
|
|
|
|
|
||||||
One time inventory costs incurred in connection with acquisition
|
—
|
|
|
203
|
|
|
1,485
|
|
|||
Gross profit before amortization of inventory fair value step-up
|
$
|
322,725
|
|
|
$
|
286,123
|
|
|
$
|
192,259
|
|
Adjusted gross profit
|
89.9
|
%
|
|
89.1
|
%
|
|
86.7
|
%
|
Index to Financial Statements
|
|
|
|
F-2
|
|
Consolidated Balance Sheets – As of December 31, 2018 and December 31, 2017
|
F-5
|
Consolidated Statements of Operations – For the years ended December 31, 2018, 2017 and 2016 (Restated)
|
F-6
|
Consolidated Statements of Stockholders’ Equity – For the years ended December 31, 2018, 2017 and 2016 (Restated)
|
F-7
|
Consolidated Statements of Cash Flows – For the years ended December 31, 2018, 2017 and 2016 (Restated)
|
F-8
|
F-10
|
|
Schedule II - Valuation and Qualifying Accounts
|
F-51
|
MIMEDX GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
|
||||||||
|
December 31,
|
|||||||
|
2018
|
|
2017
|
|||||
ASSETS
|
|
|
|
|||||
Current assets:
|
|
|
|
|||||
Cash and cash equivalents
|
$
|
45,118
|
|
|
$
|
27,476
|
|
|
Inventory, net
|
15,986
|
|
|
9,467
|
|
|||
Prepaid expenses
|
6,673
|
|
|
2,125
|
|
|||
Income tax receivable
|
454
|
|
|
656
|
|
|||
Other current assets
|
5,818
|
|
|
9,023
|
|
|||
Total current assets
|
74,049
|
|
|
48,747
|
|
|||
Property and equipment, net
|
17,424
|
|
|
14,091
|
|
|||
Goodwill
|
19,976
|
|
|
19,976
|
|
|||
Intangible assets, net
|
9,608
|
|
|
10,033
|
|
|||
Deferred tax asset, net
|
—
|
|
|
25,541
|
|
|||
Other assets
|
1,787
|
|
|
2,867
|
|
|||
Total assets
|
$
|
122,844
|
|
|
$
|
121,255
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|||||
Current liabilities:
|
|
|
|
|
|
|||
Accounts payable
|
$
|
14,864
|
|
|
$
|
8,454
|
|
|
Accrued compensation
|
23,024
|
|
|
20,941
|
|
|||
Accrued expenses
|
31,842
|
|
|
15,768
|
|
|||
Other current liabilities
|
1,817
|
|
|
647
|
|
|||
Total current liabilities
|
71,547
|
|
|
45,810
|
|
|||
Other liabilities
|
1,642
|
|
|
1,648
|
|
|||
Total liabilities
|
73,189
|
|
|
47,458
|
|
|||
Commitments and contingencies (Note 16)
|
—
|
|
|
—
|
|
|||
Stockholders’ equity:
|
|
|
|
|||||
Preferred stock; $0.001 par value;
5,000,000 shares authorized and 0 shares issued and outstanding |
—
|
|
|
—
|
|
|||
Common stock; $0.001 par value; 150,000,000 shares authorized; 112,703,926 issued and 109,098,663 outstanding at December 31, 2018 and 112,703,926 issued and 109,347,517 outstanding at December 31, 2017
|
113
|
|
|
113
|
|
|||
Additional paid-in capital
|
164,744
|
|
|
164,649
|
|
|||
Treasury stock at cost: 3,605,263 shares at December 31, 2018 and 3,356,409 shares at December 31, 2017
|
(38,642
|
)
|
|
(44,384
|
)
|
|||
Accumulated deficit
|
(76,560
|
)
|
2
|
|
(46,581
|
)
|
||
Total stockholders’ equity
|
49,655
|
|
|
73,797
|
|
|||
Total liabilities and stockholders’ equity
|
$
|
122,844
|
|
|
$
|
121,255
|
|
MIMEDX GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
|
|||||||||||
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
(Restated)
|
||||||
Net sales
|
$
|
359,111
|
|
|
$
|
321,139
|
|
|
$
|
221,712
|
|
Cost of sales
|
36,386
|
|
|
35,219
|
|
|
30,938
|
|
|||
Gross profit
|
322,725
|
|
|
285,920
|
|
|
190,774
|
|
|||
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
||||
Selling, general and administrative
|
258,528
|
|
|
220,119
|
|
|
173,412
|
|
|||
Investigation, restatement and related
|
51,322
|
|
|
—
|
|
|
—
|
|
|||
Research and development
|
15,765
|
|
|
17,900
|
|
|
14,341
|
|
|||
Amortization of intangible assets
|
1,034
|
|
|
1,678
|
|
|
2,137
|
|
|||
Operating (loss) income
|
(3,924
|
)
|
|
46,223
|
|
|
884
|
|
|||
|
|
|
|
|
|
||||||
Other income (expense)
|
|
|
|
|
|
|
|
||||
Loss on divestiture of Stability
|
—
|
|
|
(1,048
|
)
|
|
—
|
|
|||
Other income (expense), net
|
527
|
|
|
(87
|
)
|
|
(339
|
)
|
|||
|
|
|
|
|
|
||||||
(Loss) income before income tax provision
|
(3,397
|
)
|
|
45,088
|
|
|
545
|
|
|||
Income tax provision (expense) benefit
|
(26,582
|
)
|
|
19,639
|
|
|
(155
|
)
|
|||
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
(29,979
|
)
|
|
$
|
64,727
|
|
|
$
|
390
|
|
|
|
|
|
|
|
||||||
Net (loss) income per common share - basic
|
$
|
(0.28
|
)
|
|
$
|
0.61
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
||||||
Net (loss) income per common share - diluted
|
$
|
(0.28
|
)
|
|
$
|
0.56
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding - basic
|
105,596,256
|
|
|
106,121,810
|
|
|
105,928,348
|
|
|||
|
|
|
|
|
|
||||||
Weighted average shares outstanding - diluted
|
105,596,256
|
|
|
116,113,736
|
|
|
112,645,640
|
|
MIMEDX GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
|
|||||||||||||||||||||||||
|
Common Stock
|
|
Additional
Paid-in |
|
Treasury Stock
|
|
Accumulated
|
|
|
||||||||||||||||
|
Shares
|
|
Amount
|
|
Capital
|
|
Shares
|
|
Amount
|
|
Deficit
|
|
Total
|
||||||||||||
Balances, December 31, 2015 (Restated)
|
109,467,416
|
|
|
$
|
109
|
|
|
$
|
163,438
|
|
|
2,105,945
|
|
|
$
|
(17,125
|
)
|
|
$
|
(111,698
|
)
|
|
$
|
34,724
|
|
Share-based compensation (Restated)
|
—
|
|
|
—
|
|
|
17,732
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,732
|
|
|||||
Tax benefit of share-based compensation
|
—
|
|
|
—
|
|
|
(423
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(423
|
)
|
|||||
Exercise of stock options
|
243,928
|
|
|
—
|
|
|
(3,767
|
)
|
|
(918,544
|
)
|
|
7,261
|
|
|
—
|
|
|
3,494
|
|
|||||
Issuance of restricted stock
|
501,203
|
|
|
1
|
|
|
(17,546
|
)
|
|
(2,210,879
|
)
|
|
17,545
|
|
|
—
|
|
|
—
|
|
|||||
Restricted stock cancellation / forfeited
|
—
|
|
|
—
|
|
|
2,503
|
|
|
377,317
|
|
|
(2,503
|
)
|
|
—
|
|
|
—
|
|
|||||
Shares issued for services performed
|
—
|
|
|
—
|
|
|
6
|
|
|
(43,344
|
)
|
|
340
|
|
|
—
|
|
|
346
|
|
|||||
Shares issued in conjunction with acquisition of Stability
|
—
|
|
|
—
|
|
|
(462
|
)
|
|
(441,009
|
)
|
|
3,809
|
|
|
—
|
|
|
3,347
|
|
|||||
Shares repurchased
|
—
|
|
|
—
|
|
|
—
|
|
|
1,338,616
|
|
|
(10,378
|
)
|
|
—
|
|
|
(10,378
|
)
|
|||||
Shares repurchased for tax withholding on vesting of restricted stock units
|
—
|
|
|
—
|
|
|
—
|
|
|
141,658
|
|
|
(1,165
|
)
|
|
—
|
|
|
(1,165
|
)
|
|||||
Net income (Restated)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
390
|
|
|
390
|
|
|||||
Balances, December 31, 2016 (Restated)
|
110,212,547
|
|
|
$
|
110
|
|
|
$
|
161,481
|
|
|
349,760
|
|
|
$
|
(2,216
|
)
|
|
$
|
(111,308
|
)
|
|
$
|
48,067
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
21,195
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,195
|
|
|||||
Exercise of stock options
|
1,097,933
|
|
|
1
|
|
|
(3,433
|
)
|
|
(1,396,803
|
)
|
|
15,419
|
|
|
—
|
|
|
11,987
|
|
|||||
Issuance of restricted stock
|
1,393,446
|
|
|
2
|
|
|
(17,840
|
)
|
|
(1,954,068
|
)
|
|
17,838
|
|
|
—
|
|
|
—
|
|
|||||
Restricted stock cancellation / forfeited
|
—
|
|
|
—
|
|
|
3,205
|
|
|
320,117
|
|
|
(3,205
|
)
|
|
—
|
|
|
—
|
|
|||||
Shares issued for services performed
|
—
|
|
|
—
|
|
|
41
|
|
|
(17,539
|
)
|
|
125
|
|
|
—
|
|
|
166
|
|
|||||
Shares repurchased
|
—
|
|
|
—
|
|
|
—
|
|
|
5,635,077
|
|
|
(68,263
|
)
|
|
—
|
|
|
(68,263
|
)
|
|||||
Shares repurchased for tax withholding on vesting of restricted stock units
|
—
|
|
|
—
|
|
|
—
|
|
|
419,865
|
|
|
(4,082
|
)
|
|
—
|
|
|
(4,082
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64,727
|
|
|
64,727
|
|
|||||
Balances, December 31, 2017
|
112,703,926
|
|
|
$
|
113
|
|
|
$
|
164,649
|
|
|
3,356,409
|
|
|
$
|
(44,384
|
)
|
|
$
|
(46,581
|
)
|
|
$
|
73,797
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
14,768
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,768
|
|
|||||
Exercise of stock options
|
—
|
|
|
—
|
|
|
(8,210
|
)
|
|
(786,708
|
)
|
|
11,765
|
|
|
—
|
|
|
3,555
|
|
|||||
Issuance of restricted stock
|
—
|
|
|
—
|
|
|
(25,657
|
)
|
|
(1,947,475
|
)
|
|
25,657
|
|
|
—
|
|
|
—
|
|
|||||
Restricted stock cancellation / forfeited
|
—
|
|
|
—
|
|
|
19,194
|
|
|
1,861,314
|
|
|
(19,194
|
)
|
|
—
|
|
|
—
|
|
|||||
Shares repurchased
|
—
|
|
|
—
|
|
|
—
|
|
|
507,600
|
|
|
(7,572
|
)
|
|
—
|
|
|
(7,572
|
)
|
|||||
Shares repurchased for tax withholding on vesting of restricted stock units
|
—
|
|
|
—
|
|
|
—
|
|
|
614,123
|
|
|
(4,914
|
)
|
|
—
|
|
|
(4,914
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29,979
|
)
|
|
(29,979
|
)
|
|||||
Balances, December 31, 2018
|
112,703,926
|
|
|
$
|
113
|
|
|
$
|
164,744
|
|
|
3,605,263
|
|
|
$
|
(38,642
|
)
|
|
$
|
(76,560
|
)
|
|
$
|
49,655
|
|
MIMEDX GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|||||||||||
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
(Restated)
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
(29,979
|
)
|
|
$
|
64,727
|
|
|
$
|
390
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
||||
Depreciation
|
5,882
|
|
|
4,087
|
|
|
3,333
|
|
|||
Amortization of intangible assets
|
1,034
|
|
|
1,678
|
|
|
2,137
|
|
|||
Amortization of inventory fair value step-up
|
—
|
|
|
203
|
|
|
1,485
|
|
|||
Amortization of deferred financing costs
|
137
|
|
|
176
|
|
|
151
|
|
|||
Amortization of discount on notes receivable
|
(190
|
)
|
|
(12
|
)
|
|
—
|
|
|||
Change in fair value of earn-out consideration
|
—
|
|
|
(3,560
|
)
|
|
(1,650
|
)
|
|||
Intangible asset impairment
|
—
|
|
|
590
|
|
|
—
|
|
|||
Share-based compensation
|
14,768
|
|
|
21,195
|
|
|
17,732
|
|
|||
Change in deferred income taxes
|
25,541
|
|
|
(26,670
|
)
|
|
(5,992
|
)
|
|||
Loss on divestiture of Stability
|
—
|
|
|
1,048
|
|
|
—
|
|
|||
Increase (decrease) in cash, net of effects of acquisition and divestiture, resulting from changes in:
|
|
|
|
|
|
|
|
||||
Accounts receivable
|
—
|
|
|
(479
|
)
|
|
73
|
|
|||
Inventory
|
(6,519
|
)
|
|
2,747
|
|
|
(895
|
)
|
|||
Prepaid expenses
|
(4,548
|
)
|
|
(305
|
)
|
|
(793
|
)
|
|||
Income tax receivable
|
202
|
|
|
(656
|
)
|
|
—
|
|
|||
Other assets
|
3,562
|
|
|
225
|
|
|
(1,567
|
)
|
|||
Accounts payable
|
6,585
|
|
|
(1,324
|
)
|
|
(3,478
|
)
|
|||
Accrued compensation
|
2,083
|
|
|
8,397
|
|
|
(2,586
|
)
|
|||
Accrued expenses
|
16,074
|
|
|
(3,534
|
)
|
|
9,530
|
|
|||
Income taxes
|
—
|
|
|
(5,611
|
)
|
|
5,201
|
|
|||
Other liabilities
|
1,164
|
|
|
17
|
|
|
778
|
|
|||
Net cash flows provided by operating activities
|
35,796
|
|
|
62,939
|
|
|
23,849
|
|
|||
|
|
|
|
|
|
||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
||||
Purchases of property and equipment
|
(9,419
|
)
|
|
(5,126
|
)
|
|
(6,205
|
)
|
|||
Proceeds from property and equipment sale
|
30
|
|
|
—
|
|
|
—
|
|
|||
Principal payments from note receivable
|
778
|
|
|
—
|
|
|
—
|
|
|||
Stability acquisition
|
—
|
|
|
—
|
|
|
(7,631
|
)
|
|||
Fixed maturity securities redemption
|
—
|
|
|
—
|
|
|
3,000
|
|
|||
Patent application costs
|
(609
|
)
|
|
(271
|
)
|
|
(842
|
)
|
|||
Net cash flows used in investing activities
|
(9,220
|
)
|
|
(5,397
|
)
|
|
(11,678
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
||||
Proceeds from exercise of stock options
|
3,555
|
|
|
11,987
|
|
|
3,494
|
|
|||
Shares repurchased under repurchase plan
|
(7,572
|
)
|
|
(68,263
|
)
|
|
(10,378
|
)
|
|||
Shares repurchased for tax withholdings on vesting of restricted stock
|
(4,914
|
)
|
|
(4,082
|
)
|
|
(1,165
|
)
|
|||
Payments under capital lease obligations
|
(3
|
)
|
|
(29
|
)
|
|
(102
|
)
|
|||
Net cash flows used in financing activities
|
(8,934
|
)
|
|
(60,387
|
)
|
|
(8,151
|
)
|
|||
|
|
|
|
|
|
MIMEDX GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|||||||||||
Net change in cash
|
17,642
|
|
|
(2,845
|
)
|
|
4,020
|
|
|||
|
|
|
|
|
|
||||||
Cash and cash equivalents, beginning of year
|
27,476
|
|
|
30,321
|
|
|
26,301
|
|
|||
Cash and cash equivalents, end of year
|
$
|
45,118
|
|
|
$
|
27,476
|
|
|
$
|
30,321
|
|
1.
|
Nature of Business
|
2.
|
Liquidity and Capital Resources
|
•
|
shareholder derivative lawsuits or potential settlements, for which the Company is not able to estimate a loss;
|
•
|
operating loss of $3.9 million and net loss of $30.0 million;
|
•
|
private securities lawsuits, for which the Company is currently not able to estimate a loss and for which it is unclear whether the Company would be indemnified under various insurance policies;
|
•
|
the Company’s self-disclosure to the Department of Veterans’ Affairs (“VA”) concerning the eligibility of one of its products for inclusion in the Company’s FSS contract. The Company recorded a liability of $6.9 million as of December 31, 2018 representing the Company’s best estimate for a potential loss. As explained below, the Company has reached an agreement in principle with the Department of Justice to resolve a qui tam matter relating to this issue. The settlement amount is within the Company’s previously-recorded liability.
|
•
|
litigation involving former employees of the Company. The Company has settled with one former employee for $4.8 million, but it has potential exposure in other such cases for which a loss is not currently estimable;
|
•
|
payments owed to the Company’s former Interim Chief Financial Officer, under a Separation and Transition Services Agreement dated November 18, 2019;
|
•
|
payments in connection with the Company’s operating and capital lease agreements; and
|
•
|
investments and other expenditures required in order to bring the Company’s facilities into compliance with current Good Manufacturing Practices (“cGMPs”).
|
•
|
Maximum Total Leverage Ratio, defined as funded debt divided by consolidated adjusted EBITDA, of not more than 3.0 to 1.0 as of the last day of the previous four consecutive fiscal quarters.
|
•
|
Minimum Liquidity, defined as unrestricted cash and cash equivalents, of not less than $40.0 million as of the last business day of each fiscal month following the term loan closing date through and including the fiscal month ending May 31, 2020. For fiscal months beginning June 30, 2020, the Company is not permitted to have liquidity of less than $30.0 million. If, beginning December 31, 2020, the total leverage ratio is less than 2.50 to 1.0 as of the last business day of a fiscal month, the Company’s liquidity shall not be less than $20.0 million.
|
•
|
During the period from June 10, 2019 through June 10, 2020, an amount equal to 3% of the principal amount of the Term Loan prepaid on such date; and
|
•
|
During the period from June 11, 2020 through June 10, 2021, an amount equal to 2% of the principal amount of the Term Loan prepaid on such date.
|
•
|
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities;
|
•
|
Level 2: Quoted prices in active markets for similar assets or liabilities or observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
|
•
|
Level 3: Unobservable inputs or valuation techniques that are used when little or no market data is available.
|
4.
|
Restatement of the Consolidated Financial Statements
|
•
|
the timing of revenue recognition for sales through all distributors and direct sales to all customers, as discussed above;
|
•
|
the impact of bad debt expense as a result of the timing of revenue recognition;
|
•
|
the presentation of net revenue instead of gross revenue for administrative fees paid to GPOs;
|
•
|
the impact of changes in revenue recognition on cost of goods sold;
|
•
|
the timing of recognizing certain general and administrative expenses;
|
•
|
the impact on losses associated with contingency exposures;
|
•
|
the impact of other miscellaneous adjustments, such as patent cost and share-based compensation, and
|
•
|
the impact of the above on income tax.
|
•
|
changes in the amount of reported cash, due to the timing of certain cash collections;
|
•
|
changes to reported accounts receivable and other current assets and the related reserves on each, due to the restatement of revenue recognition;
|
•
|
accrual balances that are impacted by the expense and contingency determinations discussed above; and
|
•
|
the related income tax effects of the above.
|
|
Year Ended December 31, 2016
|
||||||||||
|
(in thousands, except share and per share data)
|
||||||||||
|
Previously Reported
|
|
Adjustments
|
|
Restated
|
||||||
Net sales
|
$
|
245,015
|
|
|
$
|
(23,303
|
)
|
|
$
|
221,712
|
|
Cost of sales
|
32,407
|
|
|
(1,469
|
)
|
|
30,938
|
|
|||
Gross profit
|
212,608
|
|
|
(21,834
|
)
|
|
190,774
|
|
|||
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
||||||
Selling, general and administrative
|
179,997
|
|
|
(6,585
|
)
|
|
173,412
|
|
|||
Research and development
|
12,038
|
|
|
2,303
|
|
|
14,341
|
|
|||
Amortization of intangible assets
|
2,127
|
|
|
10
|
|
|
2,137
|
|
|||
Operating income
|
18,446
|
|
|
(17,562
|
)
|
|
884
|
|
|||
|
|
|
|
|
|
||||||
Other expense, net
|
(339
|
)
|
|
—
|
|
|
(339
|
)
|
|||
|
|
|
|
|
|
||||||
Income before income tax provision
|
18,107
|
|
|
(17,562
|
)
|
|
545
|
|
|||
Income tax provision (expense)
|
(6,133
|
)
|
|
5,978
|
|
|
(155
|
)
|
|||
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
11,974
|
|
|
$
|
(11,584
|
)
|
|
$
|
390
|
|
|
|
|
|
|
|
||||||
Net income (loss) per common share - basic
|
$
|
0.11
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Net income (loss) per common share - diluted
|
$
|
0.11
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Weighted average shares outstanding - basic
|
105,928,348
|
|
|
—
|
|
|
105,928,348
|
|
|||
|
|
|
|
|
|
||||||
Weighted average shares outstanding - diluted
|
112,441,709
|
|
|
—
|
|
|
112,645,640
|
|
|
Year Ended December 31, 2016
|
||||||||||||||||||||||||||
|
Adjustments by Category
|
||||||||||||||||||||||||||
(in thousands)
|
Previously
|
|
Cash
|
|
|
|
Revenue
|
|
|
|
Total
|
|
|
||||||||||||||
|
Reported
|
|
Revenue
|
|
GPO Fees
|
|
Related
|
|
Other
|
|
Adjustments
|
|
Restated
|
||||||||||||||
Net sales
|
$
|
245,015
|
|
|
$
|
(14,725
|
)
|
|
$
|
(4,487
|
)
|
|
$
|
(4,091
|
)
|
|
$
|
—
|
|
|
$
|
(23,303
|
)
|
|
$
|
221,712
|
|
Cost of sales
|
32,407
|
|
|
—
|
|
|
—
|
|
|
(1,469
|
)
|
|
—
|
|
|
(1,469
|
)
|
|
30,938
|
|
|||||||
Gross profit
|
212,608
|
|
|
(14,725
|
)
|
|
(4,487
|
)
|
|
(2,622
|
)
|
|
—
|
|
|
(21,834
|
)
|
|
190,774
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Selling, general and administrative expenses
|
179,997
|
|
|
—
|
|
|
(4,487
|
)
|
|
(1,744
|
)
|
|
(354
|
)
|
|
(6,585
|
)
|
|
173,412
|
|
|||||||
Research and development expenses
|
12,038
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,303
|
|
|
2,303
|
|
|
14,341
|
|
|||||||
Amortization of intangible assets
|
2,127
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
10
|
|
|
2,137
|
|
|||||||
Operating income
|
18,446
|
|
|
(14,725
|
)
|
|
—
|
|
|
(878
|
)
|
|
(1,959
|
)
|
|
(17,562
|
)
|
|
884
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Other expense, net
|
(339
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(339
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Income before income tax provision
|
18,107
|
|
|
(14,725
|
)
|
|
—
|
|
|
(878
|
)
|
|
(1,959
|
)
|
|
(17,562
|
)
|
|
545
|
|
|||||||
Income tax provision (expense) benefit
|
(6,133
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,978
|
|
|
5,978
|
|
|
(155
|
)
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net income (loss)
|
$
|
11,974
|
|
|
$
|
(14,725
|
)
|
|
$
|
—
|
|
|
$
|
(878
|
)
|
|
$
|
4,019
|
|
|
$
|
(11,584
|
)
|
|
$
|
390
|
|
|
Year-ended December 31, 2016
|
||||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
|
|
|
Adjustments by Category
|
|
|
|
|
||||||||||||||||
|
Previously Reported
|
|
Cash Revenue
|
|
Revenue Related
|
|
Other
|
|
Total Adjustments
|
|
Restated
|
||||||||||||
Total stockholders' equity, December 31, 2015
|
$
|
107,988
|
|
|
$
|
(60,064
|
)
|
|
$
|
6,669
|
|
|
$
|
(19,869
|
)
|
|
$
|
(73,264
|
)
|
|
$
|
34,724
|
|
Share-based compensation
|
17,818
|
|
|
—
|
|
|
—
|
|
|
(86
|
)
|
|
(86
|
)
|
|
17,732
|
|
||||||
Tax benefit of share-based compensation
|
(424
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
(423
|
)
|
||||||
Exercise of stock options
|
3,494
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,494
|
|
||||||
Issuance of restricted stock
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
||||||
Shares issued for services performed
|
346
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
346
|
|
||||||
Shares repurchased
|
(10,378
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,378
|
)
|
||||||
Shares repurchased for tax withholding
|
(1,165
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,165
|
)
|
||||||
Shares issued in conjunction with acquisition of Stability
|
3,346
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
3,347
|
|
||||||
Net income (loss)
|
11,974
|
|
|
(14,725
|
)
|
|
(878
|
)
|
|
4,019
|
|
|
(11,584
|
)
|
|
390
|
|
||||||
Total stockholders' equity, December 31, 2016
|
$
|
133,000
|
|
|
$
|
(74,789
|
)
|
|
$
|
5,791
|
|
|
$
|
(15,935
|
)
|
|
$
|
(84,933
|
)
|
|
$
|
48,067
|
|
|
As of December 31, 2016
|
||||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
|
|
|
Adjustments by Category
|
|
|
|
|
||||||||||||||||
|
Previously Reported
|
|
Cash Revenue
|
|
Revenue Related
|
|
Other
|
|
Total Adjustments
|
|
Restated
|
||||||||||||
Common stock
|
$
|
110
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
110
|
|
Additional paid-in capital
|
161,261
|
|
|
—
|
|
|
—
|
|
|
220
|
|
|
220
|
|
|
161,481
|
|
||||||
Treasury stock
|
(2,216
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,216
|
)
|
||||||
Accumulated deficit
|
(26,155
|
)
|
|
(74,789
|
)
|
|
5,791
|
|
|
(16,155
|
)
|
|
(85,153
|
)
|
|
(111,308
|
)
|
||||||
Total stockholders' equity
|
$
|
133,000
|
|
|
$
|
(74,789
|
)
|
|
$
|
5,791
|
|
|
$
|
(15,935
|
)
|
|
$
|
(84,933
|
)
|
|
$
|
48,067
|
|
|
Year Ended December 31, 2016
|
||||||||||
|
(in thousands)
|
||||||||||
|
Previously Reported
|
|
Adjustments
|
|
Restated
|
||||||
ASSETS
|
|
|
|
|
|
||||||
Current assets:
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
34,391
|
|
|
$
|
(4,070
|
)
|
|
$
|
30,321
|
|
Accounts receivable, net
|
67,151
|
|
|
(65,224
|
)
|
|
1,927
|
|
|||
Inventory, net
|
17,814
|
|
|
(1,942
|
)
|
|
15,872
|
|
|||
Prepaid expenses
|
5,894
|
|
|
(4,056
|
)
|
|
1,838
|
|
|||
Other current assets
|
1,288
|
|
|
8,228
|
|
|
9,516
|
|
|||
Total current assets
|
126,538
|
|
|
(67,064
|
)
|
|
59,474
|
|
|||
|
|
|
|
|
|
||||||
Property and equipment, net
|
13,786
|
|
|
199
|
|
|
13,985
|
|
|||
Goodwill
|
20,203
|
|
|
—
|
|
|
20,203
|
|
|||
Intangible assets, net
|
23,268
|
|
|
(10
|
)
|
|
23,258
|
|
|||
Deferred tax asset, net
|
9,114
|
|
|
(9,114
|
)
|
|
—
|
|
|||
Other assets
|
354
|
|
|
—
|
|
|
354
|
|
|||
Total assets
|
$
|
193,263
|
|
|
$
|
(75,989
|
)
|
|
$
|
117,274
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
||||||
Current liabilities:
|
|
|
|
|
|
||||||
Accounts payable
|
$
|
11,436
|
|
|
$
|
976
|
|
|
$
|
12,412
|
|
Accrued compensation
|
12,365
|
|
|
326
|
|
|
12,691
|
|
|||
Accrued expenses
|
10,941
|
|
|
8,266
|
|
|
19,207
|
|
|||
Current portion of earn out liability
|
8,740
|
|
|
(480
|
)
|
|
8,260
|
|
|||
Deferred tax liability, net
|
—
|
|
|
1,129
|
|
|
1,129
|
|
|||
Income taxes
|
5,768
|
|
|
(157
|
)
|
|
5,611
|
|
|||
Other current liabilities
|
1,482
|
|
|
—
|
|
|
1,482
|
|
|||
Total current liabilities
|
50,732
|
|
|
10,060
|
|
|
60,792
|
|
|||
|
|
|
|
|
|
||||||
Earn out liability
|
8,710
|
|
|
(1,170
|
)
|
|
7,540
|
|
|||
Other liabilities
|
821
|
|
|
54
|
|
|
875
|
|
|||
Total liabilities
|
60,263
|
|
|
8,944
|
|
|
69,207
|
|
|||
|
|
|
|
|
|
||||||
Stockholders' equity:
|
|
|
|
|
|
||||||
Preferred stock; $.001 par value; 5,000,000 shares authorized and 0 shares issued and outstanding
|
—
|
|
|
—
|
|
|
—
|
|
|||
Common stock; $0.001 par value; 150,000,000 shares authorized; 110,212,547 issued and 109,862,787 outstanding at December 31, 2016
|
110
|
|
|
—
|
|
|
110
|
|
|||
Additional paid-in capital
|
161,261
|
|
|
220
|
|
|
161,481
|
|
|||
Treasury stock at cost: 349,760 shares at December 31, 2016
|
(2,216
|
)
|
|
—
|
|
|
(2,216
|
)
|
|||
Accumulated deficit
|
(26,155
|
)
|
|
(85,153
|
)
|
|
(111,308
|
)
|
|||
Total stockholders' equity
|
133,000
|
|
|
(84,933
|
)
|
|
48,067
|
|
|||
Total liabilities and stockholders' equity
|
$
|
193,263
|
|
|
$
|
(75,989
|
)
|
|
$
|
117,274
|
|
|
Year Ended December 31, 2016
|
||||||||||
|
(in thousands)
|
||||||||||
|
Previously Reported
|
|
Adjustments
|
|
Restated
|
||||||
Cash flows provided by operating activities:
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
11,974
|
|
|
$
|
(11,584
|
)
|
|
$
|
390
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation
|
3,333
|
|
|
—
|
|
|
3,333
|
|
|||
Amortization of intangible assets
|
2,127
|
|
|
10
|
|
|
2,137
|
|
|||
Amortization of inventory fair value step-up
|
1,485
|
|
|
—
|
|
|
1,485
|
|
|||
Amortization of deferred financing costs
|
181
|
|
|
(30
|
)
|
|
151
|
|
|||
Change in fair value of earn-out consideration
|
—
|
|
|
(1,650
|
)
|
|
(1,650
|
)
|
|||
Share-based compensation
|
17,818
|
|
|
(86
|
)
|
|
17,732
|
|
|||
Change in deferred income taxes
|
(594
|
)
|
|
(5,398
|
)
|
|
(5,992
|
)
|
|||
Increase (decrease) in cash, net of effects of acquisition and divestiture, resulting from changes in:
|
|
|
|
|
|
||||||
Accounts receivable
|
(11,396
|
)
|
|
11,469
|
|
|
73
|
|
|||
Inventory
|
(2,837
|
)
|
|
1,942
|
|
|
(895
|
)
|
|||
Prepaid expenses
|
(2,400
|
)
|
|
1,607
|
|
|
(793
|
)
|
|||
Other assets
|
(384
|
)
|
|
(1,183
|
)
|
|
(1,567
|
)
|
|||
Accounts payable
|
(3,665
|
)
|
|
187
|
|
|
(3,478
|
)
|
|||
Accrued compensation
|
(2,669
|
)
|
|
83
|
|
|
(2,586
|
)
|
|||
Accrued expenses
|
6,297
|
|
|
3,233
|
|
|
9,530
|
|
|||
Income taxes
|
5,835
|
|
|
(634
|
)
|
|
5,201
|
|
|||
Other liabilities
|
723
|
|
|
55
|
|
|
778
|
|
|||
Net cash flows provided by operating activities
|
25,828
|
|
|
(1,979
|
)
|
|
23,849
|
|
|||
|
|
|
|
|
|
||||||
Cash flows used in investing activities:
|
|
|
|
|
|
||||||
Purchases of property and equipment
|
(6,269
|
)
|
|
64
|
|
|
(6,205
|
)
|
|||
Stability acquisition
|
(7,631
|
)
|
|
—
|
|
|
(7,631
|
)
|
|||
Fixed maturity securities redemption
|
3,000
|
|
|
—
|
|
|
3,000
|
|
|||
Patent application costs
|
(842
|
)
|
|
—
|
|
|
(842
|
)
|
|||
Net cash flows used in investing activities
|
(11,742
|
)
|
|
64
|
|
|
(11,678
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows used in financing activities:
|
|
|
|
|
|
||||||
Proceeds from exercise of stock options
|
3,494
|
|
|
—
|
|
|
3,494
|
|
|||
Shares repurchased under repurchase plan
|
(10,378
|
)
|
|
—
|
|
|
(10,378
|
)
|
|||
Shares repurchased for tax withholdings on vesting of restricted stock
|
(1,165
|
)
|
|
—
|
|
|
(1,165
|
)
|
|||
Deferred financing costs
|
(30
|
)
|
|
30
|
|
|
—
|
|
|||
Payments under capital lease obligations
|
(102
|
)
|
|
—
|
|
|
(102
|
)
|
|||
Net cash flows used in financing activities
|
(8,181
|
)
|
|
30
|
|
|
(8,151
|
)
|
|||
|
|
|
|
|
|
||||||
Net change in cash
|
5,905
|
|
|
(1,885
|
)
|
|
4,020
|
|
|||
|
|
|
|
|
|
||||||
Cash and cash equivalents, beginning of year
|
28,486
|
|
|
(2,185
|
)
|
|
26,301
|
|
|||
Cash and cash equivalents, end of year
|
$
|
34,391
|
|
|
$
|
(4,070
|
)
|
|
$
|
30,321
|
|
•
|
For sales to distributors, revenue was recorded upon shipment to the distributor;
|
•
|
Certain sales to direct customers were treated as consignment sales as the customer could return the product at any time and was not required to pay until the product was used, despite no formal consignment agreement being in place. Therefore, the Company did not record revenue until the product was sold to an end-user (i.e., the recipient of the product); and
|
•
|
For other sales to direct customers, revenue was recorded upon shipment to the customer.
|
1.
|
Persuasive evidence of an arrangement exists - The Company’s sales are driven either by contracts or purchase orders. These types of documents are typically used to establish persuasive evidence of an arrangement. The Company’s customary business practices, however, must be taken into account as a contract can be written, oral, or modified based on customary business practices. Throughout 2012-2017, although the Company may have created a legal contract upon the execution of a contract and/or fulfillment of a purchase order, the lack of clarity around the final terms of the arrangement due to the pervasive side agreements with customers preclude the Company’s sales transactions from meeting this criterion upon shipment of product. Therefore, even though there may have been a legal contract governing the arrangement (which typically would indicate persuasive evidence of an arrangement), the Company’s selling and collection practices amended the stated contract terms. After considering these factors, the Company concluded that persuasive evidence of an arrangement did not exist upon shipment of product.
|
2.
|
Delivery has occurred or services have been rendered - For sales to customers, physical possession and title transferred upon shipment to the customer. However, the Company concluded that it did not pass the risks of ownership to the customer upon shipment because customers were allowed to return product for multiple reasons, which included being unable to sell the product, damages which may have occurred subsequent to delivery, and dropped product. See below for additional discussion of the Company’s rationale for concluding that delivery had not yet occurred upon shipment to the customer.
|
3.
|
The seller’s price to the buyer is fixed or determinable - At certain quarter-ends, the Company was significantly increasing sales to customers without having visibility into the level of product remaining unsold at the customer’s location. This practice made it difficult to develop an appropriate estimate of future credits to be issued to customers at the time of sale, which, in turn, impacted whether the price at the time of transfer of physical possession to the customer was fixed or determinable. This previous practice in combination with the following actions of the Company preclude the price of the Company’s sales transactions from being fixed or determinable upon shipment of product:
|
a.
|
Offering customers an unconditional right of return with many items being returned over a year after the initial sale,
|
b.
|
Offering extended payment terms to customers with days sales outstanding averaging almost 3 months, and
|
c.
|
A history of exceeding established credit limits for customers.
|
4.
|
Collectability is reasonably assured - At the time of transfer of physical possession to the customer, collectability of the sales was questionable. As determined in the Investigation and described further below, the customers’ intention to pay amounts when due was uncertain in light of the conflicting messages customers received with respect to the payment
|
•
|
timing adjustments for prepaid expenses and expense accruals for research and development expenses related to clinical trials, employee compensation and other employee-related costs, legal costs and other accruals;
|
•
|
adjustments to stock-based compensation, primarily to reflect share-based awards granted to consultants as non-employee instead of as employee awards; and
|
•
|
an adjustment for a change in fair value of $1.7 million for earn-out discussed further in Note 5. “Stability Biologics, LLC.”
|
5.
|
Stability Biologics, LLC
|
Cash paid at closing
|
|
$
|
6,000
|
|
Working capital adjustment
|
|
(481
|
)
|
|
Common stock issued (441,009 shares)
|
|
3,347
|
|
|
Assumed debt
|
|
1,771
|
|
|
Fair value of earn-out
|
|
17,450
|
|
|
Total fair value of purchase price
|
|
$
|
28,087
|
|
|
|
|
||
Net assets acquired:
|
|
|
||
Debt-free working capital
|
|
$
|
2,456
|
|
Other long-term assets
|
|
199
|
|
|
Property, plant and equipment
|
|
1,375
|
|
|
Deferred tax liability
|
|
(5,896
|
)
|
|
Subtotal
|
|
(1,866
|
)
|
|
Intangible assets:
|
|
|
||
Customer relationships
|
|
5,330
|
|
|
Patents and know-how
|
|
6,790
|
|
|
Trade names and trademarks
|
|
450
|
|
|
Non compete agreements
|
|
830
|
|
|
Licenses and permits
|
|
390
|
|
|
Subtotal
|
|
13,790
|
|
|
Goodwill
|
|
16,163
|
|
|
Total assets purchased
|
|
$
|
28,087
|
|
|
|
|
||
Working capital and other assets were composed of the following (in thousands):
|
|
|
||
Working capital
|
|
|
||
Cash
|
|
$
|
140
|
|
Prepaid Expenses and other current assets
|
|
100
|
|
|
Accounts receivable
|
|
2,001
|
|
|
Federal and state taxes receivable
|
|
28
|
|
|
Inventory
|
|
9,002
|
|
|
Accounts payable and accrued expenses
|
|
(8,815
|
)
|
|
Debt-free working capital
|
|
$
|
2,456
|
|
|
|
|
||
Current portion of long-term debt
|
|
$
|
(194
|
)
|
Long-term debt
|
|
(560
|
)
|
|
Line of Credit
|
|
(932
|
)
|
|
Shareholder loan
|
|
(85
|
)
|
|
Assumed debt
|
|
$
|
(1,771
|
)
|
|
|
|
||
Net working capital
|
|
$
|
685
|
|
|
|
|
|
|
Estimated useful life (in years)
|
Intangible asset:
|
|
|
Customer relationships
|
|
12
|
Patents and know-how
|
|
20
|
Trade name and trademarks
|
|
Indefinite
|
Non compete agreements
|
|
4
|
Licenses and permits
|
|
2
|
|
|
Year Ended December 31,
|
||
|
|
2016
|
||
Revenue
|
|
$
|
233,986
|
|
|
|
|
||
Net income
|
|
$
|
1,318
|
|
|
|
|
||
Income per share, fully diluted
|
|
$
|
0.01
|
|
|
|
Year ended
|
||
|
|
December 31, 2017
|
||
|
|
|
||
Assets divested
|
|
|
||
Trade receivables
|
|
$
|
2,406
|
|
Inventories
|
|
3,455
|
|
|
Prepaid expenses and other assets
|
|
955
|
|
|
Goodwill (a)
|
|
227
|
|
|
Intangible assets
|
|
11,857
|
|
|
Property and equipment, net
|
|
1,446
|
|
|
Total assets divested
|
|
20,346
|
|
|
|
|
|
||
Liabilities divested
|
|
|
||
Accounts payable and accrued liabilities
|
|
3,488
|
|
|
Total liabilities divested
|
|
3,488
|
|
|
|
|
|
||
Total net assets divested
|
|
$
|
16,858
|
|
|
|
|
||
Transaction costs
|
|
400
|
|
|
|
|
|
||
Consideration received
|
|
|
||
Non-trade receivable (b)
|
|
150
|
|
|
Note receivable (c)
|
|
3,190
|
|
|
Intangible assets (d)
|
|
630
|
|
|
Extinguishment of earn out liability (e)
|
|
12,240
|
|
|
Total consideration received
|
|
$
|
16,210
|
|
|
|
|
||
Loss on sale
|
|
$
|
(1,048
|
)
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Raw materials
|
$
|
516
|
|
|
$
|
644
|
|
Work in process
|
11,123
|
|
|
4,685
|
|
||
Finished goods
|
4,936
|
|
|
4,905
|
|
||
Inventory, gross
|
16,575
|
|
|
10,234
|
|
||
Reserve for obsolescence
|
(589
|
)
|
|
(767
|
)
|
||
Inventory, net
|
$
|
15,986
|
|
|
$
|
9,467
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Leasehold improvements
|
$
|
4,804
|
|
|
$
|
3,393
|
|
Laboratory and clean room equipment
|
13,787
|
|
|
9,982
|
|
||
Furniture and equipment
|
15,145
|
|
|
10,483
|
|
||
Construction in progress
|
1,507
|
|
|
2,200
|
|
||
Property and equipment, gross
|
35,243
|
|
|
26,058
|
|
||
Less accumulated depreciation and amortization
|
(17,819
|
)
|
|
(11,967
|
)
|
||
Property and equipment, net
|
$
|
17,424
|
|
|
$
|
14,091
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Leasehold improvements
|
$
|
997
|
|
|
$
|
997
|
|
Less accumulated amortization
|
(768
|
)
|
|
(711
|
)
|
||
Net leasehold improvements
|
$
|
229
|
|
|
$
|
286
|
|
|
|
|
|
||||
Obligations under capitalized leases
|
$
|
229
|
|
|
$
|
286
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||||||||||||||
|
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
||||||||||||
Amortized intangible assets
|
|
|
|
|
|
|
|
|
||||||||||||
Licenses
|
|
$
|
1,414
|
|
$
|
(1,066
|
)
|
$
|
348
|
|
|
$
|
1,009
|
|
$
|
(1,009
|
)
|
$
|
—
|
|
Patents and know how
|
|
9,180
|
|
(4,475
|
)
|
4,705
|
|
|
8,732
|
|
(3,840
|
)
|
4,892
|
|
||||||
Customer and supplier relationships
|
|
4,271
|
|
(2,202
|
)
|
2,069
|
|
|
4,271
|
|
(1,891
|
)
|
2,380
|
|
||||||
Non-compete agreements
|
|
120
|
|
(38
|
)
|
82
|
|
|
120
|
|
(8
|
)
|
112
|
|
||||||
Total amortized intangible assets
|
|
$
|
14,985
|
|
$
|
(7,781
|
)
|
$
|
7,204
|
|
|
$
|
14,132
|
|
$
|
(6,748
|
)
|
$
|
7,384
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unamortized intangible assets
|
|
|
|
|
|
|
|
|
||||||||||||
Trade names and trademarks
|
|
$
|
1,008
|
|
|
$
|
1,008
|
|
|
$
|
1,008
|
|
|
$
|
1,008
|
|
||||
Patents in process
|
|
1,396
|
|
|
1,396
|
|
|
1,641
|
|
|
1,641
|
|
||||||||
Total intangible assets
|
|
$
|
17,389
|
|
|
$
|
9,608
|
|
|
$
|
16,781
|
|
|
$
|
10,033
|
|
|
Estimated
|
||
|
Amortization
|
||
Year ending December 31,
|
Expense
|
||
2019
|
$
|
976
|
|
2020
|
976
|
|
|
2021
|
969
|
|
|
2022
|
946
|
|
|
2023
|
946
|
|
|
Thereafter
|
2,391
|
|
|
|
$
|
7,204
|
|
|
Goodwill
|
||
Balance as of January 1, 2017
|
$
|
20,203
|
|
Divestment of Stability
|
(227
|
)
|
|
Balance as of December 31, 2017
|
19,976
|
|
|
Activity
|
—
|
|
|
Balance as of December 31, 2018
|
$
|
19,976
|
|
9.
|
Accrued Expenses
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Legal costs
|
$
|
10,056
|
|
|
$
|
3,760
|
|
Settlement costs
|
8,673
|
|
|
—
|
|
||
Pricing adjustment settlement with Veterans Affairs
|
6,894
|
|
|
5,600
|
|
||
Estimated returns
|
2,325
|
|
|
3,255
|
|
||
Accrued clinical trials
|
962
|
|
|
617
|
|
||
External commissions
|
1,233
|
|
|
1,397
|
|
||
Other
|
1,699
|
|
|
1,139
|
|
||
Total
|
$
|
31,842
|
|
|
$
|
15,768
|
|
10.
|
Long-Term Debt
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net (loss) income
|
$
|
(29,979
|
)
|
|
$
|
64,727
|
|
|
$
|
390
|
|
Denominator for basic earnings (loss) per share - weighted average shares
|
105,596,256
|
|
|
106,121,810
|
|
|
105,928,348
|
|
|||
Effect of dilutive securities: Stock options, warrants, and restricted stock (a)
|
3,538,921
|
|
|
9,991,926
|
|
|
6,717,292
|
|
|||
Denominator for diluted earnings (loss) per share - weighted average shares adjusted for dilutive securities
|
105,596,256
|
|
|
116,113,736
|
|
|
112,645,640
|
|
|||
(Loss) income per common share - basic
|
$
|
(0.28
|
)
|
|
$
|
0.61
|
|
|
$
|
0.00
|
|
(Loss) income per common share - diluted
|
$
|
(0.28
|
)
|
|
$
|
0.56
|
|
|
$
|
0.00
|
|
Effect of dilutive securities:
|
2018
|
|
2017
|
|
2016
|
||||||
Stock options
|
$
|
3,172,943
|
|
|
$
|
7,813,153
|
|
|
$
|
6,048,385
|
|
Restricted stock awards
|
365,978
|
|
|
2,178,773
|
|
|
668,907
|
|
|||
|
$
|
3,538,921
|
|
|
$
|
9,991,926
|
|
|
$
|
6,717,292
|
|
|
Number of
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
(in years)
|
|
Aggregate
Intrinsic
Value
|
|||||
Outstanding at January 1, 2018
|
9,953,575
|
|
|
$
|
3.28
|
|
|
|
|
|
||
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Exercised
|
(786,708
|
)
|
|
4.52
|
|
|
|
|
|
|||
Unvested options forfeited
|
—
|
|
|
—
|
|
|
|
|
|
|||
Vested options expired
|
(5,469,720
|
)
|
|
2.22
|
|
|
|
|
|
|||
Outstanding at December 31, 2018
|
3,697,147
|
|
|
4.59
|
|
|
3.57
|
|
$
|
595,684
|
|
|
Exercisable at December 31, 2018
|
3,697,147
|
|
|
$
|
4.59
|
|
|
3.57
|
|
$
|
595,684
|
|
|
|
Number of
Shares |
|
Weighted-Average Grant Date
Fair Value |
|||
Unvested at January 1, 2018
|
|
5,181,405
|
|
|
$
|
9.18
|
|
Granted
|
|
1,947,475
|
|
|
8.52
|
|
|
Vested
|
|
(2,268,431
|
)
|
|
9.26
|
|
|
Forfeited
|
|
(1,861,314
|
)
|
|
8.96
|
|
|
Unvested at December 31, 2018
|
|
2,999,135
|
|
|
$
|
8.83
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
(Restated)
|
||||||
Cost of sales
|
$
|
705
|
|
|
$
|
539
|
|
|
$
|
439
|
|
Research and development
|
584
|
|
|
604
|
|
|
621
|
|
|||
Selling, general and administrative
|
13,479
|
|
|
20,052
|
|
|
16,672
|
|
|||
Total share-based compensation
|
$
|
14,768
|
|
|
$
|
21,195
|
|
|
$
|
17,732
|
|
Income tax benefit
|
(3,803
|
)
|
|
(5,345
|
)
|
|
(6,756
|
)
|
|||
Total share-based compensation, net of tax benefit
|
$
|
10,965
|
|
|
$
|
15,850
|
|
|
$
|
10,976
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Deferred Tax Assets:
|
|
|
|
|||||
|
Accrued expenses
|
$
|
3,572
|
|
|
$
|
2,404
|
|
|
Deferred revenue
|
13,719
|
|
|
16,311
|
|
||
|
Sales return and allowances
|
2,296
|
|
|
2,157
|
|
||
|
Accrued settlement costs
|
2,689
|
|
|
—
|
|
||
|
Research and development and other tax credits
|
2,326
|
|
|
1,216
|
|
||
|
Net operating loss
|
3,118
|
|
|
1,025
|
|
||
|
Share-based compensation
|
3,425
|
|
|
4,895
|
|
||
|
Other
|
971
|
|
|
342
|
|
||
Deferred Tax Liabilities:
|
|
|
|
|||||
|
Prepaid expenses
|
(1,823
|
)
|
|
(344
|
)
|
||
|
Property and equipment
|
(2,519
|
)
|
|
(1,555
|
)
|
||
|
Intangible assets
|
(443
|
)
|
|
(356
|
)
|
||
Net Deferred Tax Assets
|
27,331
|
|
|
26,095
|
|
|||
|
Less: Valuation allowance
|
(27,331
|
)
|
|
(554
|
)
|
||
Net Deferred Tax Assets after Valuation Allowance
|
$
|
—
|
|
|
$
|
25,541
|
|
|
December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
|
|
|
|
|
(Restated)
|
|||
Federal statutory rate
|
21.00
|
%
|
|
35.00
|
%
|
|
35.00
|
%
|
State taxes, net of federal benefit
|
3.52
|
%
|
|
0.40
|
%
|
|
116.85
|
%
|
Nondeductible compensation
|
(15.33
|
)%
|
|
0.66
|
%
|
|
1.45
|
%
|
Meals and entertainment
|
(24.16
|
)%
|
|
1.93
|
%
|
|
126.74
|
%
|
Keyman life insurance
|
(0.15
|
)%
|
|
0.02
|
%
|
|
1.52
|
%
|
Transaction costs
|
—
|
%
|
|
—
|
%
|
|
21.88
|
%
|
Inventory contribution deduction
|
0.48
|
%
|
|
(0.06
|
)%
|
|
(4.30
|
)%
|
Domestic production activities deduction
|
—
|
%
|
|
(1.54
|
)%
|
|
(150.74
|
)%
|
Fair value adjustment
|
—
|
%
|
|
(2.76
|
)%
|
|
(105.83
|
)%
|
Share-based compensation
|
10.82
|
%
|
|
(9.90
|
)%
|
|
179.74
|
%
|
Tax credits
|
19.75
|
%
|
|
(3.37
|
)%
|
|
(254.62
|
)%
|
Uncertain tax position
|
(2.35
|
)%
|
|
0.46
|
%
|
|
30.47
|
%
|
Write-off of net operating losses
|
(11.81
|
)%
|
|
—
|
%
|
|
37.11
|
%
|
Payable true-up
|
(2.69
|
)%
|
|
0.65
|
%
|
|
(2.38
|
)%
|
Sale of Stability
|
—
|
%
|
|
(8.86
|
)%
|
|
—
|
%
|
Fixed asset true-up
|
5.33
|
%
|
|
—
|
%
|
|
—
|
%
|
Federal provision to return
|
1.58
|
%
|
|
0.13
|
%
|
|
—
|
%
|
Impact of federal rate change
|
—
|
%
|
|
26.79
|
%
|
|
—
|
%
|
Other
|
(0.25
|
)%
|
|
(0.03
|
)%
|
|
(6.91
|
)%
|
Valuation allowance
|
(788.33
|
)%
|
|
(83.08
|
)%
|
|
2.48
|
%
|
|
(782.59
|
)%
|
|
(43.56
|
)%
|
|
28.46
|
%
|
|
December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Current:
|
|
|
|
|
(Restated)
|
||||||
Federal
|
$
|
614
|
|
|
$
|
5,868
|
|
|
$
|
4,338
|
|
State
|
427
|
|
|
1,163
|
|
|
1,195
|
|
|||
Total current
|
1,041
|
|
|
7,031
|
|
|
5,533
|
|
|||
|
|
|
|
|
|
||||||
Deferred:
|
|
|
|
|
|
||||||
Federal
|
19,452
|
|
|
(19,441
|
)
|
|
(4,980
|
)
|
|||
State
|
6,089
|
|
|
(7,229
|
)
|
|
(398
|
)
|
|||
Total deferred
|
25,541
|
|
|
(26,670
|
)
|
|
(5,378
|
)
|
|||
|
|
|
|
|
|
||||||
Total expense (benefit)
|
$
|
26,582
|
|
|
$
|
(19,639
|
)
|
|
$
|
155
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Unrecognized tax benefits - January 1
|
$
|
847
|
|
|
$
|
336
|
|
|
$
|
170
|
|
|
|
|
|
|
|
||||||
Gross increases - tax positions in current period
|
91
|
|
|
130
|
|
|
166
|
|
|||
|
|
|
|
|
|
||||||
Gross increases - tax positions in prior period
|
—
|
|
|
381
|
|
|
—
|
|
|||
|
|
|
|
|
|
||||||
Unrecognized tax benefits - December 31
|
$
|
938
|
|
|
$
|
847
|
|
|
$
|
336
|
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cash paid for interest
|
$
|
197
|
|
|
$
|
127
|
|
|
$
|
162
|
|
Income taxes paid
|
859
|
|
|
12,755
|
|
|
642
|
|
|||
Purchases of equipment financed through accounts payable
|
1,168
|
|
|
1,343
|
|
|
831
|
|
|||
Deferred financing costs
|
—
|
|
|
30
|
|
|
10
|
|
|||
Additional paid-in capital related tax adjustments
|
—
|
|
|
—
|
|
|
(423
|
)
|
|||
Stock issuance of 441,009 shares in connection with acquisition of Stability
|
—
|
|
|
—
|
|
|
3,347
|
|
|||
Stock issuance of 17,539 and 43,344 shares in exchange for services performed in 2017 and 2016, respectively
|
—
|
|
|
166
|
|
|
346
|
|
Years Ended December 31,
|
|
||
2019
|
$
|
2,605
|
|
2020
|
2,370
|
|
|
2021
|
1,625
|
|
|
2022
|
1,673
|
|
|
2023
|
205
|
|
|
Thereafter
|
—
|
|
|
|
$
|
8,478
|
|
17.
|
Revenue Data by Customer Type
|
|
Years Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
|
|
|
|
(Restated)
|
||||||
Direct Customers
|
$
|
343,464
|
|
|
$
|
286,742
|
|
|
$
|
176,485
|
|
Distributors
|
15,647
|
|
|
27,431
|
|
|
33,501
|
|
|||
Other(1)
|
—
|
|
|
6,966
|
|
|
11,726
|
|
|||
Total
|
$
|
359,111
|
|
|
$
|
321,139
|
|
|
$
|
221,712
|
|
18.
|
Related Party Transactions
|
19.
|
Restructuring
|
Liability balance as of January 1, 2018
|
$
|
—
|
|
Expenses
|
6,055
|
|
|
Cash distributions
|
(448
|
)
|
|
Liability balance as of December 31, 2018
|
$
|
5,607
|
|
20.
|
Quarterly Financial Data (Unaudited) (in thousands except per share data)
|
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||
Net sales
|
2018
|
$
|
84,149
|
|
|
$
|
95,417
|
|
|
$
|
86,959
|
|
|
$
|
92,586
|
|
|
2017
|
68,795
|
|
|
80,487
|
|
|
84,000
|
|
|
87,857
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Gross profit
|
2018
|
$
|
74,791
|
|
|
$
|
86,147
|
|
|
$
|
79,604
|
|
|
$
|
82,183
|
|
|
2017
|
60,766
|
|
|
72,002
|
|
|
74,697
|
|
|
78,455
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Income tax (provision) benefit
|
2018
|
$
|
1,552
|
|
|
$
|
13
|
|
|
$
|
(650
|
)
|
|
$
|
(27,497
|
)
|
|
2017
|
(280
|
)
|
|
(980
|
)
|
|
30,436
|
|
|
(9,537
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
2018
|
$
|
4,619
|
|
|
$
|
1,804
|
|
|
$
|
(178
|
)
|
|
$
|
(36,224
|
)
|
|
2017
|
5,998
|
|
|
10,402
|
|
|
44,051
|
|
|
4,276
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per common share - basic
|
2018
|
$
|
0.04
|
|
|
$
|
0.02
|
|
|
$
|
—
|
|
|
$
|
(0.34
|
)
|
|
2017
|
0.06
|
|
0.10
|
|
|
0.41
|
|
|
0.04
|
|
|||||
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per common share - diluted
|
2018
|
$
|
0.04
|
|
|
$
|
0.02
|
|
|
$
|
—
|
|
|
$
|
(0.34
|
)
|
|
2017
|
0.05
|
|
0.09
|
|
|
0.37
|
|
|
0.04
|
|
21.
|
Subsequent Events
|
•
|
Maximum Total Leverage Ratio, defined as funded debt divided by consolidated adjusted EBITDA, of not more than 3.0 to 1.0 as of the last day of the previous four consecutive fiscal quarters.
|
•
|
Minimum Liquidity, defined as unrestricted cash and cash equivalents, of less than $40.0 million as of the last business day of each fiscal month following the term loan closing date through and including the fiscal month ending May 31, 2020. For fiscal months beginning June 30, 2020, the Company is not permitted to have liquidity of less than $30.0 million. Beginning with the fiscal month ending December 31, 2020, if the total leverage ratio is less than 2.50 to 1.0 as of the last business day of any fiscal month, the Company’s liquidity shall not be less than $20.0 million.
|
•
|
During the period from June 10, 2019 through June 10, 2020, an amount equal to 3% of the principal amount of the Term Loan prepaid on such date; and
|
•
|
During the period from June 11, 2020 through June 10, 2021, an amount equal to 2% of the principal amount of the Term Loan prepaid on such date.
|
MIMEDX GROUP, INC. AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
|
||||||||||||
Years ended December 31, 2018, 2017 and 2016 (in thousands)
|
||||||||||||
|
|
|
|
|
|
|
|
|
||||
|
|
Balance at
Beginning of Year |
|
Additions charged to Expense or Revenue
|
|
Deductions
and write-offs |
|
Balance at
End of Year |
||||
|
|
|
|
|
|
|
|
|
||||
For the Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
||||
Allowance for product returns
|
|
7,362
|
|
|
1,148
|
|
|
—
|
|
|
8,510
|
|
Allowance for obsolescence
|
|
768
|
|
|
511
|
|
|
(690
|
)
|
|
589
|
|
|
|
|
|
|
|
|
|
|
||||
For the Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
||||
Allowance for product returns
|
|
11,283
|
|
|
—
|
|
|
(3,921
|
)
|
|
7,362
|
|
Allowance for obsolescence
|
|
829
|
|
|
1,192
|
|
|
(1,253
|
)
|
|
768
|
|
|
|
|
|
|
|
|
|
|
||||
For the Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
||||
Allowance for product returns (restated)
|
|
5,804
|
|
|
5,479
|
|
|
—
|
|
|
11,283
|
|
Allowance for obsolescence
|
|
397
|
|
|
2,281
|
|
|
(1,849
|
)
|
|
829
|
|
•
|
EY advised the Company that the internal controls necessary for the Company to develop reliable financial statements did not exist;
|
•
|
Although EY could accept representations from the Company’s Interim CEO and Interim CFO based on their knowledge, EY advised the Company that EY was unable to rely on representations from them because, as of the date of the resignation, the current Company’s CEO and Interim CFO, in turn, would have needed to rely on representations from certain legacy management personnel still in positions that could affect what is reflected in the Company’s books and records. At the time of EY’s resignation, the Audit Committee Investigation was still ongoing;
|
•
|
EY advised the Company of the need to significantly expand the scope of the Audit Committee Investigation, due to material allegations of inappropriate financial reporting, material allegations of noncompliance with laws and regulations, the findings to date from the Audit Committee Investigation into these allegations, and the lack of internal controls necessary for the Company to develop reliable financial statements. EY had not completed the necessary work in connection with this expanded audit scope at the time of its resignation; and
|
•
|
EY advised the Company that information had come to EY’s attention that EY had concluded materially impacts the reliability of previously issued financial statements, and the issues raised by this information had not been resolved to EY’s satisfaction prior to its resignation.
|
•
|
The Company failed to establish a tone at the top that demonstrated a commitment to integrity and ethical values, resulting in activity by senior management, members of the sales group and others that was inconsistent with both the accounting applied and applicable regulatory requirements.
|
•
|
Both the Board and senior management failed to appropriately respond to allegations of improper accounting activities, improper sales practices, and activities consistent with retaliation against employees who raised concerns of such inappropriate accounting and sales activity.
|
•
|
There were not adequate policies and procedures for review, authorization and approval of certain transactions (such as contracts with vendors and customers) by the appropriate internal resources.
|
•
|
The Company did not have a sufficient complement of personnel with an appropriate level of knowledge, experience, and oversight commensurate with its financial reporting requirements to ensure proper selection and application of U.S. GAAP.
|
•
|
There was not a mechanism in place to regularly educate and communicate to management and employees the importance of internal controls, and to raise their level of understanding of controls.
|
•
|
The organization did not have an effective process to evaluate the range of its activities to assess whether all material activities were appropriately reflected in the financial statements.
|
•
|
There were not adequate processes in place to communicate changes in the operating environment to the accounting department so they could review the changes and determine what, if any, effect the change may have on the Company’s accounting policies.
|
•
|
There were not adequate processes in place to ensure that the accounting department (and/or Audit Committee) was aware of significant transactions with related parties so it could determine whether such transactions are appropriately approved, accounted for, and disclosed.
|
•
|
The Company did not have an effective, documented and continuous risk assessment process and related controls to properly monitor, identify and analyze regulatory compliance risks, including compliance with applicable regulations around product pricing, payments to medical professionals, and related activities, and related risks of financial misstatement due to error and / or fraud, including management override of controls.
|
•
|
The Company had inadequate or ineffective senior accounting leadership and corresponding process level and monitoring controls in the area of accounting close and financial reporting around the accounting for and disclosure of material transactions and business activities. These ineffective processes and controls impacted the Company’s ability to meet a variety of its financial reporting objectives, including (but not limited to) the following: proper cutoff for cash receipts, appropriate application of cash receipts to the correct corresponding receivables, accurate calculation of stock based compensation expense, the development of quality estimates related to accrued expenses, and the expensing of prepaid expenditures (such as clinical trial costs) within the correct periods.
|
•
|
The Company did not properly design or maintain effective controls to prevent unauthorized access to certain systems, programs and data, or provide for periodic review and monitoring of access, including analysis of segregation of duties conflicts.
|
•
|
There was a lack of robust, established and documented accounting policies and insufficiently detailed Company procedures to put these policies into effective action.
|
•
|
The Company did not have adequate management oversight around completeness and accuracy of data material to financial reporting.
|
•
|
The Company’s revenue recognition methodology was not aligned with the Company’s customary business practices, resulting in certain revenue events being recorded prior to the time at which all of the sales recognition criteria were met. Such misalignment was frequently due to the existence of extra-contractual or undocumented terms or arrangements initiated by former executives of the Company at the onset of sales transactions, such as sales above established distributor and customer credit limits, and concessions agreed to by former executives of the Company subsequent to the initial transaction, such as extended unusually long payment terms, granting return or exchange rights, and contingent payment obligations.
|
•
|
Management did not have processes in place to assess whether controls within each of the five components of internal control were present and functioning as intended.
|
•
|
The level of staffing, training and specialized skills of the people performing the monitoring were not adequate given the environment.
|
•
|
There were not adequate procedures in place to monitor when controls were overridden and to determine whether the override was appropriate.
|
•
|
The Company underwent a leadership transition during the second and third quarters of 2018, during which the former CEO, CFO, COO, Controller, and VP of IT were removed from the organization. During this same period, each of these positions was filled by interim resources with appropriate technical expertise.
|
•
|
The Board created an Ethics and Compliance Committee consisting solely of independent directors. This committee is responsible for reviewing the status of the Company’s ethics and compliance program, reviewing and advising the Board regarding any open cases and trends that may impact the business, and recommending future initiatives to improve compliance performance and effectiveness.
|
•
|
Management conducted internal training courses over Sarbanes-Oxley regulations and the Company’s internal control over financial reporting program for Company personnel involved in the execution of the program.
|
•
|
Management reinforced the importance of integrity, accountability, and adherence to established internal controls, policies, and procedures through the adoption of a revised Code of Business Conduct Policy. Each newly hired employee or agent (including executives and Board members) will be required to certify that they read and understood the policy upon hire, and then re-certify their reading and understanding of the policy on an annual basis thereafter.
|
•
|
The Company enhanced the onboarding training provided to newly hired salespeople to emphasize the importance of compliance with the various regulations specific to the Life Sciences industry to which the Company is subject.
|
•
|
The Chief Compliance Officer intends to facilitate ethics and compliance training for all members of the Company’s Board.
|
•
|
The purpose of the whistleblower hotline and the mechanics of its use were formally communicated by the Chief Compliance Officer during numerous meetings with all levels of the sales department during the last two quarters of 2018, with an emphasis on the following: (a) each employee’s responsibility to report any actual or apparent violations of law or ethical standards and any questionable accounting or auditing matters so that they may be investigated and dealt with appropriately, and (b) management’s commitment to ensuring that any employees communicating such an issue via the hotline will not be subject to retaliation.
|
•
|
In addition to enhancing processes and controls over adoption of new accounting standards and the proper application of existing accounting standards, the Company enhanced the technical capabilities of its accounting department by leveraging third party consultants with expertise in U.S. GAAP. In December 2019, the Company hired an experienced EVP of Finance and, as of the date of the filing of this Form 10-K, the Company is searching for a full-time Controller. Furthermore, the Company intends to lessen its reliance on third-party consultants for its technical accounting needs during 2020 by transitioning roles currently assigned to outside consultants to full-time employees with similar technical accounting competencies.
|
•
|
Management plans to develop and implement a contract management policy that defines who is required to review new, extended, or amended contracts (including those with distributors and agents).
|
•
|
The Company hired a new Chief Compliance Officer during the second quarter of 2018 to manage compliance and regulatory risk. This person reports directly to the Board’s Ethics and Compliance Committee.
|
•
|
Management hired consultants to evaluate the Company’s compliance with regulations specific to the Life Sciences industry. Going forward, similar periodic assessments will be performed by the Chief Compliance Officer.
|
•
|
Management is designing an Anti-Fraud Program to assess (and subsequently mitigate) the organization’s susceptibility to fraud, including management override of controls. The first phase of this Anti-Fraud Program to be implemented will in an annual fraud risk assessment.
|
•
|
Management has developed a set of procedures to identify and define its population of related parties, identify transactions with those related parties, and analyze such transactions to determine whether additional approval or financial statement disclosure is required.
|
•
|
Prior to the filing of this Form 10-K, the Company established a Disclosure Committee comprised of senior management representatives from all relevant departments within the organization. Members of this committee are responsible for reviewing all quarterly and annual SEC filings, and meet prior to each filing to discuss the completeness and accuracy of the document being filed. The Company is designing and implementing a variety of new procedures, such as monthly operational meetings amongst senior management that are attended by members of the accounting department, to confirm that the accounting department is aware of operational changes that may affect the Company’s accounting policies.
|
•
|
On an annual basis (or more frequently, should a significant triggering event occur), the Company now performs a risk assessment designed to ensure that the scope of its Sarbanes-Oxley compliance program adequately reflects changes to the business and its operations.
|
•
|
Management collaborated with outside consultants possessing significant financial reporting and internal control expertise to perform an extensive review of the design of the Company’s internal controls over financial reporting. This review included the identification of internal control deficiencies and the development of remediation plans for each identified deficiency. These internal control deficiencies identified included (but were not limited to) the following: improper cutoff for cash receipts, application of cash receipts to the incorrect receivables, inaccurate calculation of stock-based compensation expense, the use of suboptimal methodologies in the development of estimates related to accrued expenses, and the expensing of prepaid expenditures (such as clinical trial costs) within the incorrect periods.
|
•
|
The Company is enhancing its financial close process by formalizing its accounting policies, introducing additional layers of independent reviews by appropriately qualified individuals, improving the precision applied to various financial result analyses, and providing education and training to the members of the finance department.
|
•
|
The Company has enhanced its review of salesperson activity which may indicate noncompliance with the Company’s sales policies, such as a quarterly review of data by the PFO, Interim Controller, and SVP of Sales which quantifies no charge evaluations, sales returns, and other key metrics both by region and at the individual salesperson level.
|
•
|
Management has gained a better understanding of system functionality through a comprehensive review of permissions and profiles within each IT application that is significant to the Company’s financial reporting objectives, and subsequently reconfigured profiles with appropriate permissions to better align with job responsibilities and enforce segregation of duties.
|
•
|
Once user profiles and their associated permissions were reconfigured, management employed procedures to ensure the continued appropriateness of all applicable system and network access. This objective was achieved through the performance of periodic user access reviews and the enhancement of procedures related to the granting and removing of system and network access.
|
•
|
Management implemented additional procedures (such as the evaluation of report query parameters and the sampling of data within reports) to validate the completeness and accuracy of system generated reports and other data deemed to be significant to the Company’s financial reporting objectives.
|
•
|
Management implemented quarterly required communications amongst relevant members of senior management in the form of certification surveys. A control certification survey is distributed to obtain information regarding any internal control related issues or concerns that control owners may have, and additional certification surveys are distributed to Disclosure Committee members and key members of the sales department which address (to the best of their knowledge) whether the period’s financial statements are free from either material misstatements, material misclassifications, or material omissions.
|
•
|
The Company further developed its Internal Audit Department, led by a VP of Internal Audit, comprised of internal resources who are tasked with continually evaluating and monitoring the effectiveness of the Company’s internal controls over financial reporting.
|
•
|
Management modified its sales procedures to enhance the Finance Department’s awareness and oversight of sales activities in order to verify the validity and proper accounting treatment of sales transactions. This has been achieved via the participation of the Finance Department in various sales and operations meetings, as well as through new requirements that all credit limit increases, credit memos related to out of policy returns, and bulk sales orders exceeding a defined threshold be reviewed and approved by the Interim Controller prior to being processed.
|
•
|
Management began, and will continue, to schedule training sessions with the Company’s Sales Department to ensure that they are familiar with the Company’s current sales related policies and procedures, including those which are significant to the Company’s financial reporting objectives. Portions of these training sessions are facilitated by the Interim Controller, who presents on topics such as the Company’s current sales return policy, acceptable credit terms for customers, events that would trigger commission claw-backs, customer credit limit modification approval protocol, and the importance of proper revenue recognition.
|
•
|
The Company modified the composition of its Pricing Committee to include representatives from the Legal and Finance departments. This committee meets monthly to discuss any requested deviations from the Company’s standard price list, and its approval is required in order for any such deviation to be applied to a sales transaction.
|
Name
|
|
Age
|
|
Since
|
|
Tenure
|
|
Independent
|
|
Committees
|
Richard J. Barry
|
|
61
|
|
2019
|
|
—
|
|
ü
|
|
CC*
|
M. Kathleen Behrens
|
|
67
|
|
2019
|
|
—
|
|
ü
|
|
COB, EC
|
James L. Bierman
|
|
67
|
|
2019
|
|
—
|
|
ü
|
|
AC, CC
|
J. Terry Dewberry
|
|
76
|
|
2009
|
|
10
|
|
ü
|
|
AC*, NCG
|
Charles R. Evans
|
|
72
|
|
2012
|
|
7
|
|
ü
|
|
AC, NCG*
|
Charles E. Koob
|
|
75
|
|
2008
|
|
12
|
|
|
|
—
|
K. Todd Newton
|
|
57
|
|
2019
|
|
—
|
|
ü
|
|
AC, EC
|
Timothy R. Wright
|
|
62
|
|
2019
|
|
—
|
|
|
|
—
|
Neil S. Yeston
|
|
76
|
|
2012
|
|
7
|
|
ü
|
|
CC, EC*, SL
|
•
|
Adding procedural mechanics for shareholders to call special meetings of shareholders or act by written consent;
|
•
|
Enhancing procedural mechanics in connection with shareholder nominations of directors and submission of shareholder proposals at shareholder meetings;
|
•
|
Specifying powers of the chair of a shareholder meeting to establish and enforce rules of conduct and the order of business at the meeting;
|
•
|
Enhancing provisions related to the adjournment and postponement of, and establishment of record dates for, shareholder meetings;
|
•
|
Clarifying that the Chair of the Board shall be chosen from among Board members and may, but need not, be the Chief Executive Officer of the Company; and
|
•
|
Allowing emergency special Board meetings to be held with less than 24 hours’ notice.
|
•
|
Parker H. “Pete” Petit. Mr. Petit served as Chairman and Chief Executive Officer from February 2009 until June 30, 2018. On September 20, 2018, the Board of Directors determined that his termination of employment was “for cause.”
|
•
|
David Coles. Mr. Coles served as Interim Chief Executive Officer from July 2, 2018 until May 13, 2019. He was an employee of Alvarez & Marsal North America, LLC.
|
•
|
Michael J. Senken. Mr. Senken served as Chief Financial Officer from January 2010 until June 6, 2018. On September 20, 2018, the Board of Directors determined that his termination of employment was “for cause.”
|
•
|
Edward Borkowski. Mr. Borkowski served as Executive Vice President and Interim Chief Financial Officer from June 7, 2018 until his resignation on November 15, 2019. He continued to serve as Acting Chief Financial Officer through the date of this filing.
|
•
|
William C. Taylor. Mr. Taylor served as President and Chief Operating Officer from September 2009 until June 30, 2018. On September 20, 2018, the Board of Directors determined that his termination of employment was “for cause.”
|
•
|
Alexandra O. Haden. Ms. Haden served as General Counsel & Secretary from March 2015 until her resignation on August 12, 2019.
|
•
|
I. Mark Landy. Mr. Landy served as Executive Vice President and Chief Strategy Officer from December 5, 2018 until the Company eliminated this role effective September 16, 2019.
|
•
|
Scott M. Turner. Mr. Turner has served as Senior Vice President—Operations & Procurement since December 5, 2018 and continues to serve in such role.
|
Abiomed, Inc.
|
|
Geron Corporation
|
|
Momenta Pharmaceuticals, Inc.
|
Acorda Therapeutics, Inc.
|
|
Halozyme Therapeutics, Inc.
|
|
Newlink Genetics Corp.
|
AMAG Pharmaceuticals, Inc.
|
|
ImmunoGen, Inc.
|
|
OPKO Health, Inc.
|
Array BioPharma, Inc.
|
|
Infinity Pharmaceuticals, Inc.
|
|
Seattle Genetics, Inc.
|
CryoLife, Inc.
|
|
Insulet Corporation
|
|
Spectrum Pharmaceuticals, Inc.
|
DexCom, Inc.
|
|
Insys Therapeutics, Inc.
|
|
Vanda Pharmaceuticals, Inc.
|
Exelixis, Inc
|
|
Ionis Pharmaceuticals, Inc.
|
|
Wright Medical Group, Inc.
|
Genomic Health, Inc.
|
|
Ironwood Pharmaceuticals, Inc.
|
|
|
|
|
2018 Management Incentive Plan Structure
|
|||||||
|
|
Minimum
|
|
Target
|
|
Maximum
|
|||
Revenue (1/3 weight)
|
|
$308,400,000
|
|
$350,500,000
|
|
$375,000,000
|
|||
Payout as % of Target Incentive
|
|
15
|
%
|
|
100
|
%
|
|
200
|
%
|
Adjusted EBITDA (1/3 weight)
|
|
$46,795,000
|
|
$66,850,000
|
|
$66,850,000
|
|||
Payout as % of Target Incentive
|
|
10
|
%
|
|
100
|
%
|
|
n/a
|
|
Individual Objectives (1/3 weight)
|
|
—
|
|
|
—
|
|
|
—
|
|
Payout as % of Target Incentive
|
|
—
|
|
|
100
|
%
|
|
n/a
|
|
•
|
develop financial assumptions and components of five-year strategic plan;
|
•
|
develop 2019 budget;
|
•
|
restate financial statements;
|
•
|
work with external firms to identify, assess, interview and select qualified candidates for senior finance and accounting positions; and
|
•
|
remediate control deficiencies.
|
•
|
hit forecast legal spend through end of year, decrease legal spend overall and develop a framework for managing legal needs going forward;
|
•
|
lead insurance renewal process;
|
•
|
support transition to biologics via intellectual property program; and
|
•
|
support upgrade of sales practices/polices/procedures.
|
•
|
form and lead Internal BLA Launch Team;
|
•
|
define commercialization plans for BLA products;
|
•
|
identify specific pipeline projects for product development; and
|
•
|
lead execution of aspects of five-year strategic plan.
|
•
|
achieve operational metrics;
|
•
|
align monthly sales and operations plan process with financial plan;
|
•
|
define facility plan and costs; and
|
•
|
implement facility plan to support business.
|
•
|
All awards of stock options and awards of restricted stock to current employees were granted and priced as of the close of the business day on which the Committee approved the grant.
|
•
|
All awards of stock options and awards of restricted stock granted to newly-hired employees were granted and priced as of the later of the business day on which the Committee approved such grants or the date of employment.
|
Person Subject to Policy
|
|
Requirement
|
|||
CEO
|
|
|
|
3.0X
|
|
President & COO
|
|
|
|
2.5X
|
|
CFO
|
|
|
|
2.0X
|
|
General Counsel
|
|
|
|
1.5X
|
|
Former
NEO
|
|
Options
Forfeited
|
|
Value on 9/20/2018
at $6.20 per share
|
|
Unvested Restricted
Stock Forfeited
|
|
Value on 9/20/2018
at $6.20 per share
|
|
Total Value
of Equity
Forfeited
|
||
Petit
|
|
2,867,820
|
|
|
$12.1 million
|
|
361,667
|
|
|
$2.2 million
|
|
$14.3 million
|
Senken
|
|
887,107
|
|
|
$3.7 million
|
|
120,368
|
|
|
$0.7 million
|
|
$4.4 million
|
Taylor
|
|
1,558,221
|
|
|
$6.2 million
|
|
229,234
|
|
|
$1.4 million
|
|
$7.6 million
|
TOTAL
|
|
5,313,148
|
|
|
$22.0 million
|
|
711,269
|
|
|
$4.3 million
|
|
$26.3 million
|
Richard J. Barry, Chair (member of the Committee since June 19, 2019)
|
James L. Bierman (member of the Committee since July 23, 2019)
|
Neil S. Yeston (member of the Committee since September 17, 2012)
|
Name and
Principal Position
|
|
Period
|
|
Salary
|
|
Bonus(6)
|
|
Stock(7)
Awards
|
|
Option
Awards
|
|
Non-Equity
Incentive Plan
Compensation
Awards
|
|
All Other(8)
Compensation
|
|
Total
|
David Coles,(1)
Former Interim
Chief Executive Officer
|
|
2018
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
|
$0
|
Edward Borkowski,(2)
EVP and Interim
Chief Financial Officer
|
|
2018
|
|
$363,846
|
|
$150,000
|
|
$0
|
|
$0
|
|
$330,000
|
|
$47,294
|
|
$891,140
|
Alexandra O. Haden(3)
General Counsel and Secretary
|
|
2018
|
|
$418,365
|
|
$0
|
|
$331,224
|
|
$0
|
|
$191,250
|
|
$9,496
|
|
$950,335
|
2017
|
|
$382,673
|
|
$153,231
|
|
$580,300
|
|
$0
|
|
$271,350
|
|
$5,761
|
|
$1,393,315
|
||
2016
|
|
$327,884
|
|
$0
|
|
$267,960
|
|
$0
|
|
$0
|
|
$3,786
|
|
$599,630
|
||
I. Mark Landy,(4)
EVP and
Chief Strategy Officer
|
|
2018
|
|
$327,788
|
|
$100,000
|
|
$199,824
|
|
$0
|
|
$117,250
|
|
$0
|
|
$744,862
|
Scott M. Turner,(5)
SVP, Operations & Procurement
|
|
2018
|
|
$302,788
|
|
$0
|
|
$156,592
|
|
$0
|
|
$108,500
|
|
$9,978
|
|
$577,858
|
(1)
|
The Board appointed Mr. Coles as Interim Chief Executive Officer effective July 2, 2018. The Company paid his employer, A&M, $1,147,751 for Mr. Coles’ services in 2018. Mr. Coles stepped down from his position as of May 13, 2019, when Mr. Wright became the Company’s new Chief Executive Officer.
|
(2)
|
The Board appointed Mr. Borkowski as Interim Chief Financial Officer effective June 6, 2018. He resigned effective November 15, 2019.
|
(3)
|
On August 12, 2019, Ms. Haden resigned from her position as General Counsel and Secretary of the Company.
|
(4)
|
The Board appointed Mr. Landy as Executive Vice President and Chief Strategy Officer effective December 5, 2018. On September 16, 2019, the Company notified Mr. Landy that the position of Chief Strategy Officer was eliminated on such date.
|
(5)
|
The Board designated Mr. Turner as an executive officer on December 5, 2018.
|
(6)
|
The bonus for Mr. Borkowski reflects a one-time cash signing bonus. Mr. Landy received a one-time cash bonus for his outstanding performance.
|
(7)
|
Represents the aggregate grant date fair value of awards of restricted stock made to the executive officer in accordance with FASB ASC Topic 718. The restricted stock awards vest pro rata annually over a three-year period. In addition to their February 2018 grants, Messrs. Landy and Turner received additional equity awards in December when their roles were enlarged as part of a management restructuring.
|
(8)
|
Represents the following amounts: (a) reimbursement for travel expenses for their spouses to attend certain work-related events: Haden—$2,621; Turner—$3,103; (b) 401(k) match: Borkowski, Haden and Turner—each, $6,875; (c) commuting expense between Atlanta and personal residence: Borkowski—$6,040; (d) lodging in Atlanta: Borkowski—$22,099; and (e) automobile lease, Borkowski—$12,280.
|
Name and
Principal Position
|
|
Period
|
|
Salary
|
|
Bonus(4)
|
|
Stock(5)
Awards
|
|
Option
Awards
|
|
Non-Equity
Incentive Plan
Compensation
Awards
|
|
All Other(6)
Compensation
|
|
Total
|
Parker H. “Pete” Petit,(1)
former Chairman and
Chief Executive Officer
|
|
2018
|
|
$457,163
|
|
$0
|
|
$1,283,160
|
|
$0
|
|
$0
|
|
$4,651
|
|
$1,744,974
|
2017
|
|
$639,904
|
|
$318,625
|
|
$1,989,600
|
|
$0
|
|
$731,250
|
|
$0
|
|
$3,679,379
|
||
2016
|
|
$602,904
|
|
$0
|
|
$1,088,080
|
|
$0
|
|
$0
|
|
$2,796
|
|
$1,693,780
|
||
Michael J. Senken,(2)
former
Chief Financial Officer
|
|
2018
|
|
$281,813
|
|
$0
|
|
$410,256
|
|
$0
|
|
$0
|
|
$6,875
|
|
$698,944
|
2017
|
|
$403,462
|
|
$162,275
|
|
$663,200
|
|
$0
|
|
$311,250
|
|
$3,584
|
|
$1,543,771
|
||
2016
|
|
$365,039
|
|
$0
|
|
$324,800
|
|
$0
|
|
$0
|
|
$0
|
|
$689,839
|
||
William C. Taylor,(3)
former President and Chief Operating Officer
|
|
2018
|
|
$376,442
|
|
$0
|
|
$807,192
|
|
$0
|
|
$0
|
|
$11,726
|
|
$1,195,360
|
2017
|
|
$527,962
|
|
$242,745
|
|
$1,243,500
|
|
$0
|
|
$531,375
|
|
$4,825
|
|
$2,550,407
|
||
2016
|
|
$502,170
|
|
$0
|
|
$690,200
|
|
$0
|
|
$0
|
|
$4,086
|
|
$1,196,456
|
(1)
|
Mr. Petit resigned as Chief Executive Officer effective June 30, 2018. On September 20, 2018, the Company announced that the Compensation Committee and the Board determined that his termination would be treated as “for cause.”
|
(2)
|
Mr. Senken resigned as Chief Financial Officer effective June 6, 2018 and continued in a transitional role through June 30, 2018. On September 20, 2018, the Company announced that the Compensation Committee and the Board determined that his termination would be treated as “for cause.”
|
(3)
|
Mr. Taylor resigned as President and Chief Operating Officer effective June 30, 2018. On September 20, 2018, the Company announced that the Compensation Committee and the Board determined that his termination would be treated as “for cause.”
|
(4)
|
Represents a one-time cash bonus, paid in recognition of outstanding performance, and a one-time bonus of restricted share awards. Amount reported for restricted share awards is grant date fair value.
|
(5)
|
Represents the aggregate grant date fair value of awards of restricted stock made to the executive officer in accordance with FASB ASC Topic 718. The restricted stock awards vest pro rata annually over a three-year period. See the “Forfeited Awards Table” as all of the restricted stock awards granted in 2018 were forfeited.
|
(6)
|
Represents the following amounts: for 2018: (a) reimbursement for travel expenses for their spouses to attend certain work-related events: Petit—$4,651; Taylor—$4,851; and (b) 401(k) match: Senken—$6,875; Taylor—$6,875.
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1)
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(2)
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
|
|
Exercise
or Base
Price of
Option
Awards
|
|
Grant
Date Fair
Value of
Stock and
Option
Awards(3)
|
||||||||
Name
|
|
Grant
Date
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
|||||||||||
Coles
|
|
—
|
|
|
$0
|
|
$0
|
|
$0
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$0
|
Borkowski
|
|
4/3/2018
|
|
|
$27,500
|
|
$330,000
|
|
$660,000
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$0
|
Haden
|
|
2/22/2018
|
|
|
$15,938
|
|
$191,250
|
|
$382,500
|
|
37,300
|
|
|
—
|
|
|
—
|
|
|
$331,224
|
Landy
|
|
2/22/2018
|
|
|
$9,771
|
|
$117,250
|
|
$234,500
|
|
17,300
|
|
|
—
|
|
|
—
|
|
|
$153,624
|
|
|
12/11/2018
|
|
|
$0
|
|
$0
|
|
$0
|
|
30,000
|
|
|
—
|
|
|
—
|
|
|
$46,200
|
Turner
|
|
2/22/2018
|
|
|
$9,042
|
|
$108,500
|
|
$217,000
|
|
15,900
|
|
|
—
|
|
|
—
|
|
|
$141,192
|
|
|
12/11/2018
|
|
|
$0
|
|
$0
|
|
$0
|
|
10,000
|
|
|
—
|
|
|
—
|
|
|
$15,400
|
(1)
|
For Non-Equity Incentive Plan Awards, these columns show the range of possible cash payouts that could have been earned by each of the NEOs under the 2018 MIP. “Threshold” represents the lowest possible payout if there is a payout and “Maximum” reflects the highest possible payout. In 2018, threshold performance would have resulted in a 15% payout of the revenue portion, a 10% payout of the Adjusted EBITDA portion and a 0% payout of the individual performance portion of the award.
|
(2)
|
Represents restricted stock awards granted under the 2016 Plan. The restricted shares vest ratably over three years from the grant date.
|
(3)
|
The amounts shown reflect the grant date fair market values of the awards computed in accordance with FASB ASC Topic 718—“Compensation-Stock compensation.”
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1)
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(2)
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
|
|
Exercise
or Base
Price of
Option
Awards
|
|
Grant
Date Fair
Value of
Stock and
Option
Awards(3)
|
|||||||
Name
|
|
Grant
Date
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
||||||||||
Petit
|
|
2/22/2018
|
|
$73,219
|
|
$532,500
|
|
$1,065,000
|
|
144,500
|
|
|
—
|
|
|
—
|
|
|
$1,283,160
|
Senken
|
|
2/22/2018
|
|
$30,250
|
|
$220,000
|
|
$440,000
|
|
46,200
|
|
|
—
|
|
|
—
|
|
|
$410,256
|
Taylor
|
|
2/22/2018
|
|
$53,625
|
|
$390,000
|
|
$780,000
|
|
90,900
|
|
|
—
|
|
|
—
|
|
|
$807,192
|
(1)
|
For Non-Equity Incentive Plan Awards, these columns show the range of possible cash payouts that could have been earned by each of the NEOs under the 2018 MIP. “Threshold” represents the lowest possible payout if there is a payout and “Maximum” reflects the highest possible payout. In 2018, threshold performance would have resulted in a 15% payout of the revenue portion and a 10% payout of the Adjusted EBITDA portion of the award. Importantly, although the non-equity incentive plan awards were granted to Messrs. Petit, Senken and Taylor in February 2018, none of them actually received these awards for 2018 given the “for cause” termination finding in September 2018.
|
(2)
|
Represents restricted stock awards granted under the 2016 Plan. The restricted shares vest ratably over three years from the grant date. See the “Forfeited Awards Table” as the 2018 awards have been forfeited.
|
(3)
|
The amounts shown reflect the grant date fair market values of the awards computed in accordance with FASB ASC Topic 718—“Compensation-Stock compensation.”
|
|
|
Option Awards
|
|
Stock Awards
|
|||||||||||||
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Option
Exercise
Price
|
|
Option
Expiration
Date
|
|
Number of
Securities
Unvested
|
|
|
|
Market
Value
of Unvested
Securities(11)
|
|||
Coles
|
|
—
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
Borkowski
|
|
—
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
Haden
|
|
60,000
|
|
|
|
|
$6.02
|
|
7/16/2023
|
|
|
|
|
|
|
||
|
|
20,350
|
|
|
|
|
$7.24
|
|
2/25/2024
|
|
|
|
|
|
|
||
|
|
20,000
|
|
|
|
|
$5.84
|
|
4/24/2024
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
11,000
|
|
|
(1)
|
|
$19,690
|
||
|
|
|
|
|
|
|
|
|
|
46,667
|
|
|
(6)
|
|
$83,534
|
||
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
(8)
|
|
$8,950
|
||
|
|
|
|
|
|
|
|
|
|
37,300
|
|
|
(9)
|
|
$66,767
|
||
Landy
|
|
—
|
|
|
—
|
|
|
|
|
|
|
9,334
|
|
|
(3)
|
|
$16,708
|
|
|
|
|
|
|
|
|
|
|
2,334
|
|
|
(5)
|
|
$4,178
|
||
|
|
|
|
|
|
|
|
|
|
16,667
|
|
|
(6)
|
|
$29,834
|
||
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
(7)
|
|
$7,160
|
||
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
(8)
|
|
$8,950
|
||
|
|
|
|
|
|
|
|
|
|
17,300
|
|
|
(9)
|
|
$30,967
|
||
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
(10)
|
|
$53,700
|
||
Turner
|
|
—
|
|
|
—
|
|
|
|
|
|
|
5,000
|
|
|
(2)
|
|
$8,950
|
|
|
|
|
|
|
|
|
|
|
1,167
|
|
|
(4)
|
|
$2,089
|
||
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
(6)
|
|
$35,800
|
||
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
(8)
|
|
$3,580
|
||
|
|
|
|
|
|
|
|
|
|
15,900
|
|
|
(9)
|
|
$28,461
|
||
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
(10)
|
|
$17,900
|
(1)
|
The remaining balance vested on February 22, 2019.
|
(2)
|
The remaining balance vested on April 25, 2019.
|
(3)
|
The remaining balance vested on July 25, 2019.
|
(4)
|
The remaining balance vested on October 26, 2019.
|
(5)
|
The remaining balance vested and on December 14, 2019.
|
(6)
|
An installment vested on February 22, 2019 and the remaining balance vested on February 22, 2020.
|
(7)
|
An installment vested on July 26, 2019 and the remaining balance was scheduled to vest on July 26, 2020.
|
(8)
|
An installment vested on October 26, 2019 and the remaining balance was scheduled to vest on October 26, 2020.
|
(9)
|
Installments vested on February 22, 2019 and February 22, 2020, and the remaining balance was scheduled to vest on 2021.
|
(10)
|
An installment vested on December 11, 2019, and the remaining balance was scheduled to vest December 11, 2020 and 2021.
|
(11)
|
Calculated based on a closing stock price of $1.79 per share on December 31, 2018.
|
|
|
|
Option Awards
|
|
Stock Awards
|
||||||||
Name
|
|
|
Number of
Securities
Acquired on
Exercise
|
|
Value
Realized
on Exercise
|
|
Number of
Securities
Acquired on
Vesting
|
|
Value
Realized
on Vesting(1)
|
||||
Coles
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Borkowski
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Haden
|
|
|
—
|
|
|
—
|
|
|
43,509
|
|
|
$366,016
|
|
Landy
|
|
|
—
|
|
|
—
|
|
|
24,499
|
|
|
$140,775
|
|
Turner
|
|
|
—
|
|
|
—
|
|
|
17,167
|
|
|
$141,398
|
(1)
|
Represents the number of shares acquired on vesting multiplied by the closing price of Company common stock on the vesting date.
|
|
|
|
Option Awards
|
|
Stock Awards
|
|||||||
Name
|
|
|
Number of
Securities Acquired on Exercise |
|
Value
Realized on Exercise |
|
Number of
Securities Acquired on Vesting |
|
Value
Realized on Vesting(1) |
|||
Petit
|
|
|
—
|
|
|
—
|
|
|
162,183
|
|
|
$1,400,793
|
Senken
|
|
|
—
|
|
|
—
|
|
|
50,507
|
|
|
$437,469
|
Taylor
|
|
|
20,000
|
|
|
$112,400
|
|
102,345
|
|
|
$883,611
|
(1)
|
Represents the number of shares acquired on vesting multiplied by the closing price of Company common stock on the vesting date. Because the vesting date of the restricted stock awards is the anniversary of the date of grant, which is in the first quarter, restricted stock awards vested in 2018 prior to the September 20, 2018 “for cause” termination.
|
Executive
|
|
Involuntary
Without
Cause or
for Good Reason
|
|
|
|
Involuntary
or for Good
Reason with
Change in
Control
|
|
|
|
Death or
Disability
|
|
|
Coles
|
|
|
|
|
|
|
|
|
|
|
|
|
cash severance
|
|
$0
|
|
|
|
$0
|
|
|
|
$0
|
|
|
estimated benefits
|
|
$0
|
|
|
|
$0
|
|
|
|
$0
|
|
|
estimated value of accelerated equity awards
|
|
$0
|
|
|
|
$0
|
|
|
|
$0
|
|
|
Borkowski
|
|
|
|
|
|
|
|
|
|
|
|
|
cash severance
|
|
$2,380,000
|
|
(1)(5)
|
|
$3,040,000
|
|
(1)(2)(5)
|
|
$0
|
|
|
estimated benefits
|
|
$15,583
|
|
(3)
|
|
$27,270
|
|
(2)(3)
|
|
$0
|
|
|
estimated value of accelerated equity awards
|
|
$0
|
|
|
|
$0
|
|
|
|
$0
|
|
|
Haden
|
|
|
|
|
|
|
|
|
|
|
|
|
cash severance
|
|
$0
|
|
|
|
$616,250
|
|
(1)(2)
|
|
$0
|
|
|
estimated benefits
|
|
$0
|
|
|
|
$5,194
|
|
(2)(3)
|
|
$0
|
|
|
estimated value of accelerated equity awards
|
|
$0
|
|
|
|
$178,941
|
|
(4)
|
|
$178,941
|
|
(4)
|
Landy
|
|
|
|
|
|
|
|
|
|
|
|
|
cash severance
|
|
$616,250
|
|
(1)
|
|
$924,375
|
|
(1)(2)
|
|
$0
|
|
|
estimated benefits
|
|
$42
|
|
(3)
|
|
$63
|
|
(2)(3)
|
|
$0
|
|
|
estimated value of accelerated equity awards
|
|
$0
|
|
|
|
$151,497
|
|
(4)
|
|
$151,497
|
|
(4)
|
Turner
|
|
|
|
|
|
|
|
|
|
|
|
|
cash severance
|
|
$238,000
|
|
(1)
|
|
$0
|
|
|
|
$0
|
|
|
estimated benefits
|
|
$7,791
|
|
(3)
|
|
$0
|
|
|
|
$0
|
|
|
estimated value of accelerated equity awards
|
|
$0
|
|
|
|
$96,780
|
|
(4)
|
|
$96,780
|
|
(4)
|
(1)
|
Includes (a) annual base salary as of December 31, 2018, plus (b) annual targeted bonus for the year ended December 31, 2018, times the multiple applicable to the NEO.
|
(2)
|
Payable only in the event the executive’s employment is terminated without cause or for “good reason” within three years following a change in control.
|
(3)
|
Includes (a) the estimated value of medical, dental, vision and life insurance, plus (b) the employer’s cost of FICA for the duration of the severance period.
|
(4)
|
Includes the value of (a) unvested stock options as of December 31, 2018 that are in-the-money based on the December 31, 2018 closing stock price of $1.79, plus (b) unvested restricted stock based on the December 31, 2018 stock price, the vesting of which is deemed accelerated to December 31, 2018.
|
(5)
|
Also includes $1.5 million pursuant to a letter agreement with Mr. Borkowski when he first joined the Company. With respect to two promised restricted stock grants, the agreement provided that he would receive a lump sum payment of $750,000 if one grant was not made before his termination, and another lump sum payment of $750,000 if one-third of the other grant did not vest before his termination. As of December 31, 2018, the Company had not made either grant.
|
(6)
|
On August 12, 2019, Ms. Haden resigned from her position as General Counsel and Secretary of the Company. On August 27, 2019, the Company and Ms. Haden entered into a consulting agreement, pursuant to which Ms. Haden will provide up to 40 hours of consulting services per month through February 29, 2020 and has executed a release of claims in favor of the Company and its affiliates. The Company will compensate Ms. Haden at the rate of $8,000 per month and will provide nine months’ severance ($476,250).
|
(7)
|
On September 16, 2019, the Company notified Mr. Landy that the position of Chief Strategy Officer was eliminated on such date.
|
|
|
Chairman
|
|
Non-Chair
Member
|
Board
|
|
$71,000
|
|
$42,000
|
Audit Committee
|
|
$21,000
|
|
$11,000
|
Compensation Committee
|
|
$16,000
|
|
$8,500
|
Nominating and Corporate Governance
|
|
$11,000
|
|
$6,000
|
Science and Research Liaison
|
|
$15,000
|
|
n/a
|
Ethics and Compliance Committee
|
|
$12,500
|
|
$6,500
|
Special Litigation Committee
|
|
$15,000
|
|
$7,500
|
Name
|
|
Year
|
|
Fees Earned or
Paid in Cash
|
|
Stock Awards(1)
|
|
Total
|
Luis A. Aguilar(2)
|
|
2018
|
|
$64,042
|
|
—
|
|
$64,042
|
Joseph G. Bleser(3)
|
|
2018
|
|
$70,875
|
|
—
|
|
$70,875
|
J. Terry Dewberry
|
|
2018
|
|
$69,000
|
|
—
|
|
$69,000
|
Charles R. Evans
|
|
2018
|
|
$97,167
|
|
—
|
|
$97,167
|
Bruce L. Hack(3)
|
|
2018
|
|
$48,000
|
|
—
|
|
$48,000
|
Charles E. Koob
|
|
2018
|
|
$42,000
|
|
—
|
|
$42,000
|
Larry W. Papasan(4)
|
|
2018
|
|
$61,500
|
|
—
|
|
$61,500
|
Neil S. Yeston
|
|
2018
|
|
$66,167
|
|
—
|
|
$66,167
|
(1)
|
The following directors had stock options outstanding as of December 31, 2018: Bleser, Dewberry and Hack—each with 110,000; Papasan—87,000; Koob—75,000; and Evans and Yeston—each with 60,000. The following directors had stock unvested restricted stock outstanding as of December 31, 2018: Aguilar—14,574.
|
(2)
|
Mr. Aguilar resigned from the Board on September 19, 2019.
|
(3)
|
Mr. Bleser's and Mr. Hack's terms expired at the 2018 Annual Meeting.
|
(4)
|
Mr. Papasan resigned from the Board following the 2018 Annual Meeting on June 17, 2019.
|
Plan Category
|
|
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
|
|
Weighted average
exercise price of
outstanding options,
warrants and rights
|
|
Number of securities
remaining available
for future issuance
under equity
compensation plans
|
||
Equity compensation plans
approved by security holders
|
|
3,697,147
|
|
|
$4.59
|
|
7,671,401
|
|
Equity compensation plans
not approved by security holders
|
|
—
|
|
|
$0
|
|
—
|
|
Total
|
|
3,697,147
|
|
|
$4.59
|
|
7,671,401
|
|
Name of Beneficial Owner
|
|
Number of
Shares(1)
|
|
|
|
Percentage
Ownership(1)
|
|
Prescience Investment Group, LLC(2)
|
|
7,618,335
|
|
|
|
|
6.7%
|
Group One Trading, LP(3)
|
|
6,379,103
|
|
|
|
|
5.6%
|
|
|
|
|
|
|
|
|
NEOs, Executive Officers, and Directors(1)
|
|
Number of
Shares(1)
|
|
|
|
Percentage
Ownership(1)
|
|
Richard J. Barry(4)
|
|
3,300,000
|
|
|
|
|
2.8%
|
M. Kathleen Behrens, Ph.D.(4)
|
|
—
|
|
|
|
|
*
|
James L. Bierman(4)
|
|
—
|
|
|
|
|
*
|
Edward J. Borkowski(5)
|
|
21,194
|
|
|
|
|
*
|
Peter M. Carlson(6)
|
|
49,295
|
|
|
|
|
*
|
David Coles(7)
|
|
—
|
|
|
|
|
*
|
J. Terry Dewberry(8)(9)
|
|
187,126
|
|
|
|
|
*
|
Charles R. Evans(9)(10)
|
|
125,460
|
|
|
|
|
*
|
Mark P. Graves(11)
|
|
48,098
|
|
|
|
|
*
|
Alexandra O. Haden(12)
|
|
254,854
|
|
|
|
|
*
|
William F. Hulse IV(13)
|
|
—
|
|
|
|
|
*
|
Charles E. Koob(9)(14)
|
|
1,520,628
|
|
|
|
|
1.3%
|
I. Mark Landy(15)
|
|
33,529
|
|
|
|
|
*
|
K. Todd Newton(4)
|
|
—
|
|
|
|
|
*
|
Parker H. Petit(16)
|
|
4,325,595
|
|
|
|
|
3.7%
|
Michael J. Senken(17)
|
|
150,162
|
|
|
|
|
*
|
Scott M. Turner
|
|
109,910
|
|
|
|
|
*
|
Timothy R. Wright
|
|
681,818
|
|
|
|
|
*
|
Neil S. Yeston(9)(18)
|
|
130,460
|
|
|
|
|
*
|
Total Directors and Executive Officers(19) (14 persons)
|
|
6,173,989
|
|
|
|
|
5.3%
|
*
|
Less than 1%
|
(1)
|
The beneficial ownership set forth in the table is determined in accordance with SEC rules. The percentage of beneficial ownership is based on 110,545,275 shares of Company common stock outstanding on March 3, 2020, plus 2,643,882 share deemed outstanding pursuant to Rule 13d-3 under the Exchange Act.
|
(2)
|
On May 30, 2019, Prescience Investment Group, LLC filed an amendment to its Schedule 13D indicating shared voting power and dispositive power over 7,618,335 shares, shared voting power and dispositive power over 4,888,652 shares by Prescience Partners, LP, shared voting power and dispositive power over 1,845,539 shares by Prescience Point Special Opportunity LP, and shared voting power and dispositive power over 6,734,191 shares by Prescience Capital, LLC. The address for Prescience Investment Group, LLC is 1670 Lobdell Avenue, Suite 200, Baton Rouge, LA 70806.
|
(3)
|
According to the most recent Schedule 13G filed with the SEC on January 31, 2019, Group One Trading, LP had sole voting and dispositive power with respect to 6,379,103 shares. The address for Group One Trading, LP is 440 South LaSalle St, Ste. 3232, Chicago, IL 60605.
|
(4)
|
Does not includes restricted stock units granted on October 22, 2019 with a value of $225,000 which will be settled in common stock based on a stock price determined after the 2019 annual meeting of shareholders and after the Company becomes current in its reporting obligations.
|
(5)
|
Mr. Borkowski resigned as Executive Vice President and Interim Chief Financial Officer effective November 15, 2019. He continues to serve as principal financial officer and principal accounting officer.
|
(6)
|
Mr. Carlson joined the Company as Executive Vice President, Finance, on December 16, 2019.
|
(7)
|
Mr. Coles served as Interim Chief Executive Officer until May 13, 2019.
|
(8)
|
Includes 60,000 shares issuable upon the exercise of options.
|
(9)
|
Does not includes restricted stock units granted on October 22, 2019 with a value of $175,000 which will be settled in common stock based on a stock price determined after the 2019 annual meeting of shareholders and after the Company becomes current in its reporting obligations.
|
(10)
|
Includes 60,000 shares issuable upon the exercise of options.
|
(11)
|
Includes 44,558 shares of restricted stock subject to forfeiture.
|
(12)
|
On July 31, 2019, Alexandra O. Haden resigned as General Counsel and Secretary effective August 12, 2019. Includes 53,201 shares of unvested restricted stock, 3,300 shares owned by Ms. Haden’s spouse and 100,350 shares issuable upon the exercise of options.
|
(13)
|
Mr. Hulse joined the Company as General Counsel on December 2, 2019.
|
(14)
|
Includes 1,375,627 shares held by a trust and 60,000 shares issuable upon the exercise of options.
|
(15)
|
The Company eliminated Mr. Landy's position of Chief Strategy Officer effective September 16, 2019.
|
(16)
|
Based on the Schedule 14A filed by the Petit Group on April 11, 2019. Mr. Petit resigned as Chief Executive Officer effective June 30, 2018. Mr. Petit’s address is 1650 Cox Road, Roswell, Georgia 30075.
|
(17)
|
Mr. Senken resigned as Chief Financial Officer effective June 6, 2018. Number of shares based solely on record ownership, and includes 50,000 shares jointly owned by Mr. Senken's spouse. Mr. Senken’s address is 145 Inwood Terrace, Roswell, GA 30075.
|
(18)
|
Includes 60,000 shares issuable upon the exercise of options.
|
(19)
|
Represents the ownership of only those persons currently serving as a director or executive officer of the Company.
|
•
|
Whether the terms of the transaction are fair to the Company and at least as favorable to the Company as would apply if the transaction did not involve a related party;
|
•
|
Whether there are demonstrable business reasons for the Company to enter into the transaction;
|
•
|
Whether the transaction would impair the independence of an outside director; and
|
•
|
Whether the transaction would present an improper conflict of interest for any director or executive officer, taking into account the size of the transaction, the direct or indirect nature of the related party’s interest in the transaction and the ongoing nature of any proposed relationship, and any other factors the Audit Committee deems relevant.
|
Type of Fee
|
Year Ended(1)
December 31, 2018
|
|
Year Ended(1)
December 31, 2017
|
|
Year Ended(1)
December 31, 2016
|
Audit Fees(2)
|
$2,433,333
|
|
$2,433,333
|
|
$2,433,333
|
Audit-Related Fees(3)
|
$21,400
|
|
$0
|
|
$0
|
Tax Fees
|
$0
|
|
$0
|
|
$0
|
All Other Fees
|
$0
|
|
$0
|
|
$0
|
(1)
|
The Company engaged BDO in 2019 to audit its financial statements for years ended December 31, 2018, 2017, and 2016. Total fees incurred by BDO are estimated to be $7.3 million and were and apportioned equally to each of the three years. The Company paid or incurred these fees in 2019.
|
(2)
|
This category includes fees for the audit of the Company’s annual financial statements and review of financial statements included in its quarterly reports on Form 10-Q.
|
(3)
|
This relates to BDO’s audit of the Company’s 401(k) plan.
|
(a)
|
Documents filed as part of this report:
|
(1)
|
Financial Statements
|
(2)
|
Financial Statement Schedule:
|
(3)
|
Exhibits
|
(b)
|
Exhibits
|
Exhibit
Number
|
|
Description
|
2.1##
|
|
Agreement and Plan of Merger dated January 10, 2016 by and among MiMedx Group, Inc., Titan Acquisition Sub I, Inc., Titan Acquisition Sub II, LLC, Stability Inc., certain stockholders of Stability Inc. and Brian Martin as representative of the Stability stockholders (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K filed on January 13, 2016).
|
2.2##
|
|
Membership Interest Purchase Agreement dated August 18, 2017 by and among MiMedx Group, Inc. Stability Biologics, LLC, each person that, as of January 13, 2016, was a stockholder of Stability Inc. and Brian Martin as stockholder representative (incorporated by reference to Exhibit 2.1 to the Registrant’s 8-K filed on August 18, 2017).
|
3.1
|
|
Articles of Incorporation, together with Articles of Amendment effective each of May 14, 2010; August 8, 2012, November 8, 2012; and May 15, 2015 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-K filed on March 1, 2017).
|
3.2
|
|
Articles of Amendment to the Articles of Incorporation effective November 6, 2018 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-A filed on November 7, 2018).
|
3.3
|
|
Bylaws of MiMedx Group, Inc., as amended and restated as of October 3, 2018 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on October 4, 2018).
|
4.1
|
|
The description of the Registrant’s Common Stock, $0.001 par value per share (incorporated by reference to the Registration Statement on Form 8-A (Registration No. 001-35887) filed on April 22, 2013).
|
10.1
|
|
Technology License Agreement dated January 29, 2007 between MiMedx, Inc., Shriners Hospitals for Children and University of South Florida Research Foundation (incorporated by reference to Exhibit 10.32 to the Registrant’s Form 8-K filed on February 8, 2008).
|
10.2
|
|
Lease effective May 1, 2013 between Hub Properties of GA, LLC and MiMedx Group, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed on May 10, 2013).
|
10.3
|
|
First Amendment to Lease dated March 7, 2017 between CPVF II West Oak LLC (as successor in interest to HUB Properties of GA, LLC) and MiMedx Group, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on March 13, 2017).
|
10.4#
|
|
Second Amendment to Lease made as of August 29, 2018 for real property and improvements located at 1775 West Oak Commons Court, Marietta, Georgia between RE Fields, LLC, successor in interest to HUB Properties GA, LLC, and CPVF II West Oak LLC, and MiMedx Group, Inc., dated January 25, 2013, as amended March 7, 2017.
|
10.5*
|
|
MiMedx Group, Inc. Assumed 2006 Stock Incentive Plan, as amended and restated effective February 25, 2014 (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on March 3, 2014).
|
10.6*
|
|
Form of Incentive Stock Option Agreement under the MiMedx Group, Inc. Assumed 2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-K filed on March 4, 2014).
|
10.7*
|
|
Form of Nonqualified Stock Option Agreement under the MiMedx Group, Inc. Assumed 2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Form 10-K filed on March 4, 2014).
|
10.8*
|
|
Form of Restricted Stock Agreement for Non-Employee Directors under the MiMedx Group, Inc. 2006 Assumed Stock Incentive Plan (incorporated by reference to Exhibit 10.66 to the Registrant’s Form 10-Q filed on August 8, 2013).
|
10.9*
|
|
Form of Restricted Stock Agreement under the MiMedx Group, Inc. 2006 Assumed Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-K filed on March 4, 2014).
|
10.10*
|
|
2016 Equity and Cash Incentive Plan (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on April 12, 2016).
|
10.11*
|
|
Form of Incentive Stock Option Agreement under the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q filed on August 2, 2016).
|
10.12*
|
|
Form of Restricted Stock Agreement under the MiMedx Group, Inc 2016 Equity and Cash Incentive Plan (for shares not registered under the Securities Act of 1933) (incorporated by reference to Exhibit 10.9 to the Registrant’s Form 8-K filed on May 30, 2019).
|
10.13*
|
|
Form of Restricted Stock Agreement under the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q filed on August 2, 2016).
|
10.14*
|
|
Form of Restricted Stock Agreement for Non-Employee Directors under the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 8-K filed on May 30, 2019).
|
10.15*
|
|
Form of Nonqualified Stock Option Agreement under the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q filed on August 2, 2016).
|
10.16*#
|
|
|
10.17*
|
|
2016 Management Incentive Plan (incorporated by reference to Exhibit 10.13 to the Registrant’s Form 8-K filed on May 30, 2019).
|
10.18*
|
|
2017 Management Incentive Plan (incorporated by reference to Exhibit 10.14 to the Registrant’s Form 8-K filed on May 30, 2019).
|
Exhibit
Number
|
|
Description
|
10.19*#
|
|
|
10.20*
|
|
Change in Control Severance Compensation and Restrictive Covenant Agreement dated November 11, 2011 between MiMedx Group, Inc. and Parker H. Petit (incorporated by reference to Exhibit 10.91 to the Registrant’s Form 10-Q filed on November 14, 2011).
|
10.21*
|
|
Change in Control Severance Compensation and Restrictive Covenant Agreement dated November 11, 2011 between MiMedx Group, Inc. and with William C. Taylor (incorporated by reference to Exhibit 10.92 to the Registrant’s Form 10-Q filed on November 14, 2011).
|
10.22*
|
|
First Amendment to Change in Control Severance Compensation and Restrictive Covenant Agreement dated May 9, 2013 between MiMedx Group, Inc. and William C. Taylor (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on May 15, 2013).
|
10.23*
|
|
Change in Control Severance Compensation and Restrictive Covenant Agreement dated November 11, 2011 between MiMedx Group, Inc. and Michael J. Senken (incorporated by reference to Exhibit 10.93 to the Registrant’s Form 10-Q filed on November 14, 2011).
|
10.24*
|
|
First Amendment to Change in Control Severance Compensation and Restrictive Covenant Agreement dated May 9, 2013 between MiMedx Group, Inc. and Michael J. Senken (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on May 15, 2013).
|
10.25*
|
|
Change in Control Severance Compensation and Restrictive Covenant Agreement dated May 20, 2016 between MiMedx Group, Inc. and Alexandra O. Haden (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on May 25, 2016).
|
10.26*#
|
|
Consulting Agreement with Alexandra O. Haden dated August 27, 2019.
|
10.27*
|
|
Employment Offer Letter dated April 3, 2018 between MiMedx Group, Inc. and Edward Borkowski (incorporated by reference to Exhibit 10.22 to the Registrant’s Form 8-K filed on May 30, 2019).
|
10.28*
|
|
Change in Control Severance Compensation and Restrictive Covenant Agreement between MiMedx Group, Inc. and Edward J. Borkowski (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K/A filed on June 25, 2018).
|
10.29*
|
|
Form of Change in Control Severance Compensation and Restrictive Covenant Agreement (incorporated by reference to Exhibit 10.24 to the Registrant’s Form 8-K filed on May 30, 2019).
|
10.30*
|
|
Form of (Non-change in Control) Executive Severance Agreement (incorporated by reference to Exhibit 10.25 to the Registrant’s Form 8-K filed on May 30, 2019).
|
10.31*
|
|
Separation and Transition Services Agreement, dated as of November 15, 2019, between MiMedx Group, Inc. and Edward J. Borkowski (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed November 20, 2019).
|
10.32*
|
|
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.65 to the Registrant’s Form 8-K filed July 15, 2008).
|
10.33*
|
|
Form of Employee Inventions and Assignment Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K/A filed on June 12, 2018).
|
10.34*
|
|
Form of Confidentiality and Non-Solicitation Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K/A filed on June 12, 2018).
|
10.35*
|
|
Form of Non-Competition Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K/A filed on June 12, 2018).
|
10.36*
|
|
Engagement Letter dated July 2, 2018 between MiMedx Group, Inc. and Alvarez & Marsal North America, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K/A filed on July 11, 2018).
|
10.37*
|
|
Letter Agreement dated April 10, 2019 between MiMedx Group, Inc. and Timothy R. Wright (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on May 9, 2019).
|
10.38*
|
|
Cooperation Agreement dated as of May 29, 2019 among MiMedx Group, Inc., M. Kathleen Behrens Wilsey, K. Todd Newton, Richard J. Barry, Prescience Partners, LP, Prescience Point Special Opportunity LP, Prescience Capital LLC, Prescience Investment Group, LLC d/b/a Prescience Point Capital Management LLC and Eiad Asbahi (incorporated by reference to Exhibit 10.32 to the Registrant’s Form 8-K filed on May 30, 2019).
|
10.39##
|
|
Loan Agreement, dated June 10, 2019, by and between MiMedx Group, Inc., the other guarantors party thereto, the lenders party thereto and Blue Torch Finance LLC, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to Form 8-K Filed June 11, 2019).
|
16.1
|
|
Letter from Cherry Bekaert LLP dated August 9, 2017 (incorporated by reference to Exhibit 16.1 to Current Report on Form 8-K filed August 10, 2017).
|
16.2
|
|
Letter from Ernst & Young LLP dated December 7, 2018 (incorporated by reference to Exhibit 16.1 to Current Report on Form 8-K filed December 7, 2018).
|
21.1#
|
|
|
23.1#
|
|
Exhibit
Number
|
|
Description
|
24.1#
|
|
Power of Attorney (included on the signature page to this Report).
|
31.1#
|
|
|
31.2#
|
|
|
32.1#
|
|
|
32.2#
|
|
|
101.INS#
|
|
XBRL Instance Document
|
101.SCH#
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL#
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF#
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB#
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE#
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Indicates a management contract or compensatory plan or arrangement
|
#
|
Filed herewith
|
##
|
Certain exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K, but a copy will be furnished supplementally to the Securities and Exchange Commission upon request.
|
March 17, 2020
|
MIMEDX GROUP, INC.
|
|
|
|
|
|
By:
|
/s/ Edward J. Borkowski
|
|
|
Edward J. Borkowski
|
|
|
Acting Chief Financial Officer
|
Signature / Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Timothy R. Wright
|
|
Chief Executive Officer and Director
|
|
March 17, 2020
|
Timothy R. Wright
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Edward J. Borkowski
|
|
Acting Chief Financial Officer
|
|
March 17, 2020
|
Edward J. Borkowski
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
|
|
/s/ M. Kathleen Behrens
|
|
Chair of the Board (Director)
|
|
March 17, 2020
|
M. Kathleen Behrens
|
|
|
|
|
|
|
|
|
|
/s/ Richard J. Barry
|
|
Director
|
|
March 17, 2020
|
Richard J. Barry
|
|
|
|
|
|
|
|
|
|
/s/ James L. Bierman
|
|
Director
|
|
March 17, 2020
|
James L. Bierman
|
|
|
|
|
|
|
|
|
|
/s/ J. Terry Dewberry
|
|
Director
|
|
March 17, 2020
|
J. Terry Dewberry
|
|
|
|
|
|
|
|
|
|
/s/ Charles R. Evans
|
|
Director
|
|
March 17, 2020
|
Charles R. Evans
|
|
|
|
|
|
|
|
|
|
/s/ Charles E. Koob
|
|
Director
|
|
March 17, 2020
|
Charles E. Koob
|
|
|
|
|
|
|
|
|
|
/s/ K. Todd Newton
|
|
Director
|
|
March 17, 2020
|
K. Todd Newton
|
|
|
|
|
|
|
|
|
|
/s/ Neil Yeston
|
|
Director
|
|
March 17, 2020
|
Neil Yeston
|
|
|
|
|
I.
|
Purpose
|
1.
|
To increase shareholder value.
|
2.
|
To achieve and exceed the MiMedx 2018 Business Plan.
|
3.
|
To reward key individuals for demonstrated performance that is sustained throughout the year.
|
4.
|
To enhance the Company’s ability to be competitive in the marketplace for executive talent, and to attract, retain and motivate a high-performing and high-potential management team.
|
II.
|
MIP Program Period
|
III.
|
MIP Participation and Eligibility
|
IV.
|
MIP Administration
|
V.
|
MIP Incentive Determination and Payment
|
VI.
|
MIP Participants
|
VII.
|
MIP Method of Calculation
|
◦
|
Adjusted EBITDA < $46,794,999 (Level 1) = no incentive earned for Adjusted EBITDA component; however, incentives for Revenue and Individual Objectives can be earned
|
◦
|
Adjusted EBITDA at $46,795,000 (Level 1) = 10% of Adjusted EBITDA target bonus (plus earned Revenue and earned Individual Objectives)
|
◦
|
Adjusted EBITDA at $52,140,000 (Level 2) = 25% of Adjusted EBITDA target bonus (plus earned Revenue and earned Individual Objectives)
|
◦
|
Adjusted EBITDA at $56,820,000 (Level 3) = 50% of Adjusted EBITDA target bonus (plus earned Revenue and earned Individual Objectives)
|
◦
|
Adjusted EBITDA at $60,830,000 (Level 4) = 75% of Adjusted EBITDA target bonus (plus earned Revenue and earned Individual Objectives)
|
◦
|
Adjusted EBITDA at $64,180,000 (Level 5) = 90% of Adjusted EBITDA target bonus (plus earned Revenue and earned Individual Objectives)
|
◦
|
Adjusted EBITDA at $66,850,000 (Level 6) = 100% of Adjusted EBITDA target bonus (plus earned Revenue and earned Individual Objectives)
|
◦
|
Adjusted EBITDA >$66,850,000 ( Level 6) = 100% of Adjusted EBITDA target bonus (plus earned Revenue and earned Individual Objectives)
|
§
|
For Adjusted EBITDA performance greater that the Adjusted EBITDA target, an Excess Bonus may only be funded based upon Revenue performance greater than 100% of revenue target as described below.
|
◦
|
Revenue < $308,399,999 (Level 1) = no incentive earned for Revenue component; however, incentives for Adjusted EBITDA and Individual Objectives can be earned
|
◦
|
Revenue at $308,400,000 (Level 1) = 15% of Revenue target bonus (plus earned Adjusted EBITDA and earned Individual Objectives)
|
◦
|
Revenue at $329,500,000 (Level 2) = 40% of Revenue target bonus (plus earned Adjusted EBITDA and earned Individual Objectives)
|
◦
|
Revenue at $336,500,000 (Level 3) = 60% of Revenue target bonus (plus earned Adjusted EBITDA and earned Individual Objectives )
|
◦
|
Revenue at $343,500,000 (Level 4) = 80% of Revenue target bonus (plus earned Adjusted EBITDA and earned Individual Objectives )
|
◦
|
Revenue at $347,000,000 (Level 5) = 90% of Revenue target bonus (plus earned Adjusted EBITDA and earned Individual Objectives )
|
◦
|
Revenue at $350,500,000 (Level 6) = 100% of Revenue target bonus (plus earned Adjusted EBITDA and earned Individual Objectives)
|
◦
|
Revenue at $354,000,000 (Level 7) = 110% of Revenue target bonus and 110% of earned Adjusted EBITDA and earned Individual Objectives
|
◦
|
Revenue at $357,500,000 (Level 8) = 120% of Revenue target bonus and 120% of earned Adjusted EBITDA and earned Individual Objectives
|
◦
|
Revenue at $361,000,000 (Level 9) = 140% of Revenue target bonus and 140% of earned Adjusted EBITDA and earned Individual Objectives
|
◦
|
Revenue at $364,500,000 (Level 10) = 160% of Revenue target bonus and 160% of earned Adjusted EBITDA and earned Individual Objectives
|
◦
|
Revenue at $368,000,000 (Level 11) = 180% of Revenue target bonus and 180% of earned Adjusted EBITDA and earned Individual Objectives
|
◦
|
Revenue at $375,000,000 (Level 12) = 200% of Revenue target bonus and 200% of earned Adjusted EBITDA and earned Individual Objectives
|
§
|
The maximum MIP amount is limited to two (2) times the participant’s Base Bonus.
|
VIII.
|
Maximum MIP Payment Amounts
|
IX.
|
Payment of Earned MIP Amounts
|
X.
|
Exemption from 409A
|
XI.
|
MIP Miscellaneous
|
ALEXANDRA O. HADEN
/s/ Alexandra O. Haden _ _________
Date: 8/23/2019
|
MIMEDX GROUP, INC.
/s/ Timothy Wright _ _________
Title: CEO
Date: 8-27-2019
|
•
|
Preparation and completion of meeting minutes related to the meetings of Company’s Board of Directors and committees thereof between March 1, 2015 and April 12, 2019.
|
•
|
Availability to discuss various Board of Director initiatives or special committees and or general questions regarding previous Board activities
|
•
|
Available for inquiries or questions related to any existing general case and/or litigation matters including but not limited to pending SEC and DOJ government investigations and pending shareholder derivative and class action lawsuits.
|
1.
|
I have reviewed this report on Form 10-K of MiMedx Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/: Timothy R. Wright
|
|
|
Timothy R. Wright
|
|
|
Chief Executive Officer
|
|
1.
|
I have reviewed this report on Form 10-K of MiMedx Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/: Edward J. Borkowski
|
|
|
Edward J. Borkowski
|
|
|
Acting Chief Financial Officer
|
|
|
|
|
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/: Timothy R. Wright
|
|
|
Timothy R. Wright
|
|
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Edward J. Borkowski
|
|
|
Edward J. Borkowski
|
|
|
Acting Chief Financial Officer
|
|
|
(Principal Financial and Accounting Officer)
|
|